Public Housing Homeownership Programs

SUMMARY: This proposed rule would set forth the requirements and

procedures governing a new statutory homeownership program to be

administered by public housing agencies (PHAs). Under this rule, a PHA

makes public housing dwelling units, public housing projects, and other

housing projects available for purchase by low-income families as their

principal residences.

DATES: Comments Due Date: Comments on the proposed rule are due on or

before November 15, 1999.

ADDRESSES: Interested persons are invited to submit written comments

regarding this proposed rule to the Rules Docket Clerk, Office of

General Counsel, Room 10276, Department of Housing and Urban

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

should refer to the above docket number and title. A copy of each

comment submitted will be available for public inspection and copying

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

Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: David Sowell, Office of Public Housing

Investments, Office of Public and Indian Housing, Department of Housing

and Urban Development, Room 4138, 451 Seventh Street, SW, Washington,

DC 20410; telephone (202) 401-8812, ext. 4641 (this is not a toll-free

number). Hearing or speech impaired individuals may access this number

via TTY by calling the toll-free Federal Information Relay Service at

1-800-877-8339.

SUPPLEMENTARY INFORMATION: Section 536 of the Quality Housing and Work

Responsibility Act of 1998 (Title V of Public Law 105-276, 112 Stat.

2461, approved October 21, 1998) (``Public Housing Reform Act'')

amended Title I of the United States Housing Act of 1937 (42 U.S.C.

1437 et seq.) (1937 Act) by adding a new section 32, which authorized a

new public housing homeownership program. The new homeownership program

replaces the public housing agency homeownership program that was

authorized under section 5(h) of the 1937 Act. Section 518 of the

Public Housing Reform Act repealed the 5(h) homeownership program, and

section 566 of the Public Housing Reform Act added a new section 5(h)

that deals with audit requirements.

This rule would revise 24 CFR part 906, which currently contains

the regulations for the 5(h) homeownership program. Many of the 5(h)

program requirements would be retained under the new section 32 (of the

1937 Act) homeownership program. The authorizing statutory language for

the 5(h) program was very brief, and the regulatory requirements at

part 906 substantially fleshed out the program. Section 32, which

provides many more explicit statutory requirements than section 5(h)

did, adopted several of the regulatory requirements promulgated at part

906 for the 5(h) program. For example, section 32 addresses the

protection of nonpurchasing residents and the use of the proceeds from

a sale. Similar provisions were provided in the 5(h) regulation. In

addition, the 5(h) regulation permitted sales to residents through

another entity, rather than directly from the PHA, and section 32

permits sales directly to residents or to another entity for resale to

residents.

There is legislative history that indicates the similarities

between the new, statutory section 32 program requirements and the

section 5(h) program requirements at part 906 are deliberate. In

reporting out S. 462, a bill entitled, ``The Public Housing Reform and

Responsibility Act of 1997'', which was the model for the Public

Housing Reform Act, the Senate Committee on Banking, Housing, and Urban

Affairs stated: ``The Committee patterned the new homeownership

provision according to the section 5(h) program which has proven to be

a highly successful program for assisting public housing residents in

becoming homeowners.'' (S. Rept. 105-21, at 28). This statement

supports the retention of the 5(h) program requirements that HUD is

proposing in this rulemaking.

Part 906 is reorganized by this rule into five subparts according

to the subjects covered: a general statement of the program; basic

program requirements; purchaser requirements; program administration;

and program submission and approval. The new statutory homeownership

requirements are integrated with the 5(h) requirements that HUD has

determined are appropriate to retain, such as proposed Sec. 906.39,

which is based upon Sec. 906.20 of the 5(h) rule and covers what must

be contained in a homeownership program.

In order to make the new program more flexible than the 5(h)

program, we have omitted some of the 5(h) program requirements,

including the detailed eligibility and affordability requirements for

purchasers found in Sec. 906.8, the nonroutine maintenance reserve

requirement of Sec. 906.11, and the purchase price and financing

provisions of Sec. 906.12. We specifically invite comments on whether

HUD should specify underwriting standards or the types of documents to

be used to secure that HUD's investment in a property ultimately serves

program purposes.

Section 32 gives a right of first refusal to the resident or

residents occupying a public housing unit. The statute does not give

that right to residents of other housing that is to be sold under the

homeownership program. Section 906.13 implements this right of first

refusal, noting that a prospective purchaser still must satisfy other

program requirements.

Section 32 provides for three categories of eligible purchasers:

(1) Low-income families assisted by a PHA; (2) other low-income

families; and (3) entities formed to purchase units for re-sale to low-

income families. This rule clarifies, at Sec. 906.15, that a family

purchasing a property under a PHA homeownership program must be a low-

income family, as defined in section 3 of the 1937 Act, at the time the

contract to purchase the property is executed. This provision

eliminates the need to re-establish eligibility at the time of closing,

and places no limitations on a family's future income as a condition of

homeownership.

Please note that the low-income eligibility requirement applies to

public housing residents, thereby making public housing residents who

earn more than 80 percent of area median income ineligible to

participate in the homeownership program. The Department welcomes

comment on this eligibility requirement.

Section 32 also includes provisions for the protection of

nonpurchasing public housing residents. One of these provisions

requires that each public housing resident displaced by the sale of a

unit will be offered comparable housing that is located in an area that

is generally not less desirable than the location of the displaced

resident's housing. (Relocation of residents of other housing that

would be displaced by a homeownership program would be covered by the

Uniform Relocation Act and part 42 of this title, as stated in

Sec. 906.24.) In a Senate colloquy before

[[Page 49933]]

passage of the Public Housing Reform Act, Senator Mack directly

addressed this provision, and the way in which it was to be

interpreted. The Senator stated:

For purposes of this provision, the phrase ``location of the

displaced resident's housing'' may be construed to mean the public

housing development from which the family was vacated, rather than a

larger geographic area. (Congressional Record of October 8, 1998,

S.11840)

Consistent with this guidance, this proposed rule provides, in

Sec. 906.24, which deals with protections available to nonpurchasing

residents, that ``comparable housing'' means housing that (among other

factors) is located in an area that is generally not less desirable

than the displaced resident's original development.

Findings and Certifications

Regulatory Flexibility Act

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 will not have a significant economic

impact on a substantial number of small entities. The rule provides the

parameters for the use of public housing properties to create

homeownership opportunities for low-income residents of public housing

and other low-income families should a public housing agency choose to

do so with, at most, an incidental effect on small entities.

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. This finding is available for public inspection between

7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules Docket

Clerk, Office of the General Counsel, Department of Housing and Urban

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

Executive Order 12612, Federalism

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

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

rule will not have substantial direct effects on States or their

political subdivisions, or the relationship between the Federal

Government and the States, or on the distribution of power and

responsibilities among the various levels of government. The rule's

major effects would be on individuals; any involvement of States or

their political subdivisions is limited to their cooperative efforts in

promoting homeownership among public and housing residents and other

low-income families.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-

4; approved March 22, 1995) (UMRA) establishes requirements for Federal

agencies to assess the effects of their regulatory actions on State,

local, and tribal governments, and on the private sector. This proposed

rule does not impose any Federal mandates on any State, local, or

tribal governments, or on the private sector, within the meaning of the

UMRA.

Paperwork Reduction Act Statement

The information collection requirements contained in this rule, as

described in Secs. 906.17, 906.19, 906.23, 906.27, 906.33, 906.39,

906.41, and 906.49 have been submitted to the Office of Management and

Budget for review under section 3507(d) of the Paperwork Reduction Act

of 1995 (44 U.S.C. Chapter 35).

Estimates of the total reporting and recordkeeping burden that will

result from the collection of information are as follows:

Reporting and Recordkeeping Burden

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

Est. avg. time

Number of Annual freq. for Est. annual

Section reference parties of requirement requirement burden (hrs.)

(hours)

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

906.17.......................................... 5,000 1 4 20,000

906.19.......................................... 30 1 40 1,200

906.23.......................................... 2,000 1 1 2,000

906.27.......................................... 50 1 .50 25

906.33.......................................... 50 1 10 500

906.39.......................................... 50 1 40 2,000

906.41.......................................... 50 1 20 1,000

906.49.......................................... 50 1 .25 12

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

Total Reporting and Recordkeeping Burden .............. .............. .............. 25,737

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

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

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-4504)

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

Millie Hamman, Reports Liaison Officer, Office of the Assistant

Secretary for Public and Indian Housing, Department of Housing & Urban

Development, 451--7th Street, SW, Room 4238, Washington, DC 20410

[[Page 49934]]

List of Subjects in 24 CFR Part 906

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

income housing, Public housing, Reporting and recordkeeping

requirements.

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

part 906 of title 24 to read as follows:

PART 906--PUBLIC HOUSING HOMEOWNERSHIP PROGRAMS

Subpart A--General

Sec.

906.1 What is the purpose of this part?

906.3 What requirements are applicable to homeownership programs

previously approved by HUD?

Subpart B--Basic Program Requirements

906.5 What dwelling units and what types of assistance may a PHA

make available under a homeownership program under this part?

906.7 What physical requirements must a property offered for sale

meet?

906.9 What effect do existing restrictions and encumbrances have on

the sale of a property?

Subpart C--Purchaser Requirements

906.11 Who is eligible to purchase housing under a homeownership

program?

906.13 Do current residents have a right of first refusal on units

made available for sale?

906.15 What requirements apply to a family purchasing a property

under a homeownership program?

906.17 How does a family apply to purchase a unit under a

homeownership program?

906.19 What requirements apply to a PRE (purchase and resale

entity), an entity formed for the purpose of purchasing units for

resale to low-income families?

Subpart D--Program Administration

906.23 What protections are available to nonpurchasing public

housing residents?

906.24 What protections are available to nonpurchasing residents of

housing other than public housing?

906.25 What ownership interest is conveyed to a purchaser?

906.27 What limitations apply to net proceeds on the sale of a

property acquired through a homeownership program?

906.31 What requirements are applicable to net proceeds?

906.33 What reporting and recordkeeping requirements apply to

homeownership programs?

906.35 Are the disposition provisions of section 18 of the United

States Housing Act of 1937 applicable to a homeownership program?

906.37 What Davis-Bacon and HUD wage rate requirements apply to

homeownership programs?

Subpart E--Program Submission and Approval

906.38 Does a PHA require HUD approval to implement a homeownership

program under this part?

906.39 What must a homeownership program include?

906.40 What requirements apply to acquisition of non-public

housing?

906.41 What supporting documentation must be submitted to HUD with

the homeownership program?

906.43 Where does a PHA submit a homeownership program for HUD

approval?

906.45 What criteria will HUD use to review a homeownership

program?

906.47 What environmental provisions apply?

906.49 How is HUD approval and authorization indicated?

Authority: 42 U.S.C. 14372-4 and 3535(d).

Subpart A--General

Sec. 906.1 What is the purpose of this part?

(a) This part sets forth the requirements and procedures governing

public housing homeownership programs carried out by public housing

agencies (PHAs), as authorized by (42 U.S.C. 1437z-4) section 32 of the

United States Housing Act of 1937 (``1937 Act''). A PHA may only

transfer public housing units for homeownership under a homeownership

program approved by HUD under this part, except as provided under

Sec. 906.3.

(b) Under a public housing homeownership program, a PHA makes

available for purchase by low-income families for use as their

principal residences public housing dwelling units, public housing

projects, and other housing units or projects owned, assisted, or

operated, or otherwise acquired by the PHA for sale under a

homeownership program in connection with the use of assistance provided

under the 1937 Act (``1937 Act funds''). A PHA may sell all or a

portion of a property for purposes of homeownership in accordance with

a HUD-approved homeownership program, and in accordance with the PHA's

annual plan under part 903 of this title.

Sec. 906.3 What requirements are applicable to homeownership programs

previously approved by HUD?

(a) Any existing section 5(h) or Turnkey III homeownership program

continues to be governed by the requirements of part 906 or part 904 of

this title, respectively, as it existed before [effective date of

Homeownership Program final rule] (contained in the April 1, 1999

edition of 24 CFR, parts 700 to 1699). The use of other program income

for homeownership activities continues to be governed by agreements

executed with HUD.

(b) A PHA may convert an existing homeownership program to a

homeownership program under this part with HUD approval.

Subpart B--Basic Program Requirements

Sec. 906.5 What dwelling units and what types of assistance may a PHA

make available under a homeownership program under this part?

(a) A homeownership program under this part may provide for sale

of:

(1) Units that are public housing units; and

(2) Other units owned, operated, assisted, or acquired for

homeownership sale that have received the benefit of 1937 Act funds or

are to be sold with the benefit of 1937 Act funds (``non-public housing

units'').

(b) A homeownership program under this part may provide for

financing to eligible families (see Sec. 905.15) purchasing dwelling

units under the program, or for acquisition of housing units or

projects by the PHA for sale under the program.

(1) Under this part, a PHA may use assistance from amounts it

receives under the Capital Fund under section 9(d) of the 1937 Act or

from other income earned from its 1937 Act programs to provide

financing assistance to public housing residents only. Public housing

residents may use such assistance to purchase the unit in which they

reside, another public housing unit, or a residence not located in a

public housing development.

(2) A PHA may provide financing assistance for other eligible

purchasers from other income, i.e., income not from 1937 Act programs,

such as proceeds from selling public housing units, loan repayments,

and public housing debt forgiveness funding not already committed to

another purpose.

(c) A PHA must not use 1937 Act funds to rehabilitate units that

are not public housing units.

Sec. 906.7 What physical requirements must a property offered for sale

meet?

A property offered for sale under a homeownership program must meet

local code requirements (or, if no local code exists, the housing

quality standards established by HUD for the Section 8 Housing

Assistance Payments Program for Existing Housing, under part 882 of

this title) and the requirements for elimination of lead-based paint

hazards in HUD-associated housing, under part 35, subpart C of this

title. When a prospective purchaser

[[Page 49935]]

with disabilities requests accessible features, the features must be

added in accordance with part 8 of this title. Further, the property

must be in good repair, with the major components having a remaining

useful life that is sufficient to justify a reasonable expectation that

homeownership will be affordable by the purchasers. These standards

must be met as a condition for conveyance of a dwelling to an

individual purchaser.

Sec. 906.9 What effect do existing restrictions and encumbrances have

on the sale of a property?

(a) If the property is subject to indebtedness under the Annual

Contributions Contract (ACC), HUD will continue to make any debt

service contributions for which it is obligated under the ACC, and the

property sold will not be subject to the encumbrance of that

indebtedness.

(b) Upon sale of a public housing unit, in accordance with the HUD-

approved homeownership program, HUD will execute a release of the title

restrictions prescribed by the ACC. Because the property will no longer

be subject to the ACC after sale, it will cease to be eligible for

public housing Operating Fund or Capital Fund payments.

Subpart C--Purchaser Requirements

Sec. 906.11 Who is eligible to purchase housing under a homeownership

program?

Low-income families and entities that purchase units from the PHA

for resale to low-income families (``purchase and resale entities'' or

PREs) are eligible to purchase properties made available for sale under

a PHA homeownership program.

Sec. 906.13 Do current residents have a right of first refusal on

units made available for sale?

(a) Yes, in selling a public housing unit under a homeownership

program, the PHA must initially offer the unit to the resident

occupying the unit, if any, or to an organization serving as a conduit

for sales to any such resident. (See Sec. 906.19.) The resident must

qualify to purchase the unit under the requirements specified by the

PHA, in accordance with Sec. 906.15.

(b) No, this program does not require the PHA, when selling a unit

that is a non-public housing unit, to offer the unit for sale first to

the current resident under the program.

Sec. 906.15 What requirements apply to a family purchasing a property

under a homeownership program?

(a) Low-income requirement. A family purchasing a property under a

PHA homeownership program must be a low-income family, as defined in

section 3 of the 1937 Act (42 U.S.C. 1437a), at the time the contract

to purchase the property is executed.

(b) Principal residence requirement. The dwelling unit sold to an

eligible family must be used as the principal residence of the family.

(c) Financial capacity requirement. Eligibility must be limited to

families who are capable of assuming the financial obligations of

homeownership, under minimum income standards for affordability, taking

into account the unavailability of public housing operating subsidies

and modernization funds after conveyance of the property by the PHA. A

homeownership program may, however, take account of any available

subsidy from other sources.

(d) Down payment requirement. (1) Each family purchasing housing

under a homeownership program must provide a downpayment in connection

with any loan for acquisition of the housing, in an amount determined

by the PHA or PRE, in accordance with an approved homeownership

program. Except as provided in paragraph (d)(2) of this section, the

PHA or PRE must permit the family to use grant amounts, gifts from

relatives, contributions from private sources, and other similar

amounts in making the downpayment.

(2) The family must use its own resources other than grants, gifts,

contributions, or similar amounts, to contribute an amount of the

downpayment that is not less than one percent of the purchase price of

the housing. The PHA or PRE must take reasonable steps, and maintain

records, that are verifiable by HUD through audits to verify the source

of this one percent contribution.

(e) Other requirements established by the PHA. A PHA may establish

requirements or limitations for families to purchase housing under a

homeownership program, including requirements or limitations regarding:

(1) Employment or participation in employment counseling or

training activities;

(2) Criminal activity;

(3) Participation in homeownership counseling programs;

(4) Evidence of regular income; and

(5) Other requirements.

Sec. 906.17 How does a family apply to purchase a unit under a

homeownership program?

Families who are interested in purchasing a unit must submit

applications to the PHA or PRE for that specific purpose, and those

applications must be handled separately from applications for other PHA

programs. Application for homeownership must not affect an applicant's

place on any other PHA waiting list for rental units.

Sec. 906.19 What requirements apply to a PRE (purchase and resale

entity), an entity formed for the purpose of purchasing units for

resale to low-income families?

(a) In general. In the case of a purchase of units for resale to

low-income families by a PRE, the PHA must have an approved

homeownership program that describes the use of a PRE to sell the units

to low-income families within 5 years from the date of the PRE's

acquisition of the units.

(b) PRE requirements. The PHA must demonstrate in its homeownership

program that the PRE has the necessary legal capacity and practical

capability to carry out its responsibilities under the program. The

PHA's homeownership program also must contain a written agreement that

specifies the respective rights and obligations of the PHA and the PRE

and which include:

(1) Assurances that the PRE will comply with all provisions of the

HUD-approved homeownership program;

(2) Assurances that the PRE will be subject to a title restriction

providing that the property may be resold or otherwise transferred only

by conveyance of individual dwellings to eligible families, in

accordance with the HUD-approved homeownership program, or by

reconveyance to the PHA, and that the property will not be encumbered

by the PRE without the written consent of the PHA;

(3) Protection against fraud or misuse of funds or other property

on the part of the PRE, its employees, and agents;

(4) Assurances that the resale proceeds will be used only for the

purposes specified by the HUD-approved homeownership program;

(5) Limitation of the PRE's administrative and overhead costs, and

of any compensation or profit that may be realized by the PRE, to

amounts that are reasonable in relation to its responsibilities and

risks;

(6) Accountability to the PHA and residents for the recordkeeping,

reporting and audit requirements of Sec. 906.33;

(7) Assurances that the PRE will administer its responsibilities

under the plan on a nondiscriminatory basis, in accordance with the

Fair Housing Act and implementing regulations; and

(8) Adequate legal remedies for the PHA and residents, in the event

of the PRE's failure to perform in accordance with the agreement.

(c) Sale to low-income families. The requirement for a PRE to sell

units

[[Page 49936]]

under a homeownership program only to low-income families must be

recorded as a deed restriction at the time of purchase by the PRE.

(d) Resale within five years. A PRE must agree that, with respect

to any units it acquires under a homeownership program under this part,

it will transfer ownership to the PHA if the PRE fails to resell the

unit to a low-income family within 5 years of the PRE's acquisition of

the unit.

(e) Required notices to families. A PRE must provide the notices to

purchasing families that are required by the PHA, in accordance with

the environmental and other requirements referenced in Sec. 906.47.

Subpart D--Program Administration

Sec. 906.23 What protections are available to nonpurchasing public

housing residents?

(a) If a public housing resident does not exercise the right of

first refusal under Sec. 906.13, the PHA:

(1) Must notify the resident residing in the unit 90 days prior to

the displacement date, except in cases of imminent threat to health or

safety, that:

(i) The public housing unit will be sold;

(ii) The transfer of possession of the unit will not occur until

the resident is relocated; and

(iii) Each resident displaced by such action will be offered

comparable housing (as defined in paragraph (b) of this section);

(2) Must provide for the payment of the actual costs and reasonable

relocation expenses of the resident to be displaced;

(3) Must ensure that the resident is offered comparable housing

under paragraph (a)(1)(iii) of this section;

(4) Must provide counseling for displaced residents of their rights

to comparable housing, including their rights under the Fair Housing

Act to choice of a unit on a nondiscriminatory basis, without regard to

race, color, religion, national origin, disability, age, sex, or

familial status; and

(5) Must not transfer possession of the unit until the resident is

relocated.

(b) For purposes of this section, the term ``comparable housing''

means housing:

(1) That meets housing quality standards;

(2) That is located in an area that is generally not less desirable

than the displaced resident's original development; and

(3) Which may include:

(i) Tenant-based assistance (tenant-based assistance must only be

provided upon the relocation of the resident to the comparable

housing);

(ii) Project-based assistance; or

(iii) Occupancy in a unit owned, operated, or assisted by the PHA

at a rental rate paid by the resident that is comparable to the rental

rate applicable to the unit from which the resident is vacated.

Sec. 906.24 What protections are available to nonpurchasing residents

of housing other than public housing?

Residents of non-public housing that would be displaced by a

homeownership program are eligible for assistance under the Uniform

Relocation Act and part 42 of this title. For purposes of this part, a

family that was over-income at the time of admission to public housing

and was admitted in accordance with section 3(a)(5) of the 1937 Act, is

treated as a nonpurchasing resident of non-public housing.

Sec. 906.25 What ownership interest is conveyed to a purchaser?

A homeownership program may provide for sale to the purchasing

family of any ownership interest that the PHA considers appropriate

under the homeownership program, including:

(a) Ownership in fee simple;

(b) A condominium interest;

(c) An interest in a limited dividend cooperative; or

(d) A shared appreciation interest with a PHA providing financing.

Sec. 906.27 What limitations apply to net proceeds on the sale of a

property acquired through a homeownership program?

(a) A PHA must establish such limitations (by an appropriate form

of title restriction) on the resale of property acquired through a

homeownership program as the PHA considers appropriate for the PHA to

recapture:

(1) Some or all of the economic gain derived from any such resale

(i.e., appreciation) occurring during the 5-year period beginning upon

purchase of the dwelling unit by the eligible family, in addition to

some or all of the assistance provided under the homeownership program

to the family; and

(2) After the expiration of such 5-year period, only such amounts

as are equivalent to the assistance provided under the homeownership

program to the family.

(b) In establishing the limitations described in paragraph (a)(1)

of this section, the PHA may consider:

(1) The aggregate amount of assistance provided under the

homeownership program to the family;

(2) The contribution of equity by the purchasing family;

(3) The period of time elapsed between purchase by the homebuyer

under the homeownership program and resale by the homebuyer;

(4) The reason for resale;

(5) Any improvements made by the family purchasing under the

homeownership program;

(6) Any appreciation in the value of the property; and

(7) Any other factors that the PHA considers appropriate.

(c) For the purposes of this section, the value of the property

must be determined by a certified appraiser within one month before the

resale.

Sec. 906.31 What requirements are applicable to net proceeds?

(a) PHA use of net proceeds. The PHA must use any net proceeds of

any sales under a homeownership program remaining after payment of all

costs of the sale for purposes relating to low-income housing and in

accordance with the PHA plan of the PHA carrying out the program.

(b) PRE use of resale net proceeds. The PHA may require the PRE to

return the net proceeds from the resale and from managing the units to

the PHA. If the PHA permits the PRE to retain the net proceeds, the PRE

must use these proceeds for low-income housing purposes.

Sec. 906.33 What reporting and recordkeeping requirements apply to

homeownership programs?

The PHA is responsible for the maintenance of records (including

sale and financial records) for all activities incident to

implementation of the HUD-approved homeownership program. Where a PRE

is responsible for the sale of units, the PHA must ensure that the

PRE's responsibilities include proper recordkeeping and accountability

to the PHA, sufficient to enable the PHA to monitor compliance with the

approved homeownership program and to meet its audit responsibilities.

All books and records must be subject to inspection and audit by HUD

and the General Accounting Office (GAO). The PHA must report annually

to HUD on the progress of each program approved under this part.

Sec. 906.35 Are the disposition provisions of section 18 of the United

States Housing Act of 1937 applicable to a homeownership program?

The provisions of section 18 of the United States Housing Act of

1937 (42 U.S.C. 1437p) do not apply to disposition of public housing

dwelling units under a homeownership program approved by HUD.

[[Page 49937]]

Sec. 906.37 What Davis-Bacon and HUD wage rate requirements apply to

homeownership programs?

(a) Type of activities covered. Rehabilitation, repairs and

accessibility modifications performed pursuant to Sec. 906.7 are

subject to Davis-Bacon or HUD-determined wage rate requirements when

involving units that are:

(1) Public housing units that will be sold under a homeownership

program; and

(2) Non-public housing units owned or acquired by a PHA with the

intent to use 1937 Act funds to rehabilitate the units, finance the

sale of the units, or otherwise provide assistance to purchasers of the

units.

(b) Type of workers covered. These prevailing wage requirements

cover laborers and mechanics involved in the construction work and

technical workers, such as architects, technical engineers, draftsmen,

and technicians. See Secs. 968.110(e) and 968.105 of this title for

further guidance concerning Davis-Bacon and HUD-determined wage rates.

Subpart E--Program Submission and Approval

Sec. 906.38 Does a PHA require HUD approval to implement a

homeownership program under this part?

A PHA must obtain HUD approval before implementing a homeownership

program. A homeownership program must be carried out in accordance with

the requirements of this part and the PHA's plan submitted under part

903 of this title.

Sec. 906.39 What must a homeownership program include?

A homeownership program must include the following matters, as

applicable to the particular factual situation:

(a) Property description. (1) If the program involves only

financing assistance to the family purchasing the unit, the PHA need

not specify property addresses, but it must describe the area in which

the assistance is to be used.

(2) If the PHA is selling existing public housing, it must describe

the property, including identification of the property by project

number, or street address if there is no project number, and the

specific dwellings to be sold, with bedroom distribution by size and

type broken down by project.

(3) If the PHA is acquiring units with 1937 Act funds to sell under

the program, it must comply with the provisions of Sec. 906.40

concerning this element of the program.

(b) Repair or rehabilitation. If applicable, a plan for any repair

or rehabilitation required under Sec. 906.7, based on the assessment of

the physical condition of the property that is included in the

supporting documentation.

(c) Purchaser eligibility and selection. The standards and

procedures to be used for homeownership applications and the

eligibility and selection of purchasers, consistent with the

requirements of Sec. 906.15. If the homeownership program allows

application for purchase of units by families who are not presently

public housing or Section 8 residents and not already on the PHA's

waiting lists for those programs, the program must include an

affirmative fair housing marketing strategy for such families,

including specific steps to inform them of their eligibility to apply,

and to solicit applications from those in the housing market who are

least likely to apply for the program without special outreach.

(d) Sale and financing. Terms and conditions of sale and financing.

(e) Consultation with residents and purchasers. A description of

resident input obtained during the resident consultation process

required by the PHA plan under part 903 of this title, and a plan for

consultation with purchasers during the implementation stage to help

insure program solvency.

(f) Counseling. Counseling, training, and technical assistance to

be provided to purchasers.

(g) Sale via PRE. If the plan contemplates sale to residents by an

entity other than the PHA, a description of that entity's

responsibilities and information demonstrating that the requirements of

Sec. 906.19 have been met or will be met in a timely fashion.

(h) Nonpurchasing residents. If applicable, a plan for

nonpurchasing residents, in accordance with Sec. 906.23.

(i) Sale proceeds. An estimate of the sale proceeds and an

explanation of how they will be used, in accordance with Sec. 906.31.

(j) Administration. An administrative plan, including estimated

staffing requirements and a listing of staff positions that will be

responsible for the day-to-day implementation and monitoring of the

program, the percentage of time each staff member will spend on

homeownership activities and the funding source for staff salaries.

(k) Records, accounts and reports. A description of the

recordkeeping, accounting and reporting procedures to be used,

including those required by Sec. 906.33.

(l) Budget. A budget estimate, showing any rehabilitation or repair

cost, any financing assistance, and the costs of implementing the

program, and the sources of the funds that will be used.

(m) Timetable. An estimated timetable for the major steps required

to carry out the plan.

Sec. 906.40 What requirements apply to acquisition of non-public

housing?

(a) Proposal contents. The PHA must submit an acquisition proposal

to the HUD Field Office for review and approval before its

homeownership plan containing acquisition of non-public housing can be

approved. This proposal must contain the following:

(1) Project description. A description of the housing, including

the number of units, unit types and number of bedrooms, and any

nondwelling facilities of the project to be acquired;

(2) Certification. Certification by the PHA that the property was

not constructed or is not being constructed with the intent that it

would be sold to the PHA;

(3) Site information. A description of the proposed general

location of the property to be acquired, or where specific properties

have been identified, street addresses of the properties;

(4) Project costs. The detailed budget of costs for acquiring the

project, including relocation and closing costs, and an identification

of the sources of funding;

(5) Appraisal. An appraisal of the proposed property by an

independent, state-certified appraiser (when the sites have been

identified);

(6) Project acquisition schedule. A copy of the PHA acquisition

schedule;

(7) Environmental information. All available environmental

information on the properties to be acquired (when sites have been

identified), to expedite the environmental review under part 58 of this

title (if a responsible entity has assumed environmental responsibility

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

the environmental review);

(8) Additional HUD-requested information. Any additional

information that may be needed for HUD to determine whether it can

approve the proposal.

(b) Cost limit. The acquisition cost of the project is limited by

the housing cost cap limit, as described in HUD Notice PIH 99-17,

issued on March 15, 1999.

Sec. 906.41 What supporting documentation must be submitted to HUD

with the homeownership program?

The following supporting documentation must be submitted to

[[Page 49938]]

HUD with the proposed homeownership program, as appropriate for the

particular program:

(a) Property value estimate. An estimate of the fair market value

of the property, including the range of fair market values of

individual dwellings, with information to support the reasonableness of

the estimate. (The purpose of this data is merely to assist HUD in

determining whether, taking into consideration the estimated fair

market value of the property, the plan adequately addresses any risks

of fraud and abuse and of windfall profit upon resale, pursuant to

Sec. 906.27. A formal appraisal need not be submitted with the proposed

homeownership program.)

(b) Physical assessment. An assessment of the physical condition of

the property, based on the standards specified in Sec. 906.7.

(c) Workability. An itemized statement demonstrating the practical

workability of the program, based on analysis of data on such elements

as purchase prices, costs of repair or rehabilitation, homeownership

costs, family incomes, availability of financing, and the extent to

which there are eligible residents who are expected to be interested in

purchase. (See Sec. 906.45(a).)

(d) PHA performance in homeownership. A statement of the commitment

and capability of the PHA (and any other entity with substantial

responsibility for implementing the homeownership program) to

successfully carry out the homeownership program. The statement must

describe the PHA's (and other entity's) past experience in carrying out

homeownership programs for low income families, and (if applicable) its

reasons for considering such programs to have been successful. A PHA

that has not previously implemented a homeownership program for low

income families instead must submit a statement describing its

experience in carrying out public housing modernization and development

projects under parts 941 and 968 of this title, respectively.

(e) Nondiscrimination certification. The PHA's or PRE's

certification that it will administer the plan on a nondiscriminatory

basis, in accordance with the Fair Housing Act, Title VI of the Civil

Rights Act of 1964, Executive Order 11063, and implementing

regulations, and will assure compliance with those requirements by any

other entity that may assume substantial responsibilities for

implementing the program.

(f) Legal opinion. An opinion by legal counsel to the PHA, stating

that counsel has reviewed the program and finds it consistent with all

applicable requirements of Federal, State, and local law, including

regulations as well as statutes. At a minimum, the attorney must

certify that the documents to be used will fully implement the sale to

a low-income family restriction of Sec. 906.41(e), the resale reverter

of Sec. 906.41(d), and the restriction of use of resale proceeds of

Sec. 906.27.

(g) Board resolution. A resolution by the PHA's Board of

Commissioners, evidencing its approval of the program.

(h) Other information. Any other information that may reasonably be

required for HUD review of the program. Except for the PHA-HUD

implementing agreement under Sec. 906.49, HUD approval is not required

for documents to be prepared and used by the PHA in implementing the

program (such as contracts, applications, deeds, mortgages, promissory

notes, and cooperative or condominium documents), if their essential

terms and conditions are described in the program. Consequently, those

documents need not be submitted as part of the program or the

supporting documentation.

Sec. 906.43 Where does a PHA submit a homeownership program for HUD

approval?

A PHA must submit its proposed homeownership program together with

supporting documentation, in a format prescribed by HUD, to the Special

Applications Center, 77 W. Jackson Street, Chicago, Illinois, with a

copy to the appropriate HUD Field Office.

Sec. 906.45 What criteria will HUD use to review a homeownership

program?

HUD will use the following criteria in reviewing a homeownership

program:

(a) Workability. The program must be practically workable, with

sound potential for long-term success. Financial viability, including

the capability of purchasers to meet the financial obligations of

homeownership, is a critical requirement.

(b) Legality. The program must be consistent with law, including

the requirements of this part and any other applicable Federal, State,

and local statutes and regulations, and existing contracts. Subject to

the other two criteria stated in this section, any provision that is

not contrary to those legal requirements may be included in the

program, at the discretion of the PHA, whether or not expressly

authorized in this part.

(c) Documentation. The program must be clear and complete enough to

serve as a working document for implementation, as well as a basis for

HUD review.

(d) PHA performance in homeownership. The PHA (and any other entity

with substantial responsibility for implementing the homeownership

program) must have demonstrated the commitment and capability to

successfully implement the homeownership program based upon the

criteria stated in 906.41(d).

Sec. 906.47 What environmental provisions apply?

(a) Generally, the environmental provisions applicable to HUD-

financed programs are found in part 58 of this title (if a responsible

entity has assumed environmental review responsibility for the project)

and part 50 of this title (if HUD is performing the environmental

review).

(b) Where the PHA's homeownership program involves no acquisition

or rehabilitation of units in anticipation of the sale but assistance

to the homebuyer will be provided with 1937 Act funds, an environmental

review is not required under part 58 or part 50 of this title. However,

the requirements of Sec. 58.6 or Sec. 50.19(b)(15) of this title are

still applicable.

Sec. 906.49 How is HUD approval and authorization indicated?

HUD may approve a homeownership program as submitted or return it

to the PHA for revision and resubmission. Upon HUD notification to the

PHA that the homeownership program is approvable (in final form that

satisfies all applicable requirements of this part), the PHA and HUD

will execute a written implementing agreement, in a form prescribed by

HUD, to evidence HUD approval and authorization for implementation. The

program itself, as approved by HUD, must be incorporated in the

implementing agreement. Any of the items of supporting documentation

may also be incorporated, if agreeable to the PHA and HUD. The PHA is

obligated to carry out the approved homeownership program and other

provisions of the implementing agreement without modification, except

with written approval by HUD.

Dated: August 27, 1999.

Deborah Vincent,

General Deputy Assistant Secretary for Public and Indian Housing.

[FR Doc. 99-23700 Filed 9-13-99; 8:45 am]

BILLING CODE 4210-33-P