Quality Housing and Work Responsibility Act of 1998; Initial Guidance

SUMMARY: On October 21, 1998, President Clinton signed into law the

Quality Housing and Work Responsibility Act of 1998. This new statute,

part of HUD's fiscal year 1999 HUD Appropriations Act, embodies many of

the reforms of the HUD 2020 Management Reform Plan that are directed at

revitalizing and improving HUD's public housing and Section 8

assistance programs. The purpose of this Notice is to advise the public

of those public and assisted housing statutory provisions that are

effective immediately and action that may or should be taken now. This

Notice also provides guidance on certain other provisions in the FY

1999 HUD Appropriations Act that impact public housing programs and

Section 8 assistance.

FOR FURTHER INFORMATION CONTACT: For further information regarding

public housing and the Section 8 certificate, voucher and moderate

rehabilitation programs contact Rod Solomon, Senior Director for Policy

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

Housing and Urban Development, 451 Seventh Street, SW, Room 4116,

Washington, DC, 20410; telephone (202) 708-0713 (this is not a toll-

free number). For further information regarding other Section 8

programs contact Willie Spearmon, Director, Office of Multifamily

Business Products; telephone (202) 708-3000. Persons with hearing or

speech impairments may access that number via TTY by calling the

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

specialists for more specific HUD program areas are listed on the HUD

web page at http://hudweb.hud.gov/offices.html.

SUPPLEMENTARY INFORMATION:

Introduction

On October 21, 1998, President Clinton signed into law HUD's fiscal

year (FY) 1999 Appropriations Act, which includes the Quality Housing

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

Appropriations Act) (QHWRA). The FY 1999 HUD Appropriations Act and the

QHWRA (Pub.L. 105-276, 112 Stat. 2461), together, enact landmark

measures that include transforming public housing, deconcentrating

poverty, creating additional housing assistance vouchers, merging the

Section 8 certificate and voucher programs, and enabling more families

to obtain FHA mortgages to become homeowners. Of particular importance

to HUD and its public housing and Section 8 program partners are the

reforms made by the QHWRA. The QHWRA makes significant and numerous

amendments to the United States Housing Act of 1937 (USHA). It is

important to note, however, that the USHA remains in effect except as

amended by the QHWRA.

The QHWRA constitutes a substantial overhaul of HUD's public

housing and Section 8 assistance programs. The QHWRA enacts into law

many of the reforms originally proposed in Secretary Andrew Cuomo's HUD

2020 Management Reform Plan, HUD's public housing bill and

Congressional bills that are directed at revitalizing and improving

HUD's public housing and Section 8 tenant-based programs. For public

housing, the HUD 2020 Management Reform Plan provides for consolidation

of public housing programs, decreased regulation of well-managed public

housing agencies (PHAs), higher performance standards for all PHAs, and

specific action to address PHAs with troubled management. The QHWRA

adopts these reforms, and enacts additional measures to protect access

to housing assistance for the poorest families, deconcentrate poverty

in public housing, support families making the transition from welfare

to work, and transform the public housing stock and the Section 8

tenant-based assistance programs.

The purposes of the QHWRA, as stated in section 502(b) of the

QHWRA, are as follows:

The purpose of this [the QHWRA] is to promote homes that are

affordable to low-income families in safe and healthy environments,

and thereby contribute to the supply of affordable housing, by--

(1) Deregulating and decontrolling public housing agencies,

thereby enabling them to perform as property and asset managers;

(2) Providing for more flexible use of Federal assistance to

public housing agencies, allowing the authorities to leverage and

combine assistance amounts with amounts obtained from other sources;

(3) Facilitating mixed income communities and decreasing

concentrations of poverty in public housing;

(4) Increasing accountability and rewarding effective management

of public housing agencies;

(5) Creating incentives and economic opportunities for residents

of dwelling units assisted by public housing agencies to work,

become self-sufficient, and transition out of public housing and

federally assisted dwelling units;

(6) Consolidating the voucher and certificate programs for

rental assistance under section 8 of the United States Housing Act

of 1937 into a single market-driven program that will assist in

making tenant-based rental assistance under such section more

successful at helping low-income families obtain affordable housing

and will increase housing choice for low-income families; and

(7) Remedying the problems of troubled public housing agencies

and replacing or revitalizing severely distressed public housing

projects.

Implementation of the QHWRA

The QHWRA makes several of its provisions effective upon enactment

(October 21, 1998). Other provisions of the QHWRA will take effect on

various dates between October 21, 1998, the enactment date of the

QHWRA, and October 1, 1999, the beginning of Federal fiscal year 2000.

(A Federal fiscal year runs from October 1st to September 30th). The

majority of the provisions of the QHWRA, however, will take effect on

October 1, 1999. Provisions of the QHWRA which are effective upon

enactment and which conflict with existing regulations prevail over the

regulations unless HUD has specifically stated otherwise, in this

Notice or elsewhere. In addition to specifying the dates by which

various statutory sections will take effect, the QHWRA also specifies

the method of implementation for many of its provisions. These methods

include notice and comment rulemaking (proposed rulemaking), interim

rulemaking, negotiated rulemaking, or issuance by direct notice or

Federal Register notice.

The purpose of this Notice is to advise HUD's public housing and

Section 8 program partners, as well as members of the public, of

certain provisions of the QHWRA and the FY 1999 HUD Appropriations Act

that are effective immediately and to provide guidance with respect to

actions that may now be taken or should be taken by PHAs and owners of

Section 8 assisted projects. This Notice does not provide a section-by-

section analysis of the QHWRA, nor does it provide guidance on all

sections. In this Notice, however, HUD has attempted to address those

key statutory sections that are effective now, and which HUD believed

would be helpful to PHAs and others to have early guidance. The

statutory sections that are effective now and for which HUD is issuing

initial guidance are covered in

[[Page 8193]]

Section I of this Notice. The majority of the statutory sections of the

QHWRA that are not addressed in this Notice (1) require rulemaking by

the QHWRA, (2) have been determined by HUD to be not immediately

effective, or (3) need elaboration or interpretation, and therefore

require rulemaking on the part of HUD or issuance of separate guidance

that addresses in detail the subject matter of a particular statutory

section. Section II of this Notice provides a list of those statutory

provisions for which the QHWRA requires rulemaking for implementation

or HUD has determined that rulemaking is necessary for implementation.

The guidance provided in this Notice, read together with reference

to the statutory language, will better assist the reader in

understanding (1) the changes that are being implemented in HUD's

public housing and Section 8 programs, (2) the prompt action that HUD

recommends be taken now or in the very near future, and (3) the reasons

for any deferred action with respect to certain statutory provisions.

Accordingly, the guidance in this Notice is complete only when read in

conjunction with the statutory language. The contents of the QHWRA are

available on the Internet by Thomas Legislative Information Service at

http://thomas.loc.gov or by contacting HUD's Office of Public and

Indian Housing or HUD's Office of Housing.

In addition to the guidance provided by this Notice, HUD staff, and

specifically the staff in the Office of Public and Indian Housing at

Headquarters and in the Field Offices, are ready to assist PHAs in

understanding the provisions of the QHWRA and with carrying out their

responsibilities under new provisions of the QHWRA. The Office of

Public and Indian Housing has established a section of its web site

that is devoted to providing additional information about the QHWRA and

includes a detailed summary of the new law (please see http://

www.hud.gov/pih/legis/titlev.html). HUD is committed to working closely

with its public housing and Section 8 partners to see that the changes

made by the QHWRA to HUD's public housing and Section 8 programs are

successfully implemented and these programs are significantly improved

with respect to the services and assistance they provide to low-income

families.

Other QHWRA Publications in Today's Federal Register

Elsewhere in today's Federal Register, HUD is publishing:

(1) One of the most significant rules required by the QHWRA--the

interim rule that would implement the Public Housing Agency Plan. This

rulemaking is required by section 511 of the QHWRA.

(2) An Advance Notice of Proposed Rulemaking on HUD's public

housing drug elimination program that solicits comments in advance of

rulemaking on HUD's proposal to provide for formula funding of HUD's

drug elimination grant funds.

(3) A notice on Section 8 renewals. Section 556 of the QHWRA added

a new provision, section 8(dd) to the U.S. Housing Act of 1937. Section

8(dd) specifies the method for calculating the amount of assistance to

be provided for renewal of all expiring tenant-based annual

contributions contracts. PHAs were advised of this methodology for

fiscal year 1999, by direct notice issued on December 31, 1998. Today's

Federal Register on Section 8 renewals publishes this notice for the

benefit of the public. The policy for Section 8 renewals for future

years will be the subject of negotiated rulemaking for the development

of final regulations.

Nondiscrimination Requirements

HUD's responsibilities and the responsibilities of its program

partners, in implementing new programs and program changes covered by

the QHWRA include (1) ensuring compliance with applicable

nondiscrimination requirements, such as the Fair Housing Act, title VI

of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act

of 1973, and Title II of the Americans with Disabilities Act, and (2)

affirmatively furthering fair housing. These responsibilities are

reiterated and reemphasized by amendments made by the QHWRA to the U.S.

Housing Act of 1937 or to HUD's programs, generally.

Section I. Statutory Provisions That Are Immediately Effective and

Accompanying Guidance

This section of the Notice lists those statutory provisions of both

the FY 1999 HUD Appropriations Act and the QHWRA that are immediately

effective and may require prompt action on the part of HUD's program

partners now or in the very near future. HUD notes that in many cases

the statutory provisions listed in this Section I may require

conforming rulemaking at a later date; that is, rulemaking that updates

HUD's regulations so that the regulations conform to statutory changes

to the programs.

A. FY 1999 HUD Appropriations Act

Elimination of Three-Month Delay on Reissuance of Section 8

Certificates and Vouchers. The FY 1999 HUD Appropriations Act does not

extend or continue the previous three month delay that was imposed on

the reissuance of certificates and vouchers.

Action Guidance for the Section 8 Certificate and Voucher Program:

Effective October 1, 1998, neither Section 8 certificates and vouchers

currently being held nor any further turnover of Section 8 certificates

and vouchers are subject to any statutory delay period on reissuance.

Elimination of the Shopping Incentive for Voucher Families Who

Remain in the Same Unit upon Initial Receipt of Assistance. Section 209

of the FY 1999 HUD Appropriations Act eliminates the ``shopping

incentive'' in the following situation involving admission to the

Section 8 voucher program by a family:

(1) Who is admitted to the voucher program after December 20, 1998;

(2) Who remains in the same unit or complex; and

(3) Where the applicable payment standard exceeds the gross rent

for the unit. (The applicable payment standards is the lower of the

payment standard for the ``family unit size'' or the payment standard

for the unit actually rented by the family.)

Therefore, the voucher program housing assistance payment for a

``stayer admission'' family who leases a unit with a gross rent (rent

to owner plus the utility allowance) below the applicable payment

standard for the family would be the amount by which the gross rent

exceeds the greater of 30% of the family's monthly adjusted income, 10%

of its monthly gross income, or the minimum rent.

Action Guidance for the Section 8 Voucher Program: This statutory

provision is effective for all voucher Housing Assistance Payment (HAP)

contracts for ``stayer admissions'' effective on or after December 20,

1998. HUD's Office of Public and Indian Housing (PIH) issued a notice

of December 18, 1998, Notice PIH 98-64, which provides additional

information on the statutory changes to the Section 8 voucher program.

Additionally, at PIH's website, PIH provides information about HUD's

Multifamily Tenant Characteristics System (MTCS). The January 1999

``MTCS News Flash'' provides information on calculating the rent for

voucher admissions and completing form HUD-50058. (Please see HUD's

website at http://www.hud.gov/pih/systems/mtcs/pihmtcs.html.) The

payment standard

[[Page 8194]]

on line 12(j) of form HUD-50058 for these stayer admissions is the

lower of (1) the PHA's payment standard for the family unit size, (2)

the PHA's payment standard for the unit actually rented by the family,

or (3) the unit's gross rent at the time of admission to the program.

Finally, it is noted that the section 209 amendment only applies

until HUD issues regulations that make effective the voucher and

certificate program merger legislation at section 545 of the QHWRA.

These changes will eliminate the shopping incentive for all voucher

families, not just for stayer admissions.

Rent Payments of Families with Enhanced Tenant-Based Assistance in

Conjunction with the Prepayment of Certain 236 and 221(d)(3) FHA

Mortgages. The FY 1999 HUD Appropriations Act, under the Housing

Certificate Fund heading, provides that during Federal fiscal year 1999

(October 1, 1998 through September 30, 1999), the minimum rent of

families who receive (or will receive) ``enhanced'' vouchers and whose

income ``declines to a significant extent'' must not exceed the greater

of:

(1) 30% of monthly adjusted income; or

(2) The percentage of monthly adjusted income paid by the family

for rent at the time of the mortgage prepayment.

This statutory rent limitation only applies to enhanced tenant-

based assistance that is provided to families located in projects where

owners prepaid certain federally assisted mortgages. HUD construes the

words ``significant extent'' to mean a decrease in income of fifteen

percent (15%) or more.

Action Guidance for the Section 8 Voucher Program. No action

required by the PHA at this time. HUD will issue further implementation

instructions on this statutory section.

Ineligibility of Individuals Convicted of Manufacturing or

Producing Methamphetamine (commonly referred to as ``speed'') for

Certain Housing Assistance. Section 428 of the FY 1999 HUD

Appropriations Act amends section 16 of the USHA to add a new

subsection (f) that makes individuals convicted of manufacturing or

producing methamphetamine (speed) ineligible for certain housing

assistance. New subsection (f) applies to public housing and the

certificate, voucher and moderate rehabilitation programs. PHAs must

have standards to:

(1) Permanently deny admission to public housing units and the

Section 8 certificate, voucher and moderate rehabilitation programs;

and

(2) Immediately and permanently terminate tenancy in public housing

or terminate Section 8 assistance, of persons convicted of

manufacturing or producing methamphetamine on the premises of the

assisted housing project in violation of any Federal or State law.

``Premises'' is defined as the building or complex in which the

dwelling unit is located, including common areas and grounds. Although

the statute does not define the term ``premises,'' HUD is defining the

term in this Notice to provide PHAs with guidance on what are the

parameters of ``premises.''

Action Guidance for the Public Housing Program. PHAs must revise

applicable occupancy policies and practices to reflect these standards.

Except to the extent this is already covered by lease provisions that

authorize eviction for drug-related criminal activity, public housing

leases must be modified to provide for eviction on these grounds.

Action Guidance for the Section 8 Certificate, Voucher and Moderate

Rehabilitation Programs. PHAs must revise their occupancy policies to

implement these admission and subsidy termination provisions.

B. Quality Housing and Work Responsibility Act of 1998 (QHWRA)

This notice does not address all sections of the QHWRA but strives

to provide as much guidance for as many sections of the QHWRA as

possible. The following lists the sections of the QHWRA that are

addressed in this Notice. The sections are either addressed in this

Section I or in Section II of this Notice.

Sec. 506. Definitions

Sec. 507. Minimum Rent.

Sec. 508. Determination of Adjusted Income and Median Income.

Sec. 509. Family Self-Sufficiency Program.

Sec. 511. PHA Plan.

Sec. 512. Community Service and Family Self-Sufficiency

Requirements.

Sec. 513. Income Targeting.

Sec. 514. Repeal of Federal Preferences.

Sec. 515. Joint Ventures and Consortia of Public Housing Agencies.

Sec. 519. Public Housing Capital and Operating Funds.

Sec. 520. Total Development Costs.

Sec. 522. Repeal of Modernization Fund.

Sec. 523. Family choice of rental payment.

Sec. 524. Occupancy by Police Officers and Over-Income Families.

Sec. 526. Pet Ownership in Public Housing.

Sec. 530. Housing Quality Requirements.

Sec. 531. Demolition and Disposition of Public Housing.

Sec. 533. Conversion of Public Housing to Vouchers; Repeal of Family

Investment Centers.

Sec. 535. Demolition, Site Revitalization, Replacement Housing, and

Tenant-Based Assistance grants for Projects.

Sec. 537. Required Conversion of Distressed Public Housing to

Tenant-Based Assistance.

Sec. 539. Mixed Finance Public Housing.

Sec. 545. Merger of Certificate and Voucher Programs.

Sec. 547. Administrative Fees.

Sec. 548. Law Enforcement and Security Personnel in Assisted

Housing.

Sec. 549. Advance Notice to Tenants of Expiration, Termination, or

Owner Nonrenewal of Assistance Contract.

Sec. 551. Funding and Allocation.

Sec. 554. Leasing to Voucher Holders.

Sec. 555. Homeownership (voucher) Option.

Sec. 556. Section 8 Renewals for Tenant-Based Certificate and

Vouchers Funds.

Sec. 559. Rulemaking and Implementation.

Sec. 561. Home rule flexible grant demonstration program.

Sec. 565. Expansion of powers for dealing with public housing

agencies in substantial default.

Sec. 575. Provisions applicable only to public housing and section 8

assistance.

Sec. 584. Use of American Products.

Sec. 586. Amendments to Public and Assisted Housing Drug Elimination

Act of 1990.

Sec. 592. Use of Assisted Housing by Aliens.

Sec. 597. Moderate rehabilitation program.

Sec. 599. Tenant participation in multifamily housing projects.

The following chart provides an overview of the above-listed

sections of the QHWRA, which have been designated by Congress as

immediately effective, and shows their applicability to HUD's public

housing program, Section 8 certificate and voucher program, Section 8

project-based certificate and moderate rehabilitation program, and

other Section 8 programs.

BILLING CODE 4210-33-P

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BILLING CODE 4210-33-C

Subtitle A of the QHWRA

Section 507--Minimum Rent for Public Housing and Section 8

Assistance. Section 507 amends section 3(a) of the USHA and follows the

previous statutory authority of requiring minimum rents of up to $50

for public housing and the Section 8 programs. In the public housing

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

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

tenant rent (TR). For families subject to a utility allowance in these

programs, the families will be subject to a minimum total tenant

payment but could still be entitled to a utility reimbursement if the

utility allowance is greater than the TTP.

Action Guidance for Public Housing and Section 8 Certificate,

Voucher and Moderate Rehabilitation Programs. PHAs are not required to

take any action to maintain any current minimum rents of up to $50 for

the public housing, Section 8 certificate, voucher and moderate

rehabilitation programs.

Action Guidance for Other Section 8 Programs. The minimum rent of

$25 which HUD has imposed for other Section 8 project-based assistance

remains in place.

Exceptions to Minimum Rent. The QHWRA also establishes certain

exceptions to the minimum rent requirements for hardship circumstances.

Section 3(a)(3)(B) of the USHA generally states that financial hardship

includes the following situations (1) the family has lost eligibility

for is awaiting an eligibility determination for a Federal, State, or

local assistance program; (2) the family would be evicted as a result

of the imposition of the minimum rent requirement; (3) the income of

the family has decreased because of changed circumstance, including

loss of employment; (4) a death in the family has occurred; and (5)

other circumstances determined by the PHA or HUD.

The QHWRA provides that an exemption may not be provided if the

hardship is determined temporary. The QHWRA also provides, however,

that the PHA or owner may not evict the family for nonpayment of rent

on the basis of hardship if the hardship is determined by the PHA or

HUD to be temporary during the 90-day period beginning upon the date of

the family's request for the exemption. During this 90-day period, the

family must demonstrate that the financial hardship is of a long-term

basis. If the family demonstrates that the financial hardship is of a

long-term basis, the PHA or HUD shall retroactively exempt the family

from the applicability of the minimum rent requirement for the 90-day

period. (HUD's responsibilities will be carried out by owners as

appropriate.)

Action Guidance for the Public Housing Program. PHAs must revise

operating procedures to immediately carry out the new statutory minimum

rent hardship exception policies, and must immediately grant such

exceptions for families who qualify. The PHA can request reasonable

documentation of hardship under the circumstances. While HUD may issue

further guidance, HUD provides the following immediate guidance.

(1) As soon as practicable, the PHA must notify all families of

right to request a minimum rent hardship exemption under the law, and

that determinations are subject to the grievance procedure;

(2) If the family requests a hardship exemption, the minimum rent

requirement is immediately suspended.

(3) Suspension may be handled as follows: the minimum rent is

suspended until a determination is made whether:

[[Page 8198]]

(a) There is a hardship covered by the statute; and

(b) The hardship is temporary or long-term.

If the PHA determines that there is no hardship covered by the

statute, minimum rent is imposed (including backpayment for minimum

rent from time of suspension).

If the PHA determines that the hardship is temporary, the minimum

rent also is imposed (including backpayment for minimum rent from the

time of suspension) but the family cannot be evicted for nonpayment

during the 90-day period commencing on the date of the family's request

for exemption of minimum rent in excess of the tenant rent otherwise

payable. A reasonable repayment agreement must be offered for any such

rent not paid during that period. If the family thereafter demonstrates

that the financial hardship is of long-term duration, the PHA shall

retroactively exempt the family from the minimum rent requirement.

The new minimum rent policies are retroactive to the effective date

of the QHWRA, October 21, 1998. If a tenant in occupancy has qualified

for one of the mandatory hardship between October 21, 1998 and the date

of this Notice and was charged minimum rent, the PHA must make

arrangements to reimburse the tenant the overpayment by providing a

cash refund or otherwise offsetting future rent payments in an

equitable manner.

Action Guidance for Section 8 Certificate, Voucher and Moderate

Rehabilitation Programs. The entity responsible for determining rent

(the PHA or owner) must revise operating procedures to immediately

carry out the new statutory minimum rent hardship exception policies.

As soon as practicable, the entity responsible for determining rent

(the PHA or owner) must notify all families of the right to request

minimum rent hardship exceptions, and that the hardship determinations

are subject to applicable PHA informal hearing procedures. The entity

responsible for determining rent (the PHA or owner) can request

reasonable documentation of hardship under the circumstances. While HUD

may issue further guidance, HUD provides the following immediate

guidance.

If a family requests a minimum rent hardship exception, the entity

responsible for determining rent (the PHA or owner) must suspend

payment of the minimum rent beginning the month following the family's

hardship request. ``Suspension'' means that the entity responsible for

determining rent (the PHA or owner) must not charge the family a

minimum rent or, if applicable, discontinue charging the family a

minimum rent. During the minimum rent suspension period, the family

will not be required to pay a minimum rent and the housing assistance

payment will be increased accordingly.

The entity responsible for determining rent (the PHA or owner) must

determine promptly whether the hardship under the statute exists and

whether it is temporary or long term.

If the entity responsible for determining rent (the PHA or owner)

determines that there is no hardship covered by the statute, a minimum

rent is imposed retroactively to the time of suspension.

If the entity responsible for determining rent (the PHA or owner)

determines that the hardship is temporary, a minimum rent may not be

imposed for a period of 90 days from the date of the family's request.

At the end of the 90 day suspension period, a minimum rent is imposed

retroactively to the time of suspension. A reasonable repayment

agreement must be offered for any minimum rent backpayment by the

family. (Note that the statutory eviction prohibition is not applicable

since the entity responsible for determining rent (the PHA or owner)

will not charge a minimum rent for 90 days, and receipt of the contract

rent will not be impacted by the family's inability to pay the minimum

rent during the 90 day period.)

If the entity responsible for determining rent (the PHA or owner)

determines that the hardship is of long-term duration, the entity

responsible for determining rent (the PHA or owner) must exempt

(retroactively to the date of the family's request for a minimum rent

exception) the family from the payment of the minimum rent until the

hardship no longer exists.

The new minimum rent policies are retroactive to the effective date

of the QHWRA, October 21, 1998. If a tenant in occupancy has qualified

for one of the mandatory exceptions between October 21, 1998 and the

date of this Notice and was charged a minimum rent, the entity

responsible for determining rent (the PHA or owner) must make

arrangements to reimburse the tenant the overpayment by providing a

cash refund or otherwise offsetting future rent payment in an equitable

manner.

Section 508--Determination of Adjusted Income and Median Income in

the Public Housing and Section 8 Programs. Section 508 amends section

3(b)(5) of the USHA and as amended provides the manner in which

adjusted income and median income will be determined, and provides

certain mandatory exclusions.

Action Guidance for the Public Housing Program. Section 508

generally is not yet effective, except that the establishment of

separate public housing and Section 8 income units in Rockland County,

New York, is effective immediately. HUD's Notice PD&R 98-04, issued

November 23, 1998, implemented this provision for Rockland County, New

York, and provided the relevant income limits. (This information may

also be found under ``income limits'' at http//www.huduser.org/data/

factors.html.)

HUD will provide implementation instructions for the QHWRA's

revised mandatory earned income disregard for public housing residents,

effective October 1, 1999, at a later date. The current 18-month

disregard for earned income of public housing residents in training

programs (see 24 CFR 5.607(c)(8)(i) and (v) and (c)(13)) continues in

effect for families who:

(1) Enroll in such programs before October 1, 1999; and

(2) Continue to meet the requirements for receiving the income

disregard.

Action Guidance for Section 8 programs. The income limits

referenced in the Action Guidance for Public Housing for Rockland

County, New York, are applicable to the Section 8 programs.

Section 509--Family Self-Sufficiency (FSS) Program in the Public

Housing and Tenant-Based Section 8 Programs. Section 509 amends section

23 of the USHA and, as amended, allows PHAs to reduce their family

self-sufficiency obligation (mandatory minimum program size, prior to

any reductions previously approved by HUD) by one family for each FSS

graduate fulfilling the family's contract of participation obligations

on or after October 21, 1998. Additionally, the QHWRA provides that the

minimum FSS program size will not increase when a PHA receives

incremental Section 8 funding and public housing units on or after

October 21, 1998. The QHWRA continues the PHA's option to operate

programs larger than the minimum FSS program size. The QHWRA also

continues HUD's ability to authorize a reduced minimum program size.

HUD is currently authorized to permit a PHA to operate a public housing

or Section 8 FSS program that is smaller than the minimum program size

if the PHA provides to HUD a certification that the operation of an FSS

program of the minimum size is not feasible because of local

circumstances (see 24 CFR 984.105(d)).

[[Page 8199]]

These provisions are effective upon enactment of the QHWRA (October

21, 1998).

Action Guidance for the Public Housing Program. The FSS provisions

are effective upon enactment of the QHWRA (October 21, 1998). For

purposes of the FSS minimum program size, ``receipt of incremental

public housing units'' means reservation of funds to acquire or

construct additional public housing units on or after October 21, 1998.

The HUD Field Office will advise PHAs of these reservation dates.

Action Guidance for the Section 8 Certificate and Voucher Programs.

The FSS provisions are effective upon enactment of the QHWRA (October

21, 1998). For purposes of the FSS minimum program size, ``receipt of

incremental Section 8 funding'' means reservation of funds for the

Section 8 certificate or voucher program (other than renewal funding

and other funding excluded by HUD Notice PIH 97-45, issued September 3,

1997) on or after October 21, 1998. The HUD Field Office will advise

PHAs of these reservation dates.

Section 512--Public Housing Community Service and Public Housing

and Tenant-Based Section 8 Family Self-Sufficiency Requirements. Public

Housing Community Service Requirements. Section 512 amends section 12

of the USHA and adds new subsections (c) through (g). Subsection (c) of

section 12 of the U.S. Housing Act of 1937 (USHA) imposes a requirement

on adult public housing residents, with important exceptions, to

participate for at least 8 hours per month in community service or

economic self-sufficiency program. In some circumstances, PHAs must

refuse to renew a resident's 12-month lease for failure to satisfy this

requirement.

Action Guidance for the Public Housing Program. Subsection (c) is

not yet effective, but will be effective October 1, 1999. HUD will

issue implementing instructions and guidance before October 1, 1999.

PHAs should begin considering how community service requirements may be

fulfilled by residents, including the potential use of qualified

resident councils or other qualified entities either as agents for

program administration or providers of opportunities for fulfilling the

community service requirement. The provision requiring 1-year public

housing leases, automatically renewable except for failure to comply

with community service requirements, also is not yet effective. HUD

notes, however, that such leases may be self-renewing without an annual

signing process, as long as the leases are terminable for failure to

meet the community service obligation under the circumstances defined

in the statute. Again, HUD will issue additional guidance at a later

date, as well as amend HUD's applicable regulations.

Treatment of Income Changes Resulting from Welfare Program

Requirements. New subsection 12(d), Treatment of Income Changes

Resulting From Welfare Program Requirements, is effective immediately,

for public housing residents and tenant-based Section 8 certificate and

voucher families whose welfare assistance is reduced specifically

because of fraud or failure to participate in an economic self-

sufficiency program or comply with a work activities requirement. Such

families must not have their public housing rent or Section 8

contribution to rent reduced based on the benefit reduction. The

prohibition on reduction of public housing rent or Section 8 tenant-

based assistance contribution is applicable only if the welfare

reduction is neither the result of the expiration of a lifetime time

limit on receiving benefits, nor a situation where the family has

complied with welfare program requirements but cannot obtain employment

(e.g., the family has complied, but loses welfare because of a

durational time limit such as a cap on welfare benefits for a period of

no more than two years in a five year period). Any PHA receiving a

request for income reexamination and rent reduction predicated on a

reduction in tenant income from welfare may deny the request only after

obtaining written verification from the welfare agency that the

family's benefits have been reduced because of noncompliance with

economic self-sufficiency program or work activities requirements or

because of fraud.

Action Guidance for the Public Housing Program. Although this

subsection (d) is effective immediately, PHAs should note that this

subsection is subject to some procedural limitations. PHAs must first

take the necessary procedural steps so that this rent policy change

will be binding on affected families, and PHAs must take these steps

expeditiously. Section 12(e) requires incorporation into leases of the

provisions of this subsection (d). The PHA also must notify affected

residents that they have the right to administrative review through the

PHA's grievance procedure.

PHAs are to make best efforts to enter into cooperation agreements

with local welfare agencies, both to obtain the necessary information

regarding welfare sanctions and to target economic self-sufficiency and

other appropriate services to public housing residents and Section 8

tenant-based certificate and voucher families. PHAs are encouraged to

pursue the targeting of such services aggressively in these cooperation

agreements, and are reminded that the QHWRA amends the public housing

management assessment program to include the extent to which the public

housing agency coordinates, promotes or provides effective programs and

activities to promote the economic self-sufficiency of public housing

residents (effective in fiscal year 2000).

Action Guidance for Section 8 Tenant-Based Certificate and Voucher

Programs. The guidance provided in the Action Guidance for Public

Housing pertaining to the policies on cooperation agreements is

applicable to the Section 8 tenant-based certificate and voucher

programs. Rather than incorporating the provisions of subsection (d)

into leases, PHAs must revise operating procedures as needed to

effectuate this provision. The PHA also must notify affected families

that they may use the informal hearing procedure under 24 CFR

982.555(a)(i).

Section 513--Public Housing and Section 8 Income Targeting. Section

513 amends section 16 of the USHA to establish, among other things,

public housing deconcentration requirements, annual requirements for

admitting families with incomes below thirty percent (30%) of area

median income, and related income targeting requirements.

Prohibition of Concentration of Low-Income Families in Public

Housing (Deconcentration of Poverty). The QHWRA requires PHAs to submit

with their annual public housing agency plans an admissions policy

designed to provide for deconcentration of poverty and income mixing,

by bringing higher income tenants into lower income public housing

projects and bringing lower income tenants into higher income public

housing projects.

Action Guidance for the Public Housing Program. Through this Notice

and consistent with the immediate effective date of this section of the

USHA, HUD is requiring PHAs to begin implementing this public housing

deconcentration policy. PHAs must immediately develop this policy.

Within 120 days of this Notice or a longer time period if HUD grants an

extension for good cause, the PHA's Board of Commissioners must pass a

resolution indicating that any necessary changes have been made in the

PHA's admissions policy. PHAs must keep this Board resolution on file

for possible HUD review. While PHAs must take any necessary actions now

to have an

[[Page 8200]]

appropriate policy in place, the admissions policy to promote

deconcentration of poverty also will be part of the PHA plan process

from its inception. Material describing the deconcentration

requirements more fully is included in the PHA plan interim rule

published elsewhere in today's Federal Register.

Income Targeting Requirements

(1) Public housing. With respect to income targeting, the general

rule is that in each fiscal year, at least 40 percent of families

admitted to public housing by a PHA must have incomes that do not

exceed 30 percent of area median. The ``fungibility'' provisions allow

a PHA to admit less than 40 percent of families with incomes below 30

percent of median (``very poor families'') in a fiscal year, to the

extent the PHA has provided more than seventy-five (75) percent of

newly available vouchers and certificates (including those resulting

from turnover) to very poor families. Thus, the provision is called

``fungibility'' because to a limited extent, it makes the targeting

requirements in public housing and tenant-based assistance

interchangeable or fungible. There are three further limitations on a

PHA's use of fungibility. Fungibility ``credits'' only can be used to

drop the annual requirement for housing very poor families below 40

percent of newly available units in public housing, by the lowest of

the following amounts:

(a) The number of units equivalent to ten (10) percent of the

number of newly available vouchers and certificates in that fiscal

year; or

(b) The number of units that (i) are in projects located in census

tracts having a poverty rate of 30% or more, and (ii) are made

available for occupancy by and actually occupied in that year by very

poor families; or

(c) The number of units that cause the PHA's overall requirement

for housing very poor families to drop to 30% of its newly available

units.

Action Guidance for the Public Housing Program. PHAs should

promptly make any needed adjustments in admissions policies, subject to

the usual procedures, to ensure compliance.

The administration of income targeting should be facilitated if the

requirements are applied on the same annual basis as the fiscal year of

the PHA's public housing or tenant-based assistance program. To allow

application of the requirements in this manner, the income targeting

requirements will be applied on a pro rata basis to the remainder of

the PHA's current fiscal year starting with April 1, 1999 to the end of

the current fiscal year, and thereafter by applicable fiscal year.

Alternatively, a PHA may apply the targeting initially to the period

starting April 1, 1999 and ending at the conclusion of the next PHA

fiscal year.

(2) Section 8 tenant-based assistance. With respect to Section 8

tenant-based assistance, for a PHA in each fiscal year, not less than

75% of its new admissions to the program must have incomes at or below

30% of the area median income. The income limits based on 30 percent of

median are listed in HUD's 1999 income limits publication which is

posted on the internet at http//www.huduser.org/data/factors.html.

Other admissions must comply with eligibility limits under the current

regulations (24 CFR 982.201(b)) and law.

Action Guidance for the Section 8 Tenant-Based Certificate and

Voucher Programs. The income targeting applies to admissions in each

PHA fiscal year. PHAs may set the initial period in the same manner as

is provided above for public housing.

If an award of vouchers to prevent or ameliorate the effects of

displacement (for instance, tenant-based assistance provided for a

preservation prepayment or when an owner opts out of the Section 8

program) would interfere with a PHA's compliance with the income

targeting requirements, the PHA may request that HUD approve a

different targeting requirement (which may take effect upon issuance of

the tenant-based assistance in question) and the PHA then may include

the HUD approved requirement in the PHA's next annual plan.

(3) Section 8 project-based assistance. For Section 8 project-based

assistance (including moderate rehabilitation and project-based

certificates), not less than 40% of new admissions to a specific

project must have incomes at or below 30% of the area median income.

Other admissions to a specific project must be at or below 80% of the

area median, with any HUD-instituted modifications for relatively low

income or high income areas as discussed above. In addition, the

previously existing nationwide targeting requirements for families with

incomes at or below 50% of area median income in pre-1981 and post-1981

projects continue to be applicable (see regulatory citation below).

Income targeting requirements do not apply to project-based assistance

made available to prevent or ameliorate the effects of displacement.

Initial Guidance for Section 8 Project-Based Assistance. The

following regulations will continue to apply:

(1) Income limits for admission (24 CFR 5.607);

(2) Anti-skipping for the purpose of selecting a relatively higher-

income family (24 CFR 5.410(e)(2)); and

(3) Ability to use worker preferences subject to the antiskipping

requirement (24 CFR 5.415(b)(1); provisions of 24 CFR 5.415(b)(1) that

reference to federal preferences may be disregarded since federal

preferences have been repealed).

In addition, owners (other than project-based certificate and

moderate rehabilitation owners) will have to modify their tenant

selection plans to conform to statutory and program requirements.

Owners' tenant selection plans should include how they will apply the

new income targeting requirements to ensure that not less than 40

percent of the units which become available each year will be leased to

families with income that does not exceed 30 percent of the median

income at the time they commence their lease.

HUD will be issuing additional guidance in a notice in the near

future.

Section 514--Repeal of Federal Preferences in the Public Housing

and Section 8 Programs. With respect to preferences, the QHWRA

provides:

(1) Permanent repeal of Federal preferences;

(2) Permanent repeal of the right of certain public housing

residents to retain federal preference status on the Section 8

certificate and voucher waiting list;

(3) Authorization for local preferences; and

(4) Elimination of the previous statutory preference for the

admission of elderly, disabled and displaced persons before other

single persons in the public housing and Section 8 programs

(accomplished by section 506 rather than section 514).

Action Guidance for Public Housing, Section 8 Certificate and

Voucher and Moderate Rehabilitation Programs. The QHWRA permanently

repeals federal preference requirements for the public housing and

Section 8 programs. PHAs are no longer required to select families from

their waiting lists using the federal preferences or provide the

singles preference. (PHAs may opt to continue the singles preference

and one or more of the former federal preferences.) HUD urges PHAs to

consider adopting admission preferences for victims of domestic

violence.

PHAs should promptly make any needed adjustments in admissions

policies, subject to the usual procedures to ensure that the

preferences they use will result in compliance with public housing

deconcentration and public

[[Page 8201]]

housing and Section 8 income targeting requirements.

Section 514 also provides that local preferences may be established

taking into account generally accepted data sources, including any

information obtained during the opportunity for public comment on the

PHA plan and in the development of the local comprehensive housing

affordability strategy (consolidated plan). Since to date there has not

been a PHA plan process, full compliance with this statutory section is

not possible with respect to local preferences that currently exist in

these programs. Because there is no indication in the QHWRA that

Congress intended to disrupt existing local preferences, existing local

preferences may remain without further immediate PHA action or may be

altered in the manner authorized before enactment of the QHWRA. Both

existing and proposed local preferences, however, must comply with the

new requirements for establishing preferences and the PHA plan process

that will commence in 1999. The QHWRA permanently eliminated in the

public housing and the Section 8 programs, the previous statutory

preference for the admission of elderly, disabled and displaced persons

before other single persons. PHAs may revise occupancy policies to

reflect this change.

Irrespective of these statutory changes, other public housing

selection preference regulations which are unrelated to these changes

continue to apply. In addition, the following regulations remain

applicable to tenant-based assistance: 24 CFR 982.204(d) prohibiting

the order of admission from the tenant-based waiting list based on

family or unit size; the prohibited admissions criteria in 24 CFR

982.202(b); and approval of any residency preferences in accordance

with 24 CFR 982.208 and 24 CFR 5.410(h). The nondiscrimination

requirement for public housing residents with respect to admissions to

tenant-based assistance also continues to apply (Section 8(s) of the

USHA).

Action Guidance for Other Section 8 Project-Based Programs. The

QHWRA permanently repeals federal preference requirements for Section 8

newly constructed or substantially rehabilitated housing and other

project-based Section 8 programs. Owners are no longer required to

select families from their waiting lists using the federal preferences

or provide the singles preference. Owners should make any changes

needed to comply with income targeting requirements. Any changes in an

owner's tenant selection system must be consistent with the Affirmative

Fair Housing Marketing Plan approved by HUD. HUD's multifamily housing

occupancy handbook, 4350.3, specifies that the tenant selection system

must consist of a written plan, be equitable and guard against

discrimination. Where an owner elects to make changes in the tenant

selection system, HUD strongly encourages the owner to provide

appropriate notification of implementation to applicants on the waiting

lists and other interested persons (e.g., by newspaper publication or

notice to applicants).

Subtitle B of the QHWRA--Public Housing

Section 519--Public Housing Capital and Operating Funds. Section

519 amends section 9 of the USHA to provide for the establishment of

capital and operating funds with new formulas. Only a few parts of this

statutory section are effective immediately. They are as follows:

Use of capital or operating funds by small PHAs. New subsection

9(g)(2) of the USHA, added by section 519 of the QHWRA, allows a PHA

with less than 250 dwelling units (small PHAs), to use capital or

operating funds for any eligible capital or operating expense if: (1)

the PHA is not designated troubled; and (2) the PHA operates its public

housing in a safe, clean and healthy condition, as determined by HUD.

Until enactment of the QHWRA, these PHAs have been receiving capital

funds for specific purposes under the competitive Comprehensive

Improvement Assistance Program (CIAP). New subsection 9(a) of the USHA,

however, provides for a merger of remaining CIAP funds into the Capital

Fund on October 1, 1999.

With the enactment of new subsection 9(g)(2) and the pending merger

of funds, HUD construes Congressional intent to be that small, non-

troubled PHAs may immediately use any CIAP or operating funds for

capital or operating purposes. Because CIAP funds were obtained

competitively based on representations of need, HUD would expect PHAs'

current use of CIAP funds for operating purposes to be judicious; for

example, to address an emergency need.

HUD reserves the right to determine, through its independent

inspections or other monitoring, that a PHA is ineligible for the

flexible use of capital and operating funds of subsection 9(g)(2) of

the USHA because the PHA is not operating and maintaining its public

housing in a safe, clean and healthy condition. HUD may notify a PHA of

this determination. If a small PHA does not receive this notification

from HUD, the PHA may use the flexibility of subsection 9(g)(2) unless

the PHA's last public housing management assistance program (PHMAP)

assessment contained a grade lower than ``E'' on Indicator #5,

Component #1.

Action Guidance. PHAs using this flexible funding authority must

retain the necessary accounting to indicate the sources and uses of all

funds, including their origination as capital (CIAP) or operating funds

(i.e., their accounting for capital funds must indicate any amount of

funds used for operating expenses). PHAs would continue to draw down

CIAP funds under the LOCCS against the program grant authorized by the

applicable annual contributions contract (ACC) amendment. PHAs also may

draw down capital funds only under the current federal rules that

require projected expenditure of the funds within three days. PHAs,

therefore, cannot draw down capital funds directly to establish or

augment reserves, or indirectly for this purpose by retaining larger

than a reasonably sized operating reserve.

Penalties for slow obligation or expenditure of capital funds. New

subsection 9(j) of the USHA provides for penalties for slow obligation

or expenditure of capital funds. While this subsection is generally not

yet effective, the QHWRA states that capital funds made available to a

PHA for fiscal year 1997 or prior fiscal years must be obligated by the

PHA not later than September 30, 1999.

The QHWRA also states that a PHA shall spend any assistance

received under section 9 of the USHA not later than 4 years (plus the

period of any extension approved by the Secretary in accordance with

new section 9(j)(2)) after the date on which funds become available to

the agency for obligation.

Action Guidance. PHAs must take all necessary steps to meet the

September 30, 1999 deadline.

Authority to NYCHA to Expend Funds for Asthma Reduction. New

subsection 9(n)(2) and (3) of the USHA allow the New York City Housing

Authority to expend, from funds otherwise available to it, up to

$500,000 annually for asthma reduction and $600,000 annually for a

comprehensive plan to address the need for services for elderly

residents, commencing in FY 1999.

Ceiling Rents. Subsection 519(d) of the QHWRA provides transitional

authority to implement ceiling rents, before the implementation of the

new funding formulas.

Action Guidance. During this transition period, PHAs may establish

or retain ceiling rents allowed under all preexisting laws, including

annual

[[Page 8202]]

appropriations laws and the Balanced Budget Downpayment Act, I. In

addition, PHAs may adopt and apply ceiling rents that reflect the

reasonable market value of the housing, but are not less than 75% of

the monthly cost to operate the PHA's housing (100% for housing

predominantly for elderly or disabled families, or both) and may

include the costs of monthly deposit for a replacement reserve. HUD

will define ``predominantly'' as at least 80 percent occupancy by such

families. The latter authorization may be used immediately and without

HUD approval, provided that PHAs keep reasonable documentation that the

ceiling rents reflect reasonable market value and are not lower than

the statutorily-required floors.

Transitional Funding Before Implementation of New Capital and

Operating Formulas. Subsection 519(e) provides requirements for

transitional funding until the new capital and operating formulas are

implemented. For FY 1999, HUD will provide funds to PHAs in accordance

with prior law (unless HUD provides further notification regarding the

distribution of capital funds). With respect to operating subsidy, this

subsection specifically provides that ceiling rents and the optional

earned income disregards authorized by the past several appropriations

acts continue to be treated as provided under prior law.

Action Guidance. In summary, prior law holds PHAs financially

harmless for adoption of authorized ceiling rents, but allows the

optional earned income disregards at PHAs' initial financial risk. This

treatment will be continued until a new formula is adopted.

Adoption of Rental Amount Other than Ceiling Rent or Optional

Earned Income Disregard. Subsection 519(e) also states that during the

transition period, if a PHA adopts a rental amount other than a ceiling

rent or an optional earned income disregard authorized by the prior

appropriations laws, which is less than the amount otherwise required

to be charged (typically 30% of a family's adjusted income), the

formula shall not be adjusted to compensate the PHA for this rent

reduction.

Action Guidance. HUD interprets this provision to authorize PHAs to

begin immediately, subject to appropriate local process, to charge

lower amounts than those otherwise required (or allowed under ceiling

rent or previously existing optional earned income disregard authority;

see the immediately preceding paragraph), as authorized by section 523

of the QHWRA (typically, ``up to'' 30% of a family's adjusted income;

new section 3(a)(2)(B)(ii) of the USHA). PHAs may take this step, prior

to adoption of a new formula, for purposes PHAs deem appropriate such

as promotion of resident self-sufficiency, even though the rest of

section 523 is not yet effective. This would be done, however, at a

PHA's financial risk. A PHA that chooses to implement this policy would

need to submit rent rolls for the purpose of FY 1999 subsidy

calculations that do not reflect the newly imposed rent decrease or

disregard. Instead, such rent rolls must presume that the PHA is

charging the rent otherwise required or allowed by law.

Section 520--Total Development Costs. Section 520 amends the

definition of ``development cost'' in section 3(c)(1) of the USHA to

exclude from this definition the costs associated with demolition or

remediation of environmental hazards associated with public housing

units that will not be replaced on the project site, or other

extraordinary site costs as determined by HUD.

Section 520 also amends 6(b) of the USHA to add a new subsection

6(b)(3) which provides that in calculating the total development cost

of a project under section 6(b)(2), HUD shall consider only capital

assistance provided by HUD to a PHA that are authorized for use in

connection with the development of public housing and shall exclude all

other amounts, including amounts provided under: (1) The HOME

Investment Partnerships Program; or (2) the CDBG Program.

Action Guidance. HUD will issue a separate notice in the near

future to impose total development cost requirements that are

consistent with the changes made by this section.

Section 522--Repeal of Public Housing Modernization Fund. Section

522 repeals section 14 of the USHA, but makes clear that before the

implementation of the new capital formula, PHAs may utilize any

authority under section 14(q) of the USHA, as amended. Section 14(q) of

the USHA allows PHAs to use capital funds for public housing

development and HOPE VI uses and allows mixed-finance public housing

developments. (Section 201 of the FY 1999 HUD Appropriations Act

clarified that such broader uses, but not operating expenses, are

permissible uses of FY 1998 and 1999 funds. The ability for PHAs other

than small PHAs to use capital funds partly for operating expenses does

not become effective until Federal fiscal year 2000.) In addition,

section 208 of the FY 1999 HUD Appropriations Act amended section 14(q)

of the USHA to provide that such assistance may involve the drawdown of

funds on a schedule commensurate with construction draws, for deposit

into an interest-bearing escrow account to serve as collateral or

credit enhancement for construction or rehabilitation bonds issued by a

public agency.

Section 523--Public Housing Family Choice of Rental Payment.

Section 523 amends section 3(a) of the USHA, and provides that each

family can elect annually whether the rent payment is a flat rate or

income based. Flat rents are set by a PHA at a rate based on the rental

value of the unit. Income based rents are calculated on the level of a

tenant's income, the basic calculation was not changed from the current

law calculation of the higher of 10% of income, 30% of adjusted income,

or the housing portion of welfare, where applicable. The current law

amounts for income-based rents, however, were changed from required

amounts to maximum amounts a PHA can charge.

Action Guidance. Although this section is not effective now except

as indicated in the discussion above of section 519(e), PHAs should

begin the process of setting flat rents as required by new section

3(a)(2)(B)(i) of the USHA. These flat rents are to be based on the

rental value of the unit, which HUD interprets to be the same as the

reasonable market value of the unit authorized for ceiling rents. HUD

will provide further guidance, but PHAs should anticipate that the rent

choice authorized by section 523 would have to be offered to families

admitted or subject to recertification after October 1, 1999.

Section 524--Occupancy by Police Officers and Over-Income Families

in Public Housing. Section 524 amends section 3(a) of the USHA to

provide that PHAs may allow police officers to reside in public

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

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

requirements, if there are no eligible families applying for assistance

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

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

eligible family.

Action Guidance. This section is effective immediately, but the

provision pertaining to police officers is subject to inclusion in the

PHA plan. Because current statutory provision is not repealed during

this fiscal year, HUD will allow occupancy by police officers under the

terms of current law until the PHA plan requirement can be implemented.

With respect to the housing of over-income families where other

families

[[Page 8203]]

are not available to small PHAs, a PHA must publish a 30-day notice of

available units in at least one newspaper of general circulation.

Section 530--Housing Quality Requirements. Section 530 amends

section 6 of the USHA to add a new subjection (f) which requires annual

contributions contracts to include a requirement that a PHA maintain

its public housing units in compliance with safety and habitability

standards specified by HUD. In developing these standards, HUD is to

make them to the greatest extent practicable, consistent with the

housing quality standards under the Section 8 voucher program. This

section also requires PHAs to conduct annual inspections for each

project to determine whether the units comply with the standards.

Action Guidance. HUD's new Public Housing Assessment System (PHAS),

which was established by final rule issued on September 1, 1998 (63 FR

46596), utilizes new uniform physical condition standards that are

consistent with the housing quality standards currently used in the

Section 8 tenant-based assistance program. See also HUD's Uniform

Physical Condition Standards final rule, published on September 1, 1998

at 63 FR 46566. PHAs are currently required by statute to conduct an

annual inspection of their projects.

Section 531--Demolition and Disposition of Public Housing. Section

531 amends section 18 of the USHA and provides that PHAs may demolish

and dispose of projects upon application to HUD when the housing is

determined obsolete and modifications are not cost-effective. This

statutory section completely revises public housing demolition and

disposition requirements, and also repeals one-for-one replacement

requirements. The immediate effective date of this statutory section

raised two threshold issues for HUD to consider.

First, how should HUD treat the pipeline of demolition and

disposition applications received prior to October 21, 1998, and those

received after that date but prior to the effectiveness of the

applicable regulations and processes?

Second, how should HUD treat the new requirement found in amended

section 18 of the USHA--that the public housing agency has specifically

authorized the demolition or disposition in its PHA plan and has

certified that the actions contemplated in the PHA plan comply with

this section?

HUD believes that it is consistent with Congressional intent not to

interrupt the processing of applications.

Action Guidance. 1. Pending Applications; New Applications. In view

of the Congressional intent and to expedite the processing of

demolition and disposition applications during this period prior to

submission and approval of PHA plans under the new law, demolition/

disposition applications will be reviewed and processed in two groups.

Group 1 are those applications received at HUD's Special Applications

Center (SAC) on or before October 21, 1998, the date the QHWRA was

signed into law. Group 2 are those applications received at the SAC

after October 21, 1998.

A. Group 1 Applications. Applications in Group 1 will generally be

reviewed and approved in accordance with 24 CFR part 970 which was in

effect at the time of the application submission. However, if the SAC

staff identifies deficiencies in a Group 1 application, the PHA has the

option at that time to either (a) correct the deficiencies in

accordance with 24 CFR part 970 or (b) withdraw its application and

resubmit it at a later date based on HUD's guidance as identified in

this Notice for implementing section 531 of the QHWRA. In addition, HUD

will implement four specific provisions of the QHWRA for all pending

applications in Group 1, as follows:

The one-for-one replacement requirement is eliminated;

PHAs that request to demolish the lesser of 5 units or 5

percent of the units in the PHA's inventory in a 5 year period, and

where the vacant space will be used for meeting the service or other

needs of the public housing residents or the units to be demolished are

beyond repair, may demolish without submitting an application and

requesting HUD approval (see paragraph 2 below on ``De Minimis

Exception for Demolition'');

Waiver of payment of debt (modernization or development

debt) for bonded developments;

Elimination of the requirement to make an offer to sell

the property proposed for demolition to the resident organization where

the PHA is requesting to demolish property; in view of the QHWRA's

elimination of this requirement with respect to demolition, the

purchase option will not be deemed ``appropriate'' for such property

under the terms of section 18(b)(1) of the USHA before its amendment by

the QHWRA.

B. Group 2 Applications. Under Section 18(a)(3) of the revised

USHA, in order for a demolition or disposition application to be

approved, a PHA must have ``specifically authorized the demolition or

disposition in the public housing agency plan, and has certified that

the actions contemplated in the public housing agency plan comply with

this section.''

HUD's interim rule on PHA plans, published elsewhere in today's

Federal Register, provides further guidance on the fulfillment of this

requirement for demolition/disposition. In brief, HUD's rule allows the

submission of interim PHA plans covering demolition or disposition, so

that a PHA may receive a timely approval which otherwise may not occur

because of the initial schedule for submitting PHA plans. A separate

notice to be issued by HUD's Office of Public and Indian Housing will

describe the procedures that govern a demolition or disposition

application under section 18 of the USHA as amended by the QHWRA, in

addition to those procedures and requirements related to the PHA plan,

before conforming changes are made to the applicable regulations.

2. De Minimis Exception for Demolition. PHAs proposing to demolish

not more than the lesser of 5 dwelling units or 5 percent of the total

dwelling units owned by the PHA over a 5-year period, and that plan to

use the space for meeting the service or other needs of the public

housing residents or are demolishing units that are beyond repair, may

demolish without submitting an application. PHAs using the de minimis

exception are required to complete Sections 1--5 of HUD Form 52860. HUD

will use this information to track the demolition in HUD's data system

for purposes such as determination of subsidy amounts; HUD will not use

this information to determine whether a PHA can demolish the units.

Once the demolition is completed, the PHA must report the actual date

of demolition to the HUD Field Office. PHAs should note that before

committing any funds for or proceeding with demolition that will be

funded or reimbursed with USHA funds, the PHA must receive HUD approval

of a Request for Release of Funds to the extent required in accordance

with 24 CFR part 58.

3. Uniform Relocation Act. Section 531(g) of the QHWRA provides

that the Uniform Relocation and Real Property Acquisition Policies Act

of 1970 (URA) shall not apply to activities under section 18 of the

USHA. The URA, however, continues to apply to:

(a) Any person displaced before October 21, 1998 (the date of

enactment of the QHWRA);

(b) Any person displaced as a result of HUD's approval of a

demolition before October 21, 1998;

[[Page 8204]]

(c) Any person displaced as a result of a demolition that is part

of a HOPE VI project (demolitions under HOPE VI are subject to the URA

because they are not subject to section 18 of the USHA);

(d) Any person displaced as a result of a demolition or disposition

that occurs from an assessment of a project for mandatory conversion to

vouchers under section 202 of the FY 1996 HUD Appropriations Act or

section 537 of the QHWRA or of voluntary conversion to vouchers out

under section 533 of the QHWRA. (Demolitions under section 202 of the

FY 1996 HUD Appropriations Act are subject to the URA because they are

governed by the law as in effect before enactment of the QHWRA and

because they are not subject to section 18 of the USHA. Demolitions

under section 537 of the QHWRA are subject to the URA because these

demolitions are not subject to section 18 of the USHA); and

(e) Any person displaced as a result of the acquisition of the site

for a project receiving Federal financial assistance.

Section 535--Demolition, Site Revitalization, Replacement Housing,

and Tenant-Based Assistance Grants for Public Housing Projects. Section

535 amends section 24 of the USHA and provides the continued authority

for the HOPE VI program, and establishes application selection and

grant requirements.

Action Guidance. Because this section is effective immediately,

HUD's FY 1999 HOPE VI Notice of Funding Availability will reflect the

terms of this section.

Exemption for severely distressed public housing demolished in

accordance with a revitalization plan. New section 24(g) of the USHA

exempts severely distressed public housing demolished in accordance

with a revitalization plan from the demolition requirements of section

18 of the USHA. However, any such housing disposed of and any housing

developed to replace the demolished housing are subject to section 18

of the USHA.

Action Guidance. HOPE VI revitalization plans approved after

October 21, 1998 (the date of enactment of the QHWRA) will receive this

exemption.

Section 537--Required Conversion of Distressed Public Housing to

Tenant-Based Assistance. Section 537 adds a new section 33 to the USHA

and repeals its forerunner provision in the FY 1996 HUD Appropriations

Act. A component of each PHA plan is its 5-year plan for the removal of

public housing units identified as distressed from the public housing

inventory and the ACC. This plan for removal of units is subject to

review by HUD.

Action Guidance. While this section is not yet effective, the

language of this section clarifies that public housing developments

identified by HUD or a PHA for conversion or for assessment of whether

conversion is required under the preexisting law and regulations shall

remain subject to that law and regulations (Section 202 of the VA/HUD/

Independent Agencies Appropriations Act of 1996 and implementing

regulations at 24 CFR part 971).

Subtitle C of the QHWRA--Section 8 Rental and Homeownership

Assistance

Section 547--Section 8 PHA Administrative Fees for the Certificate,

Voucher and Moderate Rehabilitation Programs. Section 547 amends

section 8(q) of the USHA and changes the prior administrative fee

system slightly, by increasing the fee for the first 600 certificate,

voucher and moderate rehabilitation units administered by a PHA from

7.5% to 7.65% of a defined base amount beginning October 1, 1998. HUD

will issue a separate notice indicating how the increase in FY 1999

administrative fees is to be paid.

Action Guidance for the Section 8 Certificate, Voucher and Moderate

Rehabilitation Programs. A Senate colloquy on the QHWRA legislation

indicated that HUD should allow administrative fee adjustments to cover

any necessary additional expenses for serving persons with disabilities

fully, such as additional counseling (housing search assistance)

expenses (Congressional Record of October 8, 1998, p. S11840). PHAs

that have undertaken or will undertake, such expenses may document the

services provided, describe the expenses and propose administrative fee

adjustments to HUD.

Section 548--Law Enforcement and Security Personnel in Project-

Based Section 8 Housing. To increase security, Section 548 provides

that Section 8 assistance may be provided to police officers and other

security personnel who are not otherwise eligible for assistance.

Action Guidance for the Section 8 Project-Based Certificate,

Moderate Rehabilitation and Other Section 8 Project-Based Programs.

Section 548 is applicable to FY 1999 and following fiscal years, and is

applicable to Section 8 moderate rehabilitation, project-based

certificate, new construction, substantial rehabilitation and other

project-based Section 8 projects. Owners must apply to the HUD Field

Office for authorization to house over-income police officers and other

security personnel in the assisted units. Until otherwise notified, the

owner application needs to include a statement demonstrating the need

for increased security at the project, and a description of the

proposed gross rent for the unit and any special conditions for

occupancy. Processing instructions will be provided to HUD Field

Offices.

Section 549--Advance Notice to Tenants of Expiration, Termination,

or Owner Nonrenewal of Section 8 Assistance Contract. Section 549(a) of

the QHWRA amends section 8(c)(9) of the USHA to make permanent the

tenant-based notice and endless lease provisions which had been

effective through FY 1998 and to change the project-based contract

termination notice requirement from 6 months to 1 year. Section 549(a)

also eliminates the notice and rent adjustment provisions of sections

8(c)(8) and (10).

Section 549(b) amends section 8(c)(9) to require the project-based

1-year notice to include information about the possibility of

nonrenewal of assistance (when the owner seeks renewal but

appropriations are uncertain) and the resulting protections. Section

549(b) also requires a 6-month notice to HUD and tenants when the owner

agrees to a 5-year renewal that is subject to the availability of

appropriations.

Section 549(c) amends section 514(d) of the Multifamily Assisted

Housing Reform and Affordability Act that addresses the mortgage

restructuring, to require that the owner who is not renewing project-

based assistance to give notice of the termination in addition to the

1-year notice at least 120 days before termination.

1. Tenant-based assistance. Subsection (a) of section 549,

Permanent Applicability of Notice and Endless Lease Provisions, is

effective October 21, 1999. That subsection makes permanent the

suspension in recent annual appropriations acts of the 90-day owner

termination notice to HUD and endless lease term with respect to the

tenant-based Section 8 programs. Of course, landlords still must

terminate leases and conduct evictions in accordance with other

applicable laws.

Action Guidance for Section 8 Tenant-Based Certificate and Voucher

Programs. PHAs should advise interested owners who are participating or

who are potential participants in the tenant-based assistance programs

that the 90-day owner termination and endless lease term requirements

have been permanently eliminated. Additional implementation guidance

was issued December 18, 1998 in Notice PIH 98-64.

2. Project-based assistance. Subsection (a) of section 549 also

[[Page 8205]]

requires owners of projects receiving project-based section 8

assistance to provide not less than one-year written notification to

tenants and HUD of the expiration or termination of the contract. Note

that section 8(c)(8) of the USHA which required owners to provide a 90-

day notice to the tenants of any rent increase is repealed.

Action Guidance for Section 8 Project-Based Certificate, Moderate

Rehabilitation and Other Project-Based Programs. Owners who gave notice

prior to the enactment of the QHWRA (October 21, 1998) are covered

under the 180-day notice requirement. Owners who give notice to tenants

and HUD on or after October 21, 1998 must fulfill the entire one-year

notification requirement. HUD's Office of Housing will issue further

guidance in the near future. Guidance concerning the Section 8 Moderate

Rehabilitation Program notice requirements is found in Notice PIH 98-

62, issued December 15, 1998.

Section 551--Funding and Allocation (of Public Housing and Section

8 Funds). Section 551 amends section 213 of the Housing and Community

Development Act of 1974 (42 U.S.C. 1439) which section addresses

applications for housing assistance under the USHA or section 101 of

the Housing and Urban Development Act of 1965. Section 551 most

importantly repeals restrictions on funding allocations related to an

obsolete nonmetropolitan set-aside and notification to jurisdictions

and solicitation of comments regarding certain funding awards.

Action Guidance for Public Housing and Section 8 Programs. This

notice makes section 551 effective immediately. Local government

comments with respect to affected PHA applications for Section 8 and

public housing funds are no longer required.

Section 554--Leasing to Voucher Holders. This section immediately

repeals the so-called ``take one, take all'' Section 8 tenant-based

provision that has been suspended in recent annual appropriations acts.

Action Guidance for the Section 8 Tenant-Based Certificate and

Voucher Programs. The intent of Congress was to make the tenant-based

assistance program more attractive to private landlords and encourage

participation. PHAs should make a concerted effort to inform the

prospective owner community of this permanent change, particularly for

marketing the tenant-based assistance program to owners of units in

low-poverty areas.

Section 555 and Section 545 [Sec. 8(o)(15)]--Section 8 Tenant-Based

Homeownership Option. These sections provide necessary additional

flexibility for PHAs to use vouchers to increase homeownership.

Action Guidance for the Section 8 Tenant-Based Certificate and

Voucher Programs. HUD will be providing further guidance in the near

future.

Subtitle D of the QHWRA--Home Rule Flexible Grant Demonstration

(Public Housing and Tenant-Based Section 8 Programs)

Subtitle D of the QHWRA adds a demonstration program in which

eligible jurisdictions, typically units of general local government,

could receive public housing and tenant-based assistance for up to five

years to meet specified performance goals.

Action Guidance for Public Housing and Section 8 Tenant-Based

Programs. While HUD may issue additional guidance later, any eligible

jurisdiction wishing to participate in the demonstration may follow the

statute's requirements and submit an application to the Assistant

Secretary, Office of Public and Indian Housing. HUD will not approve

such an application, however, unless the application presents a

compelling case that the eligible jurisdiction's participation and

proposal would achieve the goals of the statute (which include the

underlying program management and performance goals of the public

housing and tenant-based assistance programs) in a superior manner to

continuation of program management with the affected PHA.

Subtitle E of the QHWRA--Accountability and Oversight of Public

Housing Agencies Administering the Public Housing and Section 8

Programs

Section 565--Expansion of Powers for Dealing with Public Housing

Agencies in Substantial Default. In addition to providing for an

expansion of various powers to be exercised by HUD or receivers, this

section requires HUD to petition for court-ordered receivership (or to

implement an administrative receivership, in the case of PHAs with

fewer than 1,250 public housing units) with respect to certain troubled

PHAs. The troubled PHAs subject to that requirement are those that do

not:

(1) Within one year of the later of the date of enactment of the

Act or receiving notice of a ``troubled'' designation, improve their

performance score by at least half of the difference between their most

recent score and the score necessary to remove the troubled

designation; and

(2) Within two years of the later of such dates, escape troubled

designation.

Section 565(d) states that HUD may administer these amendments as

necessary to assure its efficient and effective initial administration.

The initial administration of this section is affected by two ongoing

processes.

First, PHAs ordinarily receive performance scores throughout the

calendar year after their staggered fiscal year ends. To meet the

statutory requirement for PHAs that receive notice of a troubled

designation after October 21, 1998, performance assessments will be

scheduled specifically for years commencing with the beginning of the

first quarter after receipt of that notice. For PHAs that were

designated troubled before October 21, 1998, performance assessments

will be scheduled specifically for years ending October 21, 1999, and

if necessary, October 21, 2000. With respect to these assessments,

which in most cases will not correspond to a PHA's fiscal year, HUD may

utilize year-end financial information or the most recent resident

satisfaction surveys where HUD determines that such use will reasonably

reflect the PHA's situation as of the assessment date.

Second, PHAs have been receiving performance scores under the

Public Housing Management Assessment Program (PHMAP), but commencing

with PHA fiscal years ending September 30, 1999, will receive scores

under the new Public Housing Assessment System (PHAS). Thus, in some

instances, during the transitional year PHAS scores will have to be

compared with PHMAP scores to determine whether the 50% improvement

requirement has been met. Where HUD determines that the 50% improvement

has not been met, but that this failure is attributable to the

transition between PHMAP and PHAS, HUD will not seek or impose court or

administrative receiverships based on that requirement. (HUD will have

the information needed to make that determination, largely based on the

``management'' component of PHAS.) The requirement to escape troubled

status within two years, however, will be imposed notwithstanding the

transition from PHMAP to PHAS.

Subtitle F--Safety and Security in Public and Assisted Housing

Section 575--Provisions Applicable Only to Public Housing and

Section 8 Assistance. Section 575 amends several subsections of section

6 of the USHA and contains a number of provisions concerning public

housing and Section 8 applicant screening and subsidy termination for

criminal activity. Except for subsection (e) of section 575, the

provisions of section 575 are not yet applicable.

[[Page 8206]]

Action Guidance for the Public Housing Program. Subsection (e) of

section 575, Obtaining Information from Drug Abuse Treatment

Facilities, was effective October 21, 1998 and is applicable only to

public housing. Any PHA that wishes to use the authority of this

subsection to obtain information whether public housing applicants are

currently using illegal controlled substances from drug abuse treatment

facilities must follow the specific requirements of subsection (e).

Subtitle G--Repeals and Related Provisions

Section 584--Use of American Products. This section reflects

Congressional intent that, to the greatest extent practicable, all

equipment and products purchased with funds made available under the FY

1999 HUD Appropriations Act should be American made.

Action Guidance. In providing financial assistance under the FY

1999 HUD Appropriations Act or in entering into any contract with any

entity using funds made available under the FY 1999 HUD Appropriations

Act, HUD, to the greatest extent practicable, is to provide a notice

that describes Congressional intent in this regard. HUD is bringing

this matter to the attention of the readers of this notice and urges

them to take appropriate action.

Section 592--Use of Assisted Housing by Aliens. This section

removes the option of PHAs to elect not to comply with section 214 of

the Housing and Community Development Act of 1980 (Restriction on

Assistance to Noncitizens). This option was provided by the Immigration

Reform and Immigrant Responsibility Act of 1996 (Pub.L. 104-298,

approved September 30, 1996). In its place, the QHWRA provides that

PHAs, notwithstanding the requirement of section 214(h)(1), may elect

not to affirmatively establish and verify eligibility before providing

financial assistance to an individual or family. Section 214(h)(1)

provides that ``No individual or family applying for financial

assistance may receive such financial assistance prior to the

affirmative establishment and verification of eligibility of at least

the individual or one family member under subsection (d) by the

applicable Secretary or other appropriate entity.''

Action Guidance for Public Housing and Section 8 Certificate,

Voucher, and Moderate Rehabilitation Programs. The amendments to

section 214 made by the QHWRA essentially reinstate HUD's noncitizens

regulations as they were in existence before the amendments made by the

Illegal Immigration Reform and Immigrant Responsibility Act of 1996.

The pre-1996 requirements did not require PHAs to affirmatively

establish and verify eligibility of at least the individual or one

family member before the individual or family may receiving financial

assistance. Additionally, the pre-1996 requirements did not provide

PHAs with the option not to comply with section 214. With the

amendments made by QHWRA, PHAs must comply with section 214 except that

they are not required to affirmatively establish and verify eligibility

of at least one family member before providing financial assistance.

PHAs, however, have the option to adhere to that requirement if they so

choose.

In the event a PHA elected to opt out of compliance with section

214, the PHA may, but is not required to, immediately commence

verification of eligibility of families for whom eligibility status

under section 214 has not yet been undertaken. A PHA must, however,

verify eligibility status in accordance with the requirements of

section 214 and the regulations at 24 CFR part 5, subpart E, no later

than the date of the family's annual reexamination.

Section 597--Section 8 Moderate Rehabilitation Program. In part,

Section 597 establishes rules for determining contract rent levels at

which expiring moderate rehabilitation contracts will be renewed.

Action Guidance for Section 8 Moderate Rehabilitation Program. PHAs

must generally extend for one year the project-based HAP contracts for

non-SRO, non-mark-to-market multifamily moderate rehabilitation

projects at contract rents that are the lower of (1) current rents

adjusted by HUD's operating cost adjustment factor, (2) comparable

rents, or (3) FMR less any amounts allowed for tenant-purchased

utilities. HUD Field Offices were provided information concerning

moderate rehabilitation renewals on October 23, 1998; HUD provided

further implementing guidance in Notice PIH 98-62 (HA), issued December

15, 1998.

Section 599--Tenant Participation in Multifamily Housing Projects.

Section 599 of the QHWRA amends section 202 of the Housing and

Community Development Amendments of 1978 to extend the rights of

tenants to organize to include all projects receiving project-based

Section 8 assistance (including moderate rehabilitation and project-

based certificate projects) and to tenants receiving ``enhanced''

vouchers under the provisions of the Emergency Low Income Housing

Preservation Act of 1987, or the Low-Income Housing Preservation and

Resident Homeownership Act of 1990, or the Multifamily Assisted Housing

Reform and Affordability Act of 1997.

Action Guidance for Project-Based Section 8 and Enhanced Vouchers.

HUD will issue rulemaking governing tenants' rights to organize at

projects receiving project-based Section 8 assistance or enhanced

vouchers in connection with preservation projects or restructuring

projects (ELIHPA, LIHPRA and MAHRA).

Section II--Certain Statutory Provisions That Require Rulemaking

The following additional provisions of the QHWRA either require

rulemaking for implementation by statute or HUD has determined in its

review of the statutory provision that rulemaking is necessary for

implementation. This list does not include conforming rules that simply

amend existing HUD regulations to reflect the new statute. HUD may

determine that other sections need rulemaking as the implementation

process progresses. These sections will be identified in HUD's

Semiannual Agenda of Regulations to be published in April 1999 as part

of the Federal Government's Unified Regulatory Agenda.

Section 511--Public Housing Agency Plan (for Public Housing and

Section 8 Programs). This section establishes a comprehensive planning

process for PHAs--a 5-year plan and an annual plan update. The 5 year

plan describes the mission of the PHA and the PHA's long range goals

and objectives for achieving its mission over the next 5 years. The

annual plan provides details about the PHA's immediate operations,

residents, programs and services, and the PHA's strategy for handling

operational concerns, residents concerns and needs, programs and

services for the upcoming fiscal year.

Implementation Method. The QHWRA requires HUD to implement this

section by issuing an interim rule no later than 120 days after

enactment of the QHWRA; that is, by February 18, 1999. The interim rule

must provide a 60-day public comment period. The QHWRA also requires

HUD to solicit recommendations from (1) State or local PHAs, (2) public

housing residents, and (3) other appropriate parties. The QHWRA also

requires HUD to convene at least two public forums. The final rule,

which must be issued no later than by October 21, 1999, must discuss

the recommendations, public comments and HUD responses to the

recommendations and comments.

[[Page 8207]]

Please note that the interim rule is published elsewhere in today's

Federal Register.

Section 515 --Joint Ventures and Consortia of Public Housing

Agencies. This section permits two or more PHAs to participate in a

consortium to administer any or all of their housing programs. This

section also permits a PHA, in accordance with its PHA plan, to form a

subsidiary or joint venture to administer programs or provide

supportive or social services. A consortium must operate in accordance

with a consortium agreement and a joint PHA plan. The income generated

by a subsidiary or joint venture must be used for low-income housing or

to benefit the residents, and will not result in lower funding to the

PHA unless the capital and operating fund formulas so provide.

Implementation Method. HUD has determined that proper

implementation of at least the consortium provisions requires

rulemaking.

Section 519--Public Housing Capital and Operating Funds. Section

519 creates two grants for funding public housing activities--the

Capital Fund and Operating Fund. Assistance through these new funding

mechanisms is to commence for FY 2000, except that HUD may extend the

implementation of the Operating Fund allocation formula by up to six

months if necessary. (Please see discussion of this statutory provision

under Section I for those provisions of section 519 that are

immediately effective.)

Implementation Method. The QHWRA requires HUD to develop allocation

formulas for these funds through the negotiated rulemaking process.

Section 526--Pet Ownership for Public Housing. Section 526 permits

a resident of public housing, as defined in new section 31 of the USHA,

to have one or more pets in the unit if the resident maintains each pet

responsibly in accordance with applicable State and local laws and with

the PHA's policies stated in the PHA plan.

Implementation Method. The QHWRA provides that section 526 will

take effect upon the effective date of regulations issued by HUD to

carry out this section. The QHWRA also provides that HUD shall issue

effective regulations after notice and opportunity to comment by the

public.

Section 533--Conversion of Public Housing to Vouchers; Repeal of

Family Investment Centers. Section 533 requires PHAs to perform a

``conversion assessment'' of each of its public housing projects to

determine the relative benefit of converting to tenant-based assistance

under the section 8 program.

Implementation Method. HUD has determined that proper

implementation of section 533 requires rulemaking.

Section 537--Required conversion of distressed public housing to

tenant-based assistance. Section 537 adds a new section 33 to the USHA

and repeals its forerunner provision in the FY 1996 HUD Appropriations

Act. A component of each PHA plan is its 5-year plan for the removal of

public housing units identified as distressed from the public housing

inventory. This plan for removal of units is subject to review by HUD.

Implementation Method. HUD has determined that proper

implementation of section 537 requires rulemaking. See guidance in

Section I of this Notice regarding continued applicability of prior law

and regulations.

Section 539--Mixed-Finance Public Housing. Section 539 adds a new

section 37 to the USHA authorizing development of projects financially

assisted by private resources as well as public housing program funds.

Implementation Method. New section 37 provides that HUD shall issue

such regulations as may be necessary to promote the development of

mixed-finance projects.

Section 545--Merger of Certificate and Voucher Programs. Section

545 amends section 8(o) of the USHA to merge the Section 8 certificate

and voucher programs.

Implementation Method. In general, the merger of certificates and

vouchers is not yet effective. HUD will be issuing a rule that merges

these two programs. Therefore, PHAs should continue to operate these

programs as previously operated, except with respect to specific

changes highlighted by this Notice or as otherwise notified by HUD.

This includes assistance for families currently under lease and the

provision of turnover or newly awarded assistance to new families.

Section 556--Section 8 Renewals for Tenant-Based Certificate and

Voucher Funds. Section 556 amends section 8 of the USHA to add a new

subsection (dd) and authorizes HUD to renew all expiring tenant-based

contracts. New subsection (dd) directs HUD to establish an allocation

baseline amount of assistance to cover the renewals, and to apply an

inflation factor (based on local or regional factors) to the baseline.

Implementation Method. Section 556 requires HUD to issue a notice

by December 31, 1998, and to develop final regulations through the

negotiated rulemaking process.

Please note that elsewhere in today's Federal Register HUD has

published for the benefit of the public the notice that was issued

directly to PHAs on December 31, 1998.

Section 559--Rulemaking and Implementation. Section 559 provides

for implementation of sections 545 through 558 and other provisions in

title V that relate to the voucher program (most notably, the merger of

the certificate and voucher programs) through ``such interim

regulations as may be necessary'' and final regulations necessary to

implement these provisions. This section also requires HUD to seek

recommendations from various types of organizations on the

implementation of sections 8(o)(6)(B), 7(B), 10(D) of the USHA and

renewals of expiring tenant-based assistance. HUD is to convene not

less than two public forums to seek such recommendations.

Section 586--Amendments to Public and Assisted Housing Drug

Elimination Act of 1990. Section 586 amends the Anti-Drug Abuse Act of

1988 to include additional eligible activities and provide for more

predictable fund distribution.

Implementation Method. The statute directs HUD to prescribe by

regulation the criteria for establishing a class of PHAs that have

urgent or serious crime problems, for which funds may be reserved under

this program.

Please note that elsewhere in today's Federal Register, HUD is

publishing an Advance Notice of Proposed Rulemaking to solicit public

comments on HUD's proposed approach to this rulemaking.

Section III--Future Guidance

The QHWRA makes many significant changes to HUD's public housing

and Section 8 programs. With many of the changes immediately effective,

substantial responsibility is placed on PHAs and Section 8 owners to

implement these changes promptly. HUD is committed to working closely

with its public housing and Section 8 partners to make the changes in

its public housing and Section 8 programs a success. The successful

administration of the new programs created by the QHWRA or program

changes made by the QHWRA benefits those most in need of these

programs--low-income families. HUD welcomes comments from its program

partners, and HUD will continue to provide additional guidance through

direct notices to PHAs and Section 8 owners, additional Federal

Register notices, or through other means that may be determined

appropriate.

[[Page 8208]]

Section IV--Findings

A Finding of No Significant Impact with respect to the environment

was made in accordance with HUD regulations in 24 CFR part 50 that

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

1969 (42 U.S.C. 4223). The Finding is available for public inspection

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

Docket Clerk, Office of General Counsel, Room 10276, Department of

Housing and Urban Development, 451 7th Street, SW, Washington, DC

20410.

Dated: February 10, 1999.

Deborah Vincent,

General Deputy Assistant Secretary for Public and Indian Housing.

[FR Doc. 99-3731 Filed 2-17-99; 8:45 am]

BILLING CODE 4210-33-P