Public Housing Agency Organization; Required Resident Membership on Board of Directors or Similar Governing Body

SUMMARY: On June 23, 1999, HUD published a proposed rule to implement

section 2(b) of the United States Housing Act of 1937, which was added

by section 505 of the Quality Housing and Work Responsibility Act of

1998. Section 2(b) requires, with certain exceptions, that the

membership of the board of directors or similar governing body of a

public housing agency (PHA) must contain not less than one member who

is directly assisted by the PHA. This final rule makes effective the

policies and procedures described in the June 23, 1999 proposed rule

and takes into consideration the public comments received on the

proposed rule.

DATES: Effective Date: November 22, 1999.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant

Secretary for Policy, Programs, and Legislative Initiatives, Room 4116,

U.S. Department of Housing and Urban Development, 451 Seventh Street,

SW, Washington, DC 20410-5000; telephone (202) 708-0713; or Paula

Blunt, Office of Public and Indian Housing, Room 4226, U.S. Department

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

DC 20410-5000; telephone (202) 619-8201. Hearing- or speech-impaired

individuals may access these numbers via TTY by calling the Federal

Information Relay Service at (800) 877-8339. With the exception of the

``800'' number, these are not toll-free telephone numbers.

SUPPLEMENTARY INFORMATION:

I. The June 23, 1999 Proposed Rule

On June 23, 1999 (64 FR 33644), HUD published a proposed rule to

implement section 505 of the Quality Housing and Work Responsibility

Act of 1998 (Pub. L. 105-276, approved October 21, 1998; 112 Stat.

2461, 2522) (the ``Public Housing Reform Act''). The Public Housing

Reform Act constitutes a substantial overhaul of HUD's public housing

and Section 8 assistance programs. Among other goals, the changes made

by the Public Housing Reform Act are designed to provide for more

resident involvement, and to increase resident participation and

awareness in creating and maintaining a positive living environment.

Section 505 of the Public Housing Reform Act amended section 2 of

the United States Housing Act of 1937 (42 U.S.C. 1437) (the ``1937

Act''). New section 2(b)(1) of the 1937 Act requires, except in certain

cases, that:

the membership of the board of directors or similar governing body

of each public housing agency shall contain not less than 1 member--

(A) who is directly assisted by the public housing agency; and (B)

who may, if provided for in the public housing agency plan, be

elected by the residents directly assisted by the public housing

agency.

New section 2(b)(2) of the 1937 Act establishes two exceptions to

the resident board member requirement. First, public housing agencies

(PHAs) that are located in a State that requires the members of a board

of directors or similar governing body of a PHA to be salaried and to

serve on a full-time basis are excepted from the resident board member

requirement. Second, PHAs with less than 300 units are excepted from

the resident board member requirement if they meet two conditions:

(1) The PHA must provide reasonable notice to the resident advisory

board of the opportunity for residents to serve on the PHA board of

directors or similar governing body; and

(2) The PHA must wait a reasonable time after the resident advisory

board has received this notice.

Resident advisory boards participate in the PHA planning process

and assist and make recommendations regarding the PHA Plan. The

membership of a resident advisory board is made up of individuals who

adequately reflect and represent the residents assisted by the PHA.

(See 24 CFR 903.13 for additional information regarding resident

advisory boards.) Part 903 of 24 CFR (entitled ``Public Housing Agency

Plans'') was established by interim rule published on February 18, 1999

(64 FR 8170).

The June 23, 1999 rule proposed to implement section 2(b) in a new

subpart E to 24 CFR part 964, which contains HUD's regulations

concerning resident participation and resident opportunities in public

housing. The preamble to the June 23, 1999 proposed rule describes in

detail the proposed amendments to 24 CFR part 964.

II. Significant Changes Between June 23, 1999 Proposed Rule and

This Final Rule

This final rule makes effective the policies and procedures

contained in the June 23, 1999 proposed rule and takes into

consideration the public comments received on the proposed rule. The

major changes made by this final rule in response to public comment are

described below. The rationale for these changes are discussed in

greater detail in Section III of this preamble.

1. Covered funding. The final rule clarifies that, subject to

certain exceptions, the statutory resident board member requirement

applies to any PHA that has a public housing annual contributions

contract with HUD or that administers Section 8 tenant-based rental

assistance. The requirement does not apply to any State financed

housing assistance or Section 8 project-based assistance.

2. State and local procedures. Sections 964.435 (which describes

initial implementation of the resident board member requirement) and

964.440 (which describes the procedures for filling an open board

member seat) of the proposed rule are not included in this final rule.

These sections established specific board-level procedures that were

intended to assist PHAs in implementing the resident board member

requirement. HUD decided not to include these sections in the final

rule and instead leave the type of implementation details covered by

Secs. 964.435 and 964.440 to State and local governments to resolve. It

is important to note, however, that the exclusion of these sections

from the final rule does not relieve covered PHAs of the responsibility

to implement the resident board member requirement. The resident board

member requirement took effect beginning on October 1, 1999. HUD

believes that implementation of this new requirement should occur as

soon as possible after this date. All covered PHAs must take the steps

necessary to comply with this requirement if they have not done so

already.

In addition, as a result of the decision to remove Secs. 964.435

and 964.440, the definitions of the terms ``elected board member'' and

``related unit of general local government'' have not been included in

the final rule because they are no longer necessary.

3. Exceptions to resident board member requirement. For purposes of

clarity, this final rule reorganizes the listing of the exceptions to

the statutory resident board member requirement.

[[Page 56871]]

The description of the exception for small PHAs is still located in

Sec. 964.425 (which has been re-designated as ``Small public housing

agencies''). The other two exceptions--for PHA boards with full-time

salaried members and for PHAs with no governing boards--have been

relocated to Sec. 964.405 (which describes the scope of the

applicability of the resident board member requirement).

4. PHAs that only administer Section 8 assistance. The final rule

clarifies that PHAs that only administer Section 8 assistance qualify

for the ``small PHA'' (i.e., those with less than 300 public housing

units) exception to the resident board member requirement regardless of

the number of Section 8 vouchers they administer.

5. Eligibility for ``small PHA'' exception. The final rule

clarifies that, in order to qualify for the ``small PHA'' exception,

the PHA must satisfy all of the conditions described in Sec. 964.425.

Specifically, the PHA must: (a) have less than 300 public housing units

(or no public housing units); (b) provide reasonable notice to the

resident advisory board of the opportunity for residents to serve on

the governing board; (c) not be notified of the intention of any

resident to participate on the governing board within a reasonable

time; and (d) repeat notification to the resident advisory board at

least once every year. If any of these conditions are not satisfied,

the PHA is subject to the resident board member requirements. For

example, if a small PHA (after providing the required notice to the

resident advisory board) is notified of a resident's intention to serve

on the governing board, the PHA must comply with the requirements of

new 24 CFR part 964, subpart E.

6. ``Reasonable time'' must not be less than 30 days. The final

rule provides that, in order to qualify for the ``small PHA''

exception, the PHA must provide residents with at least 30 days to

express their interest in serving on the PHA governing board.

7. Resident participation on the board must include matters

regarding covered assistance. The final rule clarifies that a resident

board member must be allowed to take part in PHA board decisions

related to the administration, operation, and management of Federal

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

This rule does not extend to matters that: (a) Exclusively relate to

other types of housing assistance (such as State financed housing

assistance); or (b) do not involve housing assistance (as may occur

where the city or county governing body also serves as the PHA board).

However, a PHA may choose to expand the scope of resident member

involvement to matters not covered by this rule.

8. Eligible resident. The final rule provides that, in order for a

resident to be eligible for board membership, the resident's name must

appear on the lease and the resident must be at least 18 years of age.

9. Resident board member no longer directly assisted. The final

rule clarifies that a resident board member who is no longer directly

assisted by the PHA may be removed for that cause from the PHA board,

where such action is permitted under State or local law. Alternatively,

the board member may be allowed to complete his/her current term as a

member of the PHA governing board. However, the board member may not be

re-appointed (or re-elected) to the governing board for purposes of

serving as the statutorily required resident board member.

10. Minimum qualifications for board membership. The final rule

provides that any generally applicable qualifications for board

membership also apply to residents, unless the application of the

requirements would result in the governing board not containing at

least one eligible resident as a member. Further, PHAs and localities

may not establish eligibility requirements for board membership that

are solely applicable to residents.

11. Election procedures. The final rule adopts several of the

relevant election procedures described in Sec. 964.130. This section

establishes the requirements governing the election of public housing

resident councils. Further, any election procedures devised by the PHA

must facilitate fair elections.

12. Conflicts of interest. The final rule clarifies that a resident

board member may take part in any matters before the board so long as

that matter is not applicable to that resident in a personal capacity.

A resident board member may only be excluded from participation in a

matter that uniquely applies to that resident, and the resident may be

involved in any matter that is generally applicable to residents. The

final rule also makes clear that having a lease with the PHA does not

constitute a conflict of interest for the resident board member.

Further, the rule clarifies that a board member's status as a public

housing resident or recipient of Section 8 tenant-based assistance does

not constitute a conflict of interest.

13. Conforming change. The final rule also makes a technical, non-

substantive change to 24 CFR part 964. Specifically, the rule removes

outdated Sec. 964.110, which describes HUD's policy regarding resident

membership on the PHA governing board. These provisions have been

incorporated in new subpart E.

III. Discussion of Public Comments Received on the June 23, 1999

Proposed Rule

The public comment period on the June 23, 1999 proposed rule closed

on August 23, 1999. HUD received 71 comments on the proposed rule.

Comments were submitted by PHAs; the three main organizations

representing PHAs; legal services organizations; resident

organizations; low-income housing advocates; and various other

organizations and individuals.

This section of the preamble presents a summary of the significant

issues raised by the public commenters on the May 29, 1998 proposed

rule and HUD's responses to these comments.

A. Support for Proposed Rule

Several commenters supported the proposed amendments to 24 CFR part

964. One of the commenters wrote to express his strong support for the

rule based on his experience as the executive director of a PHA that

has had a resident board member for 25 years. However, the majority of

the commenters writing in support also expressed concerns regarding the

implementation of the resident board membership requirements.

B. Opposition to Resident Board Member

Several commenters opposed the resident board membership

requirement. Although these commenters provided a variety of reasons

for their opposition, they all agreed that a PHA board should not be

required to include a public housing resident as a member.

Comment: Residents are not qualified to serve on PHA board. Several

of the commenters wrote that public housing residents lack the

necessary experience and expertise to serve on a PHA board. One of

these commenters wrote that resident board members, many of whom have

never owned property or managed a bank account, will be required to

make sound financial and management decisions. Another commenter wrote

that most of the qualified residents are elderly or caring for families

and, therefore, unable to serve on a PHA board. The commenters feared

that resident board members would lower the standard for PHA board

membership and weaken the PHA's ability to garner local support. The

commenters also worried that the requirement would

[[Page 56872]]

discourage qualified persons from serving on the PHA board.

Comment: Requirement will endanger confidentiality of board

deliberations and create conflicts of interest. Several commenters

wrote that resident members would endanger the confidentiality of board

deliberations. Other commenters wrote that the requirement may pose a

conflict of interest for a resident required to make decisions that

will financially impact the resident's family. Several commenters

worried about the potential for abuse of power by a resident board

member.

Comment: Requirement presents logistical difficulties. Several

commenters wrote about the logistical difficulties presented by the PHA

board membership requirement. For example, one commenter wrote that in

rural areas PHAs will have difficulty ensuring that a resident board

member travels the necessary distance to attend PHA board meetings. The

commenter also wrote that board meetings are often held during working

hours, which makes it difficult for employed residents to attend.

Comment: Residents are not interested in serving on PHA boards.

Other commenters wrote that PHAs often have difficulty attracting

resident participation. According to the commenters, this could result

in a resident board member who does not fully or enthusiastically

participate in decisionmaking. One commenter wrote that the lack of

resident interest indicates that public housing residents do not have

the necessary responsibility or dedication to serve on a PHA board.

Comment: Requirement is unnecessary--residents already have input

in PHA management and operations. Several commenters wrote that the PHA

board membership requirement is unnecessary. These commenters noted

that residents currently have the right to provide input in public

housing management and operations through the resident advisory board

and other forums.

HUD Response. (This response applies to all of the comments

discussed in this section III.B.) HUD's part 964 regulations have

always encouraged active resident participation in PHAs, including

involvement in management and operation (Sec. 964.15) and resident

membership on PHA governing boards (Sec. 964.110). HUD understands that

these commenters have concerns regarding the effectiveness of requiring

a resident board member. HUD is not in a position, however, to revise

or rescind this requirement because it is a statutorily mandated

requirement. As noted in the preamble to the July 2, 1999 proposed rule

and the preamble to this rule, section 2(b) of the 1937 Act requires

that each PHA governing board contain at least one member who is

directly assisted by the PHA. Congress enacted new section 2(b) because

Congress viewed the resident board member requirement as necessary to

promote a better understanding of resident concerns and to foster

better relations and communication between residents and PHAs (S. Rep.

No. 105-21, at 7 (1998)).

C. Federalism Concerns

Many commenters raised concerns regarding the Federalism

implications of the proposed rule. The comments reflect the belief that

the proposed rule infringes on the rights of PHAs, as well as the

rights of States and localities. The commenters wrote that

accomplishing the statutory goal of including a resident member on each

PHA board will be much more difficult than the proposed rule

contemplates. A large portion of the comments point out that section

2(b) conflicts with many State laws governing PHA board membership.

Several of the commenters wrote that adding an additional seat to an

elected board would conflict with the State election laws and infringe

on the rights of States. Many of the commenters asked HUD to seek a

change to the law where the organization of the board is not conducive

to resident participation, such as where the board is the city council.

One of the commenters wrote that section 2(b) may be

unconstitutional. According to the commenter, section 2(b) would

unconstitutionally ``rewrite State housing authority laws,'' and

``prescribe the manner in which appointing authorities will exercise

the prerogative of appointment, which derives from State statute.'' The

commenter wrote that the ``Federal government may neither issue

directives requiring the States to address particular problems, nor

command the State's officers, or those of their political subdivisions,

to administer or enforce a Federal regulatory program'' (quoting the

United States Supreme Court decision in Printz v. United States, 521

U.S. 98 (1997)). The commenter also noted that many PHAs operate

programs that ``have nothing to do with the Federal government.''

However, the ``Federal mandate contained in (section 2(b) and the

proposed rule) necessarily affects the nonfederal activities of'' PHAs.

The commenter acknowledged that the Federal government may attach

conditions to the receipt of Federal funding. However, the commenter

wrote that ``the mandates involved here are directed, not to the [PHA]

that is party to the (Annual Contributions Contract (ACC)), but to the

appointing authority, which is not.'' The commenter also acknowledged

that the Federal government can preempt State law, but did not believe

that preemption was justified in this context. Specifically, the

commenter did not find explicit statutory language authorizing

peremption, nor the existence of ``a regulatory scheme so pervasive as

to imply (a Federal) intent to occupy a particular field.'' Neither did

the commenter believe that preemption would be justified due to a

conflict between State law and section 2(b).

HUD Response. HUD agrees that this rulemaking, which seeks to

implement the explicit statutory directive of section 2(b), may have

direct effects on States and localities. The Federalism implications of

the rulemaking, however, derive solely from the statutory text and

substance of section 2(b). The scope of the rule is exclusively

concerned with implementation of the statutory resident board

membership requirement.

HUD believes that this rulemaking is necessary to: (1) Provide

guidance to PHAs in fulfilling this requirement; (2) minimize the

potential burdens on States and local governments in carrying out the

statutory mandate; and (3) ensure that the Federal objective of

increasing resident involvement in public housing is achieved. In most

instances where section 2(b) provides HUD with the flexibility to leave

a matter to the discretion of a State or locality, HUD has elected to

do so. As is noted in the summary of comments below, many commenters

requested additional regulatory guidance on a variety of matters

related to the statutory resident board membership requirement. In most

of these instances, HUD has declined to adopt the suggestion made by

the commenters on the basis that States and localities should have

flexibility in implementing the requirements of section 2(b). In one

instance, HUD decided not to include two sections of the proposed rule

(Secs. 964.435 and 964.440) specifically to provide States and

localities with the flexibility to reconfigure their PHA governing

boards to comply with the requirements of section 2(b) in a manner best

suited to local conditions.

HUD is not in a position to determine the Constitutionality of

section 2(b). However, HUD has concluded that section 2(b) preempts any

conflicting State laws regarding PHA board membership. This final rule

reflects this

[[Page 56873]]

statutory preemption, and does not constitute a decision on HUD's part

to preempt State law through its rulemaking authority.

Executive Order 12612, Federalism, was issued on October 30, 1987

(52 FR 41685). The Order requires that executive branch agencies take

Federalism concerns into account when developing and implementing

agency policy initiatives that have substantial, direct effects on

States or their political subdivisions, or on the relationship or

distribution of power among the various levels of government. Section 4

of Executive Order 12612 contains special provisions governing the

preemption of State law by Federal statutes and regulations.

Specifically, section 4 of the Order provides that:

To the extent permitted by law, Executive departments and

agencies shall construe, in regulations and otherwise, a federal

statute to preempt State law only when the statute contains an

express preemption provision or there is some other firm and

palpable evidence compelling the conclusion that the Congress

intended preemption of State law, or when the exercise of State

authority directly conflicts with the exercise of Federal authority

under the Federal statute.

Although section 2(b) does not expressly provide for the preemption

of State laws governing PHA board membership, HUD has concluded that

``firm and palpable'' evidence exists for concluding that the Congress

intended the preemption of State law in those cases where the ``State

authority directly conflicts'' with the Federal resident board

membership requirement.

The first reason for HUD's conclusion is the statutory language of

section 2(b). The statutory resident board membership requirement is

explicit:

Except as provided * * * the membership of the board of

directors or similar governing body of each (PHA) shall contain not

less than 1 member * * * who is directly assisted by the (PHA).

The exceptions referred to are: (1) For small PHAs with less than

300 units; and (2) for PHAs in States that require that PHA board

members be full-time salaried employees. The two statutory exceptions

reflect Congressional awareness that the resident board membership

requirement may be burdensome for small PHAs or conflict with certain

State requirements. Nevertheless, the Congress elected to provide

exceptions only for the two narrow situations described above.

Accordingly, HUD has concluded that the statutory language of section

2(b) contains firm and palpable evidence that the Congress intended the

resident board membership requirement to be broadly applicable,

regardless of conflicting State law.

HUD's second reason for its conclusion is based on the dominant

Federal interest in the public and assisted housing programs

administered under the 1937 Act. HUD's August 22, 1988 (53 FR 31926)

notice implementing Executive Order 12612 provides that HUD will infer

preemption where ``the field is one in which Federal interest is

sufficiently dominant to provide firm and palpable evidence that

Congress intended to preclude enforcement of State laws on the same

subject.'' HUD believes, for the following reasons, that the section

2(b) requirements satisfy this test.

The 1937 Act, a Federal statute, establishes the basic framework

for most of the public and assisted housing programs operated by PHAs

throughout the country. HUD is the Federal agency responsible for

establishing and enforcing the regulatory and contractual requirements

necessary to carrying out the purposes of the 1937 Act. With few

exceptions, HUD is the primary source of funding for public housing

developments assisted under the 1937 Act. Given this dominant Federal

role in the administration of 1937 Act programs, HUD has concluded that

section 2(b) preempts any conflicting State laws governing PHA board

membership.

Further, as one of the commenters acknowledges, the Federal

government may establish conditions on the receipt of Federal funds.

For the recipients of the Federal funds, these conditions preempt any

conflicting State or local requirements. As this final rule makes

clear, the resident board member requirement is a condition to the

receipt of funding under the 1937 Act. For example, the requirements of

section 2(b) apply solely to PHAs that have an ACC with HUD or that

administer tenant-based rental assistance under section 8 of the 1937

Act (see Sec. 964.405). Additionally, resident participation is

required only for those PHA board decisions related to Federally funded

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

requirements of section 2(b) do not extend to PHA board decisions that

exclusively affect other types of housing assistance, or that do not

regard housing assistance. (See Sec. 964.430(a)(2).) As a condition of

1937 Act funding, the statutory resident board member requirement

supersedes any conflicting State or local requirements regarding PHA

board membership for those PHAs receiving assistance under the 1937

Act.

D. Other General Comments Regarding the Proposed Rule

Comment: Stipends and Per Diems Should be Excluded from Income. Two

commenters wrote that stipends and per-diem expenses are common for PHA

board members. The commenters suggested that HUD exclude these items

from the income of the resident board member. Otherwise, the board

member would risk an increase in rent, which is calculated based on

resident income.

HUD Response. HUD agrees that counting such stipends as ``income''

for the purposes of determining rent could serve as a deterrent to

residents who would otherwise be interested in serving on the PHA

Board. HUD is addressing this issue in the final rule on Admission and

Occupancy to reflect that stipends for services rendered as a resident

board member are to be treated as resident services stipends, which are

exempted from a resident's income to the extent other such stipends are

exempt. (For additional details regarding the Admission and Occupancy

rule, see the proposed rule published on April 30, 1999 (64 FR 23460).)

Comment: What happens to a resident board member who is no longer

``directly assisted'' by the PHA? Several commenters asked whether a

resident who is no longer directly assisted by the PHA (due to

eviction, etc.) could continue to serve on the PHA board. Some of the

commenters wrote that requiring the resident to leave the board might

conflict with State or local requirements governing the selection and

removal of board members. Other commenters asked whether the resident

who replaces the removed board member would complete the original board

membership term or start a new term.

HUD Response. A resident board member who ceases to be directly

assisted by the PHA is no longer an ``eligible resident'' as defined in

Sec. 964.410. Such a board member may be removed from the PHA board for

that cause, where such action is permitted under State or local law.

State laws and PHA policies should be changed, where necessary, to

reflect that resident board members who cease to be directly assisted

by the PHA may be removed from the board for cause. Alternatively, the

board member may be allowed to complete his/her current term as a

member of the PHA governing board. However, the board member may not be

re-appointed (or re-elected) to the governing board for purposes of

serving as the statutorily required resident board member.

[[Page 56874]]

Comment: Final rule should provide for the removal of disruptive

resident board members. One commenter suggested that HUD revise the

proposed rule to provide for the removal of unruly or disruptive

resident PHA board members.

HUD Response. As previously noted, section 2(b) of the 1937 Act and

Sec. 964.430 of this final rule, provide that a resident board member

is a full member of the governing board. As a full member, the resident

board member is subject to the same rules regarding behavior as any

other board member. HUD does not see any need to impose additional

procedures regulating the behavior of resident board members. Moreover,

the imposition of such procedures specific to resident board members

would undermine the resident board member's position as a full member

of the governing board and would run counter to Congress' intent in

enacting the resident board member requirement.

Comment: Final rule should contain a mechanism for resident

complaints, investigation, and consequences of PHA noncompliance. One

commenter made this suggestion.

HUD Response. HUD has not adopted the change suggested by this

commenter. PHAs that fail to comply with the requirements of this final

rule are subject to the same noncompliance and enforcement procedures

that apply to other 1937 Act requirements. Consequently, HUD does not

see the need to implement additional compliance procedures.

Comment: Rule should provide for training and provision of

resources to resident board member. Two commenters wrote that the final

rule should provide for the training of resident board members by an

independent training entity on all aspects of PHA operations. The

commenters also suggested that resident board members should be

provided with adequate resources (office space, phone, photocopier,

etc.) to carry out their duties.

HUD Response. HUD has not changed the rule to reflect this request.

Resident board members are to be treated as any other member of the

governing board. If all board members are provided with resources, such

as office space and office equipment, these must also be made available

to the resident board member. HUD will not, however, require that PHAs

supply additional resources to the resident board member. HUD continues

to encourage PHAs to maintain partnerships to provide training to

residents consistent with Sec. 964.140.

Comment: What happens if there is only one resident who expresses

interest in serving on the board? Several commenters posed this

question.

HUD Response. Appointing authorities are not required to appoint

any specific member to the board of directors. If there is limited

interest among residents so that the PHA or appointing authority

believes there is no real choice in who becomes a board member, the PHA

or appointing authority may undertake outreach efforts to identify a

pool of interested residents. However, a PHA is required to have a

resident on its board, regardless of the number of residents who are

interested.

E. Comments Regarding Sec. 964.405--Applicability

Proposed Sec. 964.404 identifies the types of assistance to which

the resident board membership requirement applies. The proposed rule

provides that new subpart E is applicable to ``any [PHA] that has a

public housing annual contributions contract with HUD or a housing

assistance payments contract with HUD under section 8 of the United

States Housing Act of 1937 (42 U.S.C. 1437f).''

Comment: Does the resident board membership requirement apply to

PHAs that only administer Section 8 assistance? Several commenters

asked whether the resident board membership requirements are applicable

to PHAs that do not administer public housing programs, but do

administer Section 8 assistance. One of the commenters wrote that the

wording of proposed Sec. 964.405 is confusing because it refers to a

Section 8 ``housing assistance payment [HAP] contract with HUD.'' The

commenter noted that under the tenant-based Section 8 program, there is

no HAP contract with HUD. Another commenter noted that section 2(b)

establishes an exception for small PHAs based on the number of ``public

housing units'' operated by the PHA. According to the commenter, this

statutory language implies that PHAs that do not operate any ``public

housing units'' are totally exempt from the resident board membership

requirements.

HUD Response. PHAs that only administer Section 8 assistance are

subject to the resident board membership requirement. However, they

fall within the category of PHAs with less than 300 public housing

units, regardless of the number of Section 8 vouchers they administer.

This means that these PHAs are exempt from the resident board member

requirement, provided: (1) They have given adequate prior notice to the

resident advisory board of the opportunity for a resident to become a

resident board member, and (2) that within a reasonable time of such

notice, the PHA has not been notified of any residents who are

interested in such participation. This rule makes the necessary

qualification to Sec. 964.425, which describes the ``small PHA''

exception to the resident board member requirement.

The final rule also clarifies that the resident board membership

requirement applies to PHAs that ``administer tenant-based rental

assistance under Section 8 of'' the 1937 Act. The change is in response

to the commenter who noted that under the tenant-based Section 8

program there is no HAP contract with HUD.

HUD also notes that, under the interim rule on PHA Plans published

in the Federal Register on February 18, 1998 (64 FR 8170), all PHAs

(including those that only administer Section 8 assistance) are

required to establish a resident advisory board. (The PHA Plan interim

rule is codified at 24 CFR part 903.)

F. Comment Regarding Sec. 964.410--Additional Definitions

Proposed Sec. 964.410 defines various terms that are applicable to

the resident board membership requirements described in new 24 CFR part

964, subpart E.

Comment: Definition of ``directly assisted'' should be narrowed/

broadened. Proposed Sec. 964.410 defines ``directly assisted'' to mean

``a public housing resident or a participant in the tenant-based

section 8 program.'' Two commenters objected to this definition. One of

the commenters suggested that the scope of the definition be narrowed

to only include Federal programs. The commenter noted that many PHAs

administer State housing programs that should not be subject to Federal

requirements. However, the second commenter suggested that the

definition include all persons assisted by the PHA, including those

assisted under Department of Agriculture Rural Development projects.

HUD Response. The final rule clarifies that ``directly assisted''

means residing in public housing or receiving Section 8 tenant-based

assistance. Direct assistance does not include any State-financed

housing assistance programs, section 8 project-based assistance, or

Section 8 new construction assistance.

Comment: Definition of ``elected board member'' should exclude

residents who serve on PHA board as a result of being elected to

another office. The proposed rule defines ``elected board member'' to

mean ``either a

[[Page 56875]]

member of the governing board who is elected directly to the governing

board or who serves on the board as a result of being elected to

another office'' (emphasis supplied). One commenter wrote that the

definition should be revised to exclude resident board members who

serve on the board as a result of being elected to another office.

According to the commenter, including such members in the definition

frustrates the democratic electoral process contemplated by section

2(b).

HUD Response. As a result of the decision to remove Sec. 964.435

from the final rule, the definition of the term ``elected board

member'' is no longer necessary and has also been removed from the

final rule. This comment and the following discussion are included in

the final rule, however, because the situation where a resident board

member may serve on a governing board as a result of being elected to

another office may still occur.

There are a number of jurisdictions in which certain local elected

officials may also act, by virtue of their elected office, as members

of the PHA governing board. For example, a city council may also act as

the local PHA governing board. In cases like these, when a person is

elected to the city council they are also, automatically, ``elected''

to the PHA governing board. These members have dual roles. The

definition of ``elected board member'' in the proposed rule makes clear

that these elected officials are elected board members. If a PHA

resident is elected to such a ``dual-purpose'' local office, then that

resident may also serve as the statutorily required resident board

member under section 2(b).

The comment suggests that this creates a conflict if the PHA Plan

provides for the resident board member to be ``elected by the residents

directly assisted by the (PHA).'' The conflict appears to stem from the

fact that the resident board member has not been directly elected by

the residents, as provided for in the PHA Plan. In this case, however,

there is no conflict.

The requirement to have at least one resident board member is

mandatory, while provision for direct elections is merely permissive.

If provided for in the PHA Plan, section 2(b) states that a resident

may be directly elected by residents. Even if it is provided for in the

PHA Plan, section 2(b) does not require the direct election by

residents. Therefore, if a resident becomes a board member by virtue of

holding some other elected office, that resident may also qualify as

the statutorily required board member under section 2(b), even though

the resident was not directly elected by residents. However, the

locality is free to decide that the ``dual purpose'' resident should

not also serve as the statutorily required resident board member. The

locality could then hold the election provided for in the PHA Plan, and

have the resident board member directly elected by the public housing

residents.

Comment: Definition of ``eligible resident'' should include

additional criteria. Proposed Sec. 964.410 provides that a resident is

eligible to serve on a PHA board if the resident ``is directly assisted

by a [PHA] and is eighteen years of age or older.'' Several commenters

requested that the definition provide additional eligibility criteria.

For example, one of the commenters suggested that the criteria for

board membership should be the same as for membership in a public

housing Resident Council. However, the commenter also suggested that

the Resident Council eligibility requirements at Sec. 964.125 should be

revised so that residents whose names do not appear on the lease are

eligible for board membership. Other commenters recommended that only

residents in good standing should be eligible for PHA board membership.

One commenter suggested that any minimum qualifications for PHA board

members should also apply to residents. Another commenter requested

clarification on whether Section 8 Existing or New Construction

residents are eligible to serve on a PHA board.

HUD Response. In response to these comments, HUD reevaluated the

requirements contained in the definition of the term ``eligible

resident'' to make sure that the definition was appropriate and capable

of being implemented in a fair and consistent manner. HUD is concerned

about implementation of the resident board member requirement being

delayed because of conflicts over secondary issues such as the

definition of an eligible resident. Accordingly, HUD has made the

following changes to the definition of ``eligible resident.''

HUD has decided to include in the definition that to be eligible, a

resident must be named in the lease. The reason for this change is to

make clear exactly who may become a resident board member and to avoid

any possible conflicts about who is a resident directly assisted by a

PHA. A person is a resident directly assisted if he or she is are

listed on the lease.

HUD agrees with the commenters who wrote that any general minimum

qualifications for board membership should also apply to residents. HUD

has revised the proposed rule to adopt this suggestion. However, these

requirements cannot excuse a PHA's failure to comply with the

requirements of section 2(b). A PHA must have at least one resident

board member despite these minimum qualifications. Further, PHAs and

localities may not establish eligibility requirements for board

membership that are solely applicable to residents.

HUD has decided not to include a requirement that a resident be in

good standing. HUD believes that the term ``good standing'' may be

defined in different ways by each PHA and could be used to exclude a

resident from participation without good cause. Other than the

requirement that a resident must be named in the lease, the definition

of ``eligible resident'' remains the same as in the proposed rule.

G. Comments Regarding Sec. 964.420--Election of Resident Board Member

Proposed Sec. 964.420 provides that residents directly assisted by

a PHA may elect a resident board member, if provided for in the PHA

Plan.

Comment: PHA should be required to advise residents of election

procedures. One commenter suggested that a PHA should be required to

advise all residents of the election procedures in writing. Another

commenter recommended that the a PHA should be required to certify that

it has advised the PHA resident advisory board that resident board

members may be elected.

HUD Response. HUD believes that most decisions regarding election

procedure should be determined locally. However, HUD agrees that some

minimal standards must be met. Accordingly, HUD has revised the

proposed rule to adopt several of the relevant provisions of 24 CFR

964.130, which describes the election procedures for public housing

resident councils. Specifically, the final rule requires that the PHA

must provide residents with at least 30 days advance notice for

nominations and elections. The notice should include a description of

the election procedures, eligibility requirements, and dates of

nominations and elections. Further, any election procedures devised by

the PHA must facilitate fair elections.

Comment: Resident council election procedures should be

incorporated in final rule. One commenter suggested that the resident

council election procedures described in Sec. 964.130 should be

incorporated in new subpart E. According to the commenter, this will

ensure that sufficient notice is provided to residents before

elections, and that election are held on a fair and frequent basis.

[[Page 56876]]

HUD Response. As noted in the response to the previous comment, HUD

has revised the proposed rule to adopt several of the relevant

provisions of 24 CFR 964.130, which describes the election procedures

for public housing resident councils.

Comment: Final rule should require the election of resident board

members. Several commenters wrote that the final rule should require

that resident board members be elected. According to the commenters,

this will ensure that the board membership process is fair and

democratic.

HUD Response. The statute provides that the decision to allow an

elected resident board member is to be made locally. Section 2(b) does

not establish a right to an elected resident board member, it merely

allows for the possibility and requires that this choice become part of

the PHA Plan. The purpose of informing residents of the fact that a

resident board member may be elected is to allow residents to petition

their PHAs to allow elected resident board members. In the end,

however, the decision to allow elected resident board members is a

local one.

H. Comments Regarding Sec. 964.425--Exceptions

Proposed Sec. 964.425 describes the exceptions to the resident

board membership requirements. Specifically, the proposed rule exempts

PHAs that are not governed by a PHA board, or are located in a State

that requires board members to serve on a full-time salaried basis. The

proposed rule also provides that PHAs with less than 300 public housing

units are exempted from the resident board member requirement, provided

the PHA has: (1) Provided reasonable notice to the resident advisory

board of the opportunity for residents to serve on the governing board;

and (2) not been notified of the intention of any resident to

participate on the governing board within a reasonable time of the

resident advisory board receiving the notice.

As noted in Section II of this preamble, this final rule

reorganizes the listing of the exceptions to the statutory resident

board member requirement. The description of the exception for small

PHAs is still located in Sec. 964.425. The other two exceptions--for

PHA boards with full-time salaried members and for PHAs with no

governing boards--have been relocated to Sec. 964.405 (which describes

the scope of the applicability of the resident board member

requirement).

Comment: Reasonable notice should be provided to all residents.

Several commenters wrote that a PHA should be required to provide

reasonable notice to all residents, not just the resident advisory

board. One commenter wrote that the notice could accompany the monthly

rent notifications, or the mailings regarding the PHA Plan process.

Another commenter suggested that the notice could be posted at each

public housing site and rental office.

Several commenters were concerned that PHAs that do not administer

public housing programs under the 1937 Act (but do administer Section 8

assistance) might not be able to comply with the notification

requirement. According to these commenters, such agencies do not have

resident advisory boards.

HUD Response. HUD has not incorporated this request into the final

rule. Section 2(b) of the 1937 Act specifies that notice must be given

to the resident advisory board. Section 2(b) does not require or

provide for the notification of all public housing residents. The

procedures for ensuring that residents are made aware of the

opportunity to participate on the PHA board should be determined

locally (including how the resident advisory board will notify the

residents of such opportunities, and when that notice needs to be

given).

In response to the commenters concerned about the ability of PHAs

that do not administer 1937 Act public housing programs to comply with

the notification requirements, HUD again notes that its interim rule on

PHA Plans (February 18, 1999; 64 FR 8170) requires that all PHAs

establish resident advisory boards (see Sec. 901.13(b) of the interim

rule).

Comment: Final rule should specify what constitutes a ``reasonable

time''. To qualify for exemption, small PHAs must also provide

residents with a ``reasonable time'' to express their intention to

participate on the governing board. Several commenters suggested that

the final rule should specify what constitutes a ``reasonable time.''

Two commenters recommended that the rule provide for a 45-day period.

Another commenter suggested a 120-day period. One of the commenters

suggested that PHAs provide residents with written procedures for

indicating their interest in serving on the governing board.

HUD Response. In developing this final rule (and the June 23, 1999

proposed rule), HUD wished to provide PHAs with flexibility in

implementing the resident board member requirement. The language of

this final rule tracks the statutory language of section 2(b) and

requires that PHAs must provide residents with a reasonable time to

express their interest in serving on the PHA governing board. HUD does

not believe it would be appropriate to dictate by regulation exactly

how much time is ``reasonable,'' nor what procedures should govern

resident expressions of interest. HUD defers to PHAs to make these

determinations on a local basis. However, HUD agrees that a minimum

time period should be established to ensure that residents have

adequate time to indicate their interest. Accordingly, this final rule

provides that the ``reasonable time'' provided by PHAs must not be less

than 30 days.

Comment: HUD should establish additional exemptions. Several

commenters advocated that HUD expand the list of exceptions to the

resident board membership requirement. For example, one commenter

recommended that HUD should exempt PHAs with less than 500 public

housing units. Two commenters suggested that the final rule exempt PHAs

already subject to State or local resident board membership

requirements. Another commenter wrote that HUD should extend the

exemption for full-time salaried PHA boards to include part-time board

members. Several commenters advocated the exemption of PHAs that do not

administer public housing or Section 8 programs as their principal

means of providing housing assistance.

Several commenters wrote that PHA boards consisting of elected

officials (such as city council members or county commissioners) should

not be subject to the resident board membership requirements. These

commenters noted that these officials often take oaths of office and

are, therefore, subject to a different standard of accountability than

a public housing resident. Other commenters advocated an exemption for

elected PHA boards.

HUD Response. Section 2(b) provides clear and narrow exceptions to

the resident board member requirement. The statute does not provide HUD

with the authority to establish additional exceptions.

Comment: Small PHAs should be required to comply with resident

board membership requirement. One commenter wrote that all PHAs, even

those with under 300 units, should be required to include a resident

member on the governing board. Another commenter urged that HUD not

revise the proposed rule to expand the list of exceptions.

HUD Response. The statutory language of section 2(b) explicitly

exempts small PHAs with less than 300 units from the resident board

membership requirement if they follow certain procedures. Accordingly,

HUD does not have the statutory authority to

[[Page 56877]]

adopt the suggestion made by the commenter.

I. Comments Regarding Sec. 964.430--Nondiscrimination

Proposed Sec. 964.430 provides that a ``resident board member is a

full member of the governing board.'' Further, proposed Sec. 964.430(c)

provides that a PHA board ``may not exclude any resident board member

from participating in any matter before the governing board on the

grounds that the resident board member's lease with the [PHA] either

results or may result in a conflict of interest, unless the matter is

clearly applicable to the resident board member only in a personal

capacity.''

Comment: State or local conflict of interest requirements should be

applicable to resident board members. Several commenters objected to

the proposed conflict of interest language quoted above. According to

these commenters, the proposed rule is not strict enough, and would

allow residents to unfairly benefit from their policy making position.

The commenters suggested that State and local conflict of interest

requirements, which apply to the other members of the PHA board, should

also be applicable to resident board members.

HUD Response. Section 2(b) of the 1937 Act makes clear that

resident board members must be treated as full members of the PHA

governing board. In implementing this requirement, HUD has attempted to

address possible conflicts of interest issues by providing a resident

may not take part in any decisions or activities that relate

specifically to that resident in a personal capacity. However, section

2(b) is clear that a resident must not be precluded from board

membership and activities based on his or her status as a resident of

public housing or a recipient of Section 8 tenant-based assistance.

Comment: Suggested clarification to conflict of interest provision.

One commenter suggested that the language of proposed Sec. 964.430(c)

be clarified to provide that a resident may vote on all matters of

general applicability, including issues regarding rents. The commenter

recommended the following addition to the proposed regulatory language:

``* * * unless the matter is clearly applicable to the resident board

member only in a personal capacity which applies uniquely to that

member and not generally to residents or to a subcategory of

residents'' (emphasis supplied to indicate additional language).

Another commenter suggested that HUD issue additional guidance

regarding the conflict of interest governing resident participation on

a PHA board. The commenter wrote that such guidance would prevent

misinterpretation of the conflict of interest provisions and facilitate

compliance with these requirements.

HUD Response. HUD has revised the rule generally to adopt the

language suggested by the first commenter. HUD agrees with the

commenter that the addition of this language clarifies the conflict of

interest requirements, and will assist PHAs and residents to comply

with these provisions. HUD believes that the regulatory language of

revised Sec. 964.430(c) makes clear that a resident board member may

take part in any matters before the board so long as that matter is not

applicable to that resident in a personal capacity. A resident board

member may only be excluded from participation in a matter that

uniquely applies to that resident, and the resident may be involved in

any matter that is generally applicable to residents.

HUD wishes to reiterate that having a lease with the PHA does not

constitute a conflict of interest for the resident board member. If

such a lease could be viewed as constituting a conflict of interest,

the intent of section 2(b) would be frustrated. Under such an

interpretation, no resident with a lease with the PHA would be able to

serve on its governing board. HUD also wishes to clarify that, for

similar reasons, the board member's status as a public housing resident

or recipient of Section 8 tenant-based assistance does not constitute a

conflict of interest. Such an interpretation would prevent residents

directly assisted by the PHA from serving on the governing board.

In response to the second commenter, HUD may issue additional

guidance regarding the conflict of interest provisions (or other

provisions of this final rule) as necessary. Such guidance may be

issued in a handbook, Federal Register notice, or other appropriate

means.

Comment: Resident participation should be limited to Federal

programs. Several commenters noted that PHAs administer non-Federal

housing programs. These commenters recommended that the final rule

limit the participation of the resident board members to those

decisions regarding Federal assistance.

HUD Response. This final rule clarifies that a resident board

member must be allowed to take part in decisions related to the

administration, operation, and management of Federal public housing

programs and Section 8 tenant-based rental assistance programs. This

rule does not extend to matters that: (1) Exclusively relate to other

types of housing assistance (such as State financed housing

assistance); or (2) do not involve housing assistance (as may occur

where the city or county governing body also serves as the PHA board).

However, a PHA may choose to expand the scope of resident member

involvement to matters not covered by this rule.

J. Comments Regarding Sec. 964.435--Initial Implementation of Resident

Board Member Requirement

Proposed Sec. 964.435 provides that if the PHA board consists of

appointed board members, the first seat on the board that becomes open

on or after October 1, 1999, would have to be filled by an eligible

resident. If the board consists of elected board members, the chief

executive officer of the unit of general local government whose

jurisdiction coincides most directly with the jurisdiction of the PHA

would have to create at least one additional seat on the board, by

December 31, 1999, and would have to fill that seat with an eligible

resident. In the case of multi-jurisdictional PHAs, the chief executive

officers of each unit of general local government that comprises the

jurisdiction of the PHA would be jointly responsible for creating and

filling any additional seats.

HUD received a number of public comments on the initial

implementation procedures described in proposed Sec. 964.435. Several

of these commenters raised the Federalism concerns summarized in

section III.C of this preamble. As noted, HUD has responded to these

concerns by not including Sec. 964.435 in the final rule. In developing

the regulations implementing section 2(b), HUD wished to grant PHAs and

localities flexibility in complying with the resident board member

requirement. Rather than specifying regulatory procedures for the

appointment of residents to a PHA board, HUD has decided to leave these

procedures to each locality. HUD is mindful of the implementation

difficulties presented by the statutory resident board member

requirement, and encourages the development of local solutions to these

problems.

Several commenters raised questions or issues about the specific

procedures described in proposed Sec. 964.435. As a result of the

decision not to include Sec. 964.435 in the final rule, these public

comments are no longer applicable to this final rule and are not

discussed in the summary below.

Comment: May a PHA choose to elect a resident board member in a

jurisdiction where PHA board members

[[Page 56878]]

are typically appointed? One commenter posed this question.

HUD Response. The statutory language of section 2(b) is clear--

residents directly assisted by the a PHA may elect a resident board

member, if provided for in the PHA Plan. A PHA could, therefore, choose

to elect a resident board member in a jurisdiction where PHA board

members are usually appointed. The winner of the election would then be

appointed and serve as the statutorily required board member under

section 2(b). However, the choice to hold such an election would need

to be provided for in the PHA Plan.

Comment: HUD should postpone implementation date until July 1,

2000. Several commenters wrote that the implementation dates provided

in the proposed rule are unrealistic. The commenters noted that many

jurisdiction will have to revise their local laws in order to permit

the appointment of a resident board member. The commenters suggested

that HUD delay the implementation dates to permit localities to conform

their laws governing the selection and appointment of board members to

the requirements of section 2(b). Several commenters proposed an

implementation date of July 1, 2000, which reflects the probable

effective date of the necessary legislation.

HUD Response. While HUD has decided not to include Sec. 964.435 in

the final rule, section 503 of the Public Housing Reform Act is clear

that the amendments made by the statute, including the resident board

member requirement, will take effect beginning on October 1, 1999. HUD

believes that implementation of section 2(b) should occur as soon as

possible after this date if a PHA is not already in compliance.

Congress provided a one year period from enactment to implementation to

provide PHAs and localities with adequate notice of the resident board

member requirements.

Comment: Implementation should be ``phased-in''. Many commenters

suggested that HUD ``phase-in'' implementation of the board membership

requirement. These commenters wrote that the final rule should allow

PHAs to implement the new requirement at some point during a specified

period (the next 5 board vacancies, 2 years, etc.) These commenters

feared that the proposed implementation schedule might force the

removal of the most knowledgeable PHA board member, in order to make

room for a resident.

HUD Response. HUD has not adopted the change suggested by these

commenters. As noted in the response to the previous comment, the

resident board member requirement becomes effective beginning October

1, 1999. HUD believes that implementation of section 2(b) should occur

as soon as possible after this date. All covered PHAs must take the

steps necessary to comply with this requirement if they have not done

so already. It has been one year since section 2(b) became law,

providing States and PHAs time to address the concerns this provision

raises and to determine how best to implement this statutory

requirement.

Comment: Implementation date should not be postponed. One commenter

advocated that HUD adopt the proposed implementation schedule without

change. The commenter wrote that implementation should not be delayed.

HUD Response. HUD agrees with this commenter that implementation of

the resident board member requirement should occur as soon as possible

after October 1, 1999. All covered PHAs must take the steps necessary

to comply with this requirement if they have not done so already. As

noted above, States and PHAs have had time to address the concerns

raised by section 2(b) and to determine how best to implement this

statutory requirement.

K. Comments Regarding Sec. 964.440--Filling an Open Board Member Seat

Proposed Sec. 964.440 describes the procedures governing the

filling of an open board seat by a resident. HUD received a number of

public comments on proposed Sec. 964.440. Several of these commenters

raised the Federalism concerns summarized in Section III.C of this

preamble, above. As noted, HUD has responded to these concerns by not

including Sec. 964.440 in the final rule. In developing the regulations

implementing section 2(b), HUD wished to grant PHAs and localities with

flexibility in complying with the resident board member requirement.

Rather than specifying regulatory procedures for the appointment of

residents to a PHA board, HUD has decided to leave these procedures to

each locality. HUD is mindful of the implementation difficulties

presented by the statutory resident board member requirement, and

encourages the development of local solutions to these problems.

Several commenters raised questions or issues about the specific

procedures described in proposed Sec. 964.440. As a result of the

decision not to include Sec. 964.440 in the final rule, these public

comments are no longer applicable to this final rule and are not

discussed in this summary.

IV. Findings and Certifications

Environmental Impact

This final rule does not direct, provide for assistance or loan and

mortgage insurance for, or otherwise govern or regulate, real property

acquisition, disposition, leasing, rehabilitation, alteration,

demolition, or new construction, or establish, revise, or provide for

standards for construction or construction materials, manufactured

housing, or occupancy. Therefore, under HUD's regulations at 24 CFR

50.19(c)(1), this rule is categorically excluded from environmental

review under the National Environmental Policy Act of 1969 (42 U.S.C.

4321).

Regulatory Flexibility Act

The Secretary has reviewed this final rule before publication and

by approving it certifies, in accordance with the Regulatory

Flexibility Act (5 U.S.C. 605(b)), that this final rule will not have a

significant economic impact on a substantial number of small entities.

The final rule implements section 505 of the Public Housing Reform Act

(42 U.S.C. 1437), which requires with certain exceptions, that the

board of directors or similar governing body of a PHA contain not less

than one member who is directly assisted by the PHA. Section 505 and

this final rule provide flexibility for smaller PHAs through an

exception for PHAs that have less than 300 public housing units.

Consequently, HUD does not believe that this final rule will have a

significant economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act

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

1531-1538) (UMRA) requires Federal agencies to assess the effects of

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

the private sector. This final rule does not impose, within the meaning

of the UMRA, any Federal mandates on any State, local, or tribal

governments or on the private sector.

Federalism Impact

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

of Executive Order 12612 (captioned ``Federalism''), has determined

that the policies contained in this final rule will have federalism

implications. Specifically, the requirement that the membership of the

board of directors or similar governing body of a PHA must contain not

less than one member who is directly assisted by the PHA will have

direct effects on any State or local laws that govern the organization

of PHAs.

[[Page 56879]]

HUD provided copies of the June 23, 1999 proposed rule to each of the

50 State Attorney Generals and specifically invited their comments on

the proposed regulatory requirements. HUD has also prepared and

submitted to the Office of Management and Budget a Federalism

Assessment that addresses the Federalism implications raised by this

rulemaking.

Regulatory Planning and Review

The Office of Management and Budget has reviewed this rule under

Executive Order 12866 (captioned ``Regulatory Planning and Review'')

and 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 during regular business hours

(7:30 a.m. to 5:30 p.m.) at the Office of the General Counsel, Rules

Docket Clerk, Room 10276, U.S. Department of Housing and Urban

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

List of Subjects in 24 CFR Part 964

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

Reporting and recordkeeping requirements.

For the reasons discussed in the preamble, HUD amends 24 CFR part

964 as follows:

PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC

HOUSING

1. The authority citation for 24 CFR part 964 is revised to read as

follows:

Authority: 42 U.S.C. 1437, 1437d, 1437g, 1437l, 1437r, 1437t,

and 3535(d).

2. Amend Sec. 964.3 as follows:

a. Revise paragraph (a);

b. Redesignate paragraph (e) as paragraph (f); and

c. Add new paragraph (e).

The addition and revision to Sec. 964.3 read as follows:

Sec. 964.3 Applicability and scope.

(a) The policies and procedures contained in this part apply to any

PHA that has a Public Housing Annual Contributions Contract (ACC) with

HUD. This part, except for subpart E, does not apply to PHAs with

housing assistance payments contracts with HUD under section 8 of the

U.S. Housing Act of 1937.

* * * * *

(e) Subpart E of this part implements section 2(b) of the United

States Housing Act of 1937 (42 U.S.C. 1437), which provides for

resident membership on the board of directors or similar governing body

of a PHA. Subpart E applies to any public housing agency that has a

public housing annual contributions contract with HUD or administers

tenant-based rental under section 8 of the United States Housing Act of

1937 (42 U.S.C. 1437f).

* * * * *

Sec. 964.110 [Removed]

2. Remove Sec. 964.110.

3. Add subpart E to read as follows:

Subpart E--Resident Board Members

Sec.

964.400 Purpose.

964.405 Applicability.

964.410 Additional definitions.

964.415 Resident board members.

964.420 Resident board member may be elected.

964.425 Small public housing agencies.

964.430 Nondiscrimination.

Subpart E--Resident Board Members

Sec. 964.400 Purpose.

The purpose of this subpart is to implement section 2(b) of the

United States Housing Act of 1937 (42 U.S.C. 1437).

Sec. 964.405 Applicability.

(a) General. Except as described in paragraph (b) of this section,

this subpart applies to any public housing agency that has a public

housing annual contributions contract with HUD or administers tenant-

based rental assistance under section 8 of the United States Housing

Act of 1937 (42 U.S.C. 1437f).

(b) Exceptions. The requirements of this subpart do not apply to a

public housing agency that is:

(1) Located in a State that requires the members of a governing

board to be salaried and to serve on a full-time basis; or

(2) Not governed by a governing board.

Sec. 964.410 Additional definitions.

The following additional definitions apply to this subpart only:

Directly assisted. Directly assisted means a public housing

resident or a recipient of housing assistance in the tenant-based

section 8 program. Direct assistance does not include any State

financed housing assistance or Section 8 project-based assistance.

Eligible resident. An eligible resident is a person:

(1) Who is directly assisted by a public housing agency;

(2) Whose name appears on the lease; and

(3) Is eighteen years of age or older.

Governing board. Governing board means the board of directors or

similar governing body of a public housing agency.

Resident board member. A resident board member is a member of the

governing board who is directly assisted by that public housing agency.

Sec. 964.415 Resident board members.

(a) General. Except as provided in Secs. 964.405(b) and 964.425,

the membership of the governing board of each public housing agency

must contain not less than one eligible resident board member.

(b) Resident board member no longer directly assisted. (1) A

resident board member who ceases to be directly assisted by the public

housing agency is no longer an ``eligible resident'' as defined in

Sec. 964.410.

(2) Such a board member may be removed from the PHA board for that

cause, where such action is permitted under State or local law.

(3) Alternatively, the board member may be allowed to complete his/

her current term as a member of the governing board. However, the board

member may not be re-appointed (or re-elected) to the governing board

for purposes of serving as the statutorily required resident board

member.

(c) Minimum qualifications for board membership. Any generally

applicable qualifications for board membership also apply to residents,

unless the application of the requirements would result in the

governing board not containing at least one eligible resident as a

member. Further, PHAs and localities may not establish eligibility

requirements for board membership that are solely applicable to

residents.

Sec. 964.420 Resident board member may be elected.

(a) General. Residents directly assisted by a public housing agency

may elect a resident board member if provided for in the public housing

agency plan, adopted in accordance with 24 CFR part 903.

(b) Notice to residents. The public housing agency must provide

residents with at least 30 days advance notice for nominations and

elections. The notice should include a description of the election

procedures, eligibility requirements, and dates of nominations and

elections. Any election procedures devised by the public housing agency

must facilitate fair elections.

Sec. 964.425 Small public housing agencies.

(a) General. The requirements of this subpart do not apply to any

public housing agency that:

[[Page 56880]]

(1) Has less than 300 public housing units (or has no public

housing units):

(2) Has provided reasonable notice to the resident advisory board

of the opportunity for residents to serve on the governing board;

(3) Has not been notified of the intention of any resident to

participate on the governing board within a reasonable time (which

shall not be less than 30 days) of the resident advisory board

receiving the notice described in paragraph (a)(3) of this section; and

(4) Repeats the requirements of paragraphs (a)(2) and (a)(3) of

this section at least once every year.

(b) Public housing agencies that only administer Section 8

assistance. A public housing agency that has no public housing units,

but administers Section 8 tenant-based assistance, is eligible for the

exception described in paragraph (a) of this section, regardless of the

number of Section 8 vouchers it administers.

(c) Failure to meet requirements for exception. A public housing

agency that is otherwise eligible for the exception described in

paragraphs (a) and (b) of this section, but does not meet the three

conditions described in paragraphs (a)(2) through (a)(4) of this

section, must comply with the requirements of this subpart.

Sec. 964.430 Nondiscrimination.

(a) Membership status.--(1) General. A resident board member is a

full member of the governing board.

(2) Resident participation must include matters regarding Federal

public housing and Section 8 tenant-based assistance. A resident board

member must be allowed to take part in decisions related to the

administration, operation, and management of Federal public housing

programs and Section 8 tenant-based rental assistance programs. This

rule does not extend to matters that:

(i) Exclusively relate to other types of housing assistance (such

as State financed housing assistance); or

(ii) Do not involve housing assistance (as may occur where the city

or county governing body also serves as the PHA board).

(3) Public housing agency may expand scope of resident

participation. A public housing agency may choose to expand the scope

of resident member involvement to matters not required under paragraph

(a)(2) of this section.

(b) Residence status. A governing board may not prohibit any person

from serving on the governing board because that person is a resident

of a public housing project or is assisted under section 8 of the

United States Housing Act of 1937 (42 U.S.C. 1437f).

(c) Conflict of interest. A governing board may not exclude any

resident board member from participating in any matter before the

governing board on the grounds that the resident board member's lease

with the public housing agency, or the resident board member's status

as a public housing resident or recipient of Section 8 tenant-based

assistance, either results or may result in a conflict of interest,

unless the matter is clearly applicable to the resident board member

only in a personal capacity and applies uniquely to that member and not

generally to residents or to a subcategory of residents.

Dated: October 14, 1999.

Harold Lucas,

Assistant Secretary for Public and Indian Housing.

[FR Doc. 99-27301 Filed 10-20-99; 8:45 am]

BILLING CODE 4210-33-P