[Federal Register: September 17, 2003 (Volume 68, Number 180)]
[Rules and Regulations]
[Page 54612-54623]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17se03-17]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 972
[Docket No. FR-4476-F-04]
RIN 2577-AC02
Voluntary Conversion of Developments From Public Housing Stock
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule furthers HUD's implementation of section 533
of the Quality Housing and Work Responsibility Act of 1998. Section 533
authorizes Public Housing Agencies (PHAs) to convert a development to
tenant-based assistance by removing the development or a portion of the
development from its public housing inventory and providing for
relocation of the residents or provision of tenant-based assistance to
them. This action is permitted only when that change would be cost
effective, be beneficial to residents of the development and the
surrounding area, and not have an adverse impact on the availability of
affordable housing. Since the cost methodology necessary to conduct the
cost comparisons for voluntary conversions has not yet been finalized,
PHAs may not undertake conversions under this final rule until the
effective date of the cost methodology. HUD is publishing a proposed
rule elsewhere in today's Federal Register, to provide the public with
an opportunity to comment on the methodology that HUD proposes be used
for the required cost comparisons. This final rule follows publication
of a July 23, 1999, proposed rule and takes into consideration the
public comments received on the proposed rule.
DATES: Effective Date: March 15, 2004.
FOR FURTHER INFORMATION CONTACT: Bessy Kong, Acting Deputy Assistant
Secretary for Policy, Program, and Legislative Initiatives, Department
of Housing and Urban Development, Office of Public and Indian Housing,
451 Seventh Street, SW., Room 4116, Washington, DC 20410-5000;
telephone (202) 708-0713 (this is not a toll-free telephone number).
Persons with hearing or speech impairments may access this number via
TTY by calling the toll-free Federal Information Relay Service at 1-
800-877-8339.
SUPPLEMENTARY INFORMATION:
I. The July 23, 1999, Proposed Rule
On July 23, 1999 (64 FR 40240), HUD published for public comment a
proposed rule to implement section 533 of the Quality Housing and Work
Responsibility Act of 1998 (Title V of the Fiscal Year 1999 HUD
Appropriations Act; Public Law 105-276, approved October 21, 1998)
(QHWRA).
Section 533 of QHWRA amended section 22 of the United States
Housing Act of 1937 (42 U.S.C. 1437 et seq.) (1937 Act). As amended,
section 22 authorizes Public Housing Agencies (PHAs) to convert a
development to tenant-based assistance by removing the development or a
portion of a development from its public housing inventory and
providing for relocation of the residents or provision of tenant-based
assistance to them. This action is permitted only when that change
would be cost effective, be beneficial to residents of the development
and the surrounding area, and not have an adverse impact on the
availability of affordable housing. In the July 23, 1999, proposed
rule, HUD proposed to implement the voluntary conversion requirements
through the creation of a new 24 CFR part 972, subpart B.
In addition to permitting voluntary conversions, QHWRA revised the
provisions governing the program of required conversions. Section 537
of QHWRA added a new section 33 to the 1937 Act, entitled ``Required
Conversion of Distressed Public Housing to Tenant-Based Assistance.'' A
separate proposed rule was published on July 23, 1999 (64 FR 40232), to
implement these provisions through a new 24 CFR 972, subpart A. The
final rule that will make these proposed amendments effective is
published elsewhere in today's Federal Register.
II. The June 22, 2001, Final Rule on Required Initial Assessments
Section 22 of the 1937 Act also requires every PHA to conduct and
submit to HUD an initial conversion assessment for its developments no
later than October 1, 2001 (see section 22(b) of the 1937 Act).
However, the statute gives HUD the authority to exempt certain classes
of developments from this requirement, or streamline the requirements
of the required initial assessment. On June 22, 2001 (66 FR 33616), HUD
published a final rule providing regulatory guidance on the preparation
and submission of these assessments in a streamlined, simplified form.
The June 22, 2001, final rule also took into consideration the public
comments received on the proposed initial assessment requirements
contained in the July 23, 1999, proposed rule.
For the convenience of readers, the regulatory text of this final
rule repeats (but does not modify) the required initial assessment
requirements contained in the June 22, 2001, final rule. However,
interested readers should refer to the June 22, 2001, final rule for a
detailed discussion of these requirements, and of HUD's responses to
the public comments on the proposed initial assessment procedures.
III. Cost Methodology for Conversions
This final rule does not address the cost methodology that PHAs
must use for the required and voluntary conversion of public housing
developments. Both conversion processes require that PHAs, before
undertaking any conversion activity, compare the cost of providing
tenant-based assistance with the cost of continuing to operate the
development as public housing. This methodology was originally
contained in HUD's July 23, 1999, proposed rule on voluntary
conversions (although the methodology also applies to required
conversions). HUD has decided to significantly revise the cost
methodology, based on both the public comments received on the proposed
rule and upon further consideration of the cost factors that should be
assessed by PHAs in making conversion determinations. Accordingly, HUD
has decided to issue a new proposed rule published elsewhere in today's
Federal Register, which provides the public with an additional
opportunity to comment on the methodology that will be used for the
required cost comparisons.
Since the cost methodology necessary to conduct the required cost
comparisons has not yet been finalized, HUD is delaying the effective
date of this rule for a period of six months (180 days) following
publication (as opposed to the customary 30-day period). HUD's goal is
to have a final rule establishing the cost methodology in effect by
this date. Delaying the effective date of this rule for six months will
permit the final rule to take effect as close as possible to the
targeted effective date for the cost methodology. While the cost
methodology is being completed, PHAs may wish to prepare for voluntary
conversions by using the proposed methodology contained in the HUD
[[Page 54613]]
proposed rule being published today. However, because final methodology
may differ from what is contained in the proposed rule, PHAs should not
assume that the proposed cost test will be final with respect to
possible required or voluntary conversions.
IV. This Final Rule
This final rule furthers HUD's implementation of the voluntary
conversion program authorized by amended section 22 of the 1937 Act.
The final rule follows publication of the July 23, 1999, proposed rule
and takes into consideration the public comments received on the
proposed rule.
The major differences between this final rule and the July 23,
1999, proposed rule are described below.
A. General Changes
1. Initial assessment requirements not addressed in this final
rule. As noted above in section II of this preamble, this final rule
does not address the initial assessment requirements contained in the
July 23, 1999, proposed rule. These requirements were the subject of a
separate June 22, 2001, HUD final rule. Interested readers should refer
to that final rule for a detailed discussion of the streamlined initial
assessment requirements, and HUD's responses to the public comments
received on the initial assessment procedures contained in the proposed
rule. For the convenience of readers, the regulatory text of this final
rule repeats the initial assessment requirements established by the
June 22, 2001, final rule, but does not modify these requirements.
2. Cost methodology subject of separate HUD rulemaking. As noted
above in section III of this preamble, this final rule does not address
the cost methodology that PHAs must use to compare the cost of public
housing with the provision of tenant-based assistance. HUD has decided
to significantly revise the cost methodology contained in the July 23,
1999, proposed rule. HUD has, therefore, issued a new proposed rule
published elsewhere in today's Federal Register, which provides the
public with an additional opportunity to comment on the methodology
that will be used for the required cost comparisons. PHAs may not
undertake the cost test necessary for conversions until HUD's
publication of the final rule establishing the cost methodology.
3. Reorganization of voluntary conversion requirements. For
purposes of clarity, this final rule reorganizes several of the
regulatory provisions contained in the proposed rule. For example, the
final rule now groups all regulatory provisions concerning similar
subject matter (such as the voluntary conversion process or conversion
plans) under undesignated headings that identify the subject of the
related requirements. In addition, the final rule replaces the question
and answer format used in the proposed rule with standard section
headings that identify the subject of the regulatory provisions.
4. Applicability of the Uniform Relocation Act. This final rule
adds a new Sec. 972.215, which affirms that, to the extent that
tenants are displaced as a direct result of the demolition,
acquisition, or rehabilitation of federally-assisted property converted
pursuant to this final rule, the requirements of the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970 (42
U.S.C. 4601) (URA), and the implementing regulations issued by the
Department of Transportation at 49 CFR part 24, apply.
B. Changes Regarding Conversion Assessment Requirements
1. Payment standard use for analysis of rental market conditions.
This final rule continues to require that a PHA conduct an analysis of
rental market conditions as part of a conversion assessment required
for approval of voluntary conversion. This analysis must include an
assessment of the availability of decent and safe dwelling units rented
at or below the payment standard established for Section 8 tenant-based
assistance. This final rule clarifies that the payment standard used
for this determination is the applicable section 8 payment standard for
the jurisdiction or designated part of the FMR area in which the
development is located.
2. Tenant-based success rates. This final rule continues to require
that, as part of the analysis of rental market conditions, the PHA
consider the success rate of using Section 8 tenant-based assistance in
the community for the appropriate bedroom size. The final rule,
however, clarifies that this determination includes recent success
rates for units renting at or below the established payment standard.
3. Characteristics that may affect a family's ability to be housed.
This final rule continues to provide that, as part of the required
analysis of rental market conditions, a PHA must consider any
particular characteristics of the specific residents of the public
housing that may affect their ability to be housed. For purposes of
clarity, the regulatory text has been revised to provide two examples
of such characteristics--large household size and the presence of an
elderly or disabled family member. These examples are meant to
illustrate the types of characteristics that a PHA should consider in
making this determination. The examples do not preclude a PHA from
considering other characteristics that may impact a family's ability to
locate housing.
4. Consideration of other substantial impacts. This final rule
clarifies that, in addition to the identified potential impacts of
conversion, the required impact analysis must also assess ``any other
substantial impacts on the neighborhood.''
5. Additional guidance on what it means to ``principally benefit''
residents, the PHA, and the community. This final rule clarifies that
in determining whether conversion will principally benefit public
housing residents, the PHA, and the community, the PHA must consider
such factors as the availability of landlords providing section 8
tenant-based assistance, as well as access to schools, jobs, and
transportation. Further, the final rule provides that, in determining
whether a conversion will principally benefit residents, the PHA, and
the community, HUD will consider whether the conversion will conflict
with any litigation settlement agreements, voluntary compliance
agreements, or other remedial agreements signed by the PHA with HUD.
6. Resident participation in development of conversion assessments.
This final rule expands the resident participation process for
developing a conversion assessment. The conversion assessment
consultation process established by this final rule is similar to the
consultation process for conversion plans. Specifically, the final rule
requires a PHA to hold at least one public meeting with residents of
the affected site (including the duly elected Resident Council, if any,
that covers the development in question). At the meeting, the PHA must
explain the voluntary conversion requirements (especially as they apply
to residents of affected developments), and provide draft copies of the
conversion assessment to the residents. The PHA must also provide the
residents with a reasonable period of time to submit comments on the
draft conversion assessment. The conversion assessment submitted to HUD
must contain a summary of the resident comments, as well as the PHA
responses to any significant issues raised by the commenters. (This
process may be combined with the process for submitting a conversion
plan if the PHA will submit the assessment and plan to HUD together,
but otherwise must be
[[Page 54614]]
undertaken separately from the process for submitting a conversion
plan.)
C. Changes Regarding Conversion Plan Requirements
1. Required consultation with resident council. This final rule
clarifies that the PHA must meet to discuss the proposed conversion
with any duly elected resident council that covers the development in
question.
2. Conversion plan consistency with conversion assessment. This
final rule requires that a conversion plan include a description of the
plan's consistency with the findings of the conversion assessment.
3. Relocation plan. This final rule provides that the relocation-
related requirements of a conversion plan must be contained in a
relocation plan, which must include a budget for carrying out
relocation activities.
4. Schedule for the provision of moving expenses. This final rule
clarifies that a voluntary conversion plan must also include a
timetable for the provision of moving services and/or expenses
(including a description of the amounts).
5. Consideration of resident comments received on conversion plan.
This final rule clarifies that the conversion plan must not only
include a summary of the resident comments received during the
development of the plan, but must also contain the PHA responses to the
comments (including a description of any actions taken by the PHA as a
result of the comments).
6. URA notices of displacement. For purposes of clarity, HUD has
revised the rule to more closely conform to the notice requirements of
the URA and the implementing regulations at 49 CFR part 24. As required
by 49 CFR 24.203, if a voluntary conversion is subject to the URA, PHAs
must provide families scheduled to be displaced with a General
Information Notice, a Notice of Relocation Eligibility or Notice of
Non-displacement (as applicable), and a 90-day advance notice of the
earliest date by which a resident may be required to move.
The General Information Notice provides families subject to
displacement with certain information regarding their rights under URA.
Under the URA regulation at 49 CFR 24.203, persons subject to
displacement must be provided with the General Information Notice ``as
soon as feasible.'' Accordingly, this final rule requires that the PHA
provide families with the General Information Notice no later than the
date the conversion plan is submitted to HUD.
The Notice of Relocation eligibility advises families subject to
displacement that they are eligible for relocation assistance as of a
certain date that agencies are free to define (called the ``date of
initiation of negotiations'' in the URA regulations). This final rule
provides that, for purposes of voluntary conversions, the ``date of
initiation of negotiations'' shall be the date that HUD approves the
conversion plan.
HUD Handbook 1378.0, ``Tenant Assistance, Relocation and Real
Property Acquisition'' (issued on March 28, 1996), provides additional
details and helpful information regarding the basic statutory and
regulatory requirements that must be followed by an agency that carries
out real property acquisition or the displacement of a person for a
project or program for which HUD financial assistance is provided,
including the notice requirements discussed above. Interested persons
may download a copy of Handbook 1378.0 through HUD's Client Information
and Policy System (HUDCLIPS) Web Page at http://www.hudclips.org.
7. Provision of voucher assistance used for relocation. This final
rule provides that, where Section 8 voucher assistance is being used
for relocation, the vouchers must be issued to the family at least 90
days before conversion.
8. Actual and reasonable relocation expenses. This final rule
clarifies that the PHA has the discretion to define whether a
relocation cost is actually or reasonably related to the family's
relocation and, therefore, reimbursable.
9. Mobility counseling. For purposes of clarity, this final rule
specifies that the required PHA counseling to displaced families must
include appropriate mobility counseling.
10. Timing of submission of conversion plan. This final rule
clarifies that a PHA must prepare a conversion plan, and submit it to
HUD, as part of the next PHA Annual Plan, within one year after
submitting the full conversion assessment, or as a significant
amendment to that Annual Plan. The PHA may also submit the conversion
plan in the same Annual Plan as the conversion assessment.
11. HUD review of conversion plans. This final rule clarifies that
HUD anticipates that its review of a conversion plan will ordinarily
occur within 90 days following submission of a complete plan by the
PHA. A longer process may be required where HUD's initial review of the
plan raises questions that require further discussion with the PHA. In
any event, HUD will provide all PHAs with a preliminary response within
90 days following submission of a conversion plan. Lack of a HUD
response within this time frame will constitute automatic HUD approval
of the conversion plan.
V. Discussion of Public Comments Received on the July 23, 1999,
Proposed Rule
The public comment period closed on September 21, 1999. By close of
business on that date, HUD had received six public comments. Comments
were submitted by a private citizen; a PHA; two of the three main
organizations representing PHAs; and two legal aid organizations. This
section of the preamble presents a summary of the significant issues
raised by the public commenters on the July 23, 1999, proposed rule and
HUD's responses to these comments.
As noted above in this preamble, this final rule does not address
the public comments received on the proposed initial assessment
requirements (which were addressed as part of HUD's June 22, 2001,
final rule on this subject) or on the conversion cost methodology
(which is the subject of a separate proposed rule published elsewhere
in today's Federal Register).
A. General Comments Not Related to a Specific Regulatory Section
Comment: The voluntary conversion program will not work until HUD
develops an effective way to enforce Housing Quality Standards (HQS).
One commenter wrote that ``[s]o long as PHAs are not enforcing HQS,
[and] so long as HUD has no capability to monitor the inspection of
those properties in Section 8, the [voluntary conversion] process is
flawed.''
HUD Response. HUD's Section 8 Management Assessment Program (SEMAP)
provides for the objective measurement of PHA performance in key areas
of the Section 8 tenant-based assistance program (including PHA
enforcement of HQS). SEMAP enables HUD to ensure program integrity and
accountability by identifying PHA management capabilities and
deficiencies and by improving risk assessment to effectively target
monitoring and program assistance.
HUD's final rule for the SEMAP was published on September 10, 1998
(63 FR 48548). Most provisions of the final rule took effect on October
13, 1998. The SEMAP regulations enable HUD to assess PHA enforcement of
HQS using specific criteria, and to ensure that appropriate corrective
action is taken when a PHA fails to adequately enforce HQS.
[[Page 54615]]
Comment: Comments regarding internet cost calculator. The preamble
to the proposed rule stated that HUD is considering establishing a web-
based cost comparison calculator on HUD's internet homepage to assist
PHAs in conducting the cost comparisons required by the proposed rule.
(See 64 FR 40241, first column.) Two commenters supported the idea of a
web-based cost calculator, writing that it would reduce the workload on
PHAs and provide consistency. Another commenter, however, wrote that it
is not possible to comment on the web-based calculator until additional
details are provided. The commenter also suggested that the methodology
used by the web-based calculator should be subject to notice and
comment rulemaking procedures.
HUD Response. HUD agrees that an internet cost calculator will
reduce PHA administrative burden. HUD also agrees that development of
such a calculator will help to ensure the accuracy and consistency of
the required cost comparisons. HUD intends to proceed with development
of the web-based calculator. Short of a web-based calculator, HUD may
post compilation worksheets on its Internet homepage (http://www.hud.gov
), which will make these calculations easier.
B. Comments Regarding Conversion Assessment Components (Sec. 972.209
of the Proposed Rule; Sec. 972.218 of This Final Rule)
The proposed rule at Sec. 972.209 described the various components
of a conversion assessment (the corresponding provisions of this final
rule are located at Sec. 972.218).
Comment: HUD should provide additional guidance regarding the
conduct of the conversion assessment. In the preamble to the July 23,
1999, proposed rule, HUD invited public comments on ``whether
additional guidance should be given regarding how PHAs should conduct
the analysis of rental market conditions and the analysis of the impact
on the neighborhood and how these analyses relate to the PHA's
obligation to affirmatively further fair housing'' (see 64 FR 40242,
first column).
Two commenters wrote that such guidance would be helpful. One of
the commenters wrote that the templates developed for the five-year and
annual PHA Plans have been a ``helpful addition to the process.'' The
commenter suggested that ``[p]erhaps something similar could be
developed for [the conversion assessment], and presented for public
review and comment.'' The second commenter emphasized that HUD should
not ``prescribe specific requirements for rental market or neighborhood
impact analyses beyond those found in the statute.''
HUD Response. HUD agrees that additional guidance regarding the
conduct of the conversion assessment would be helpful. Where
appropriate, HUD has revised the proposed rule to provide additional
clarification and guidance on the conversion assessment requirements.
For example, HUD has revised the proposed rule to provide examples of
the types of characteristics that may impact a family's ability to be
housed. The final rule also clarifies that, in considering the success
rate of using Section 8 tenant-based assistance, PHAs must consider
recent success rates for units renting at or below the established
payment standard. HUD may develop further non-regulatory guidance on
the voluntary conversion process.
Comment: The impact analysis should include an analysis of the
effect of conversion on schools and neighborhood businesses. One
commenter made this suggestion.
HUD Response. This final rule requires that the conversion
assessment ``describe the likely impact of conversion of the public
housing development on the neighborhood in which the public housing is
located.'' Section 972.218(d) provides two examples of potential
neighborhood impacts that should be included in the analysis: the
impact on the availability of affordable housing in the neighborhood,
and the impact on the concentration of poverty in the neighborhood.
These examples are meant to illustrate the types of impacts on the
neighborhood that must be analyzed by the PHA. The examples do not
excuse a PHA from analyzing other likely impacts of the conversion,
such as the impact on schools and neighborhood businesses. For purposes
of clarity, HUD has revised the proposed rule to provide that the
impact analysis must also include ``any other substantial impacts on
the neighborhood.'' This change clarifies that a PHA may analyze the
types of impacts identified by the commenter, as well as any other
impacts on the neighborhood that the PHA determines are appropriate for
inclusion in the required analysis.
C. Comments Regarding the Necessary Conditions for HUD Approval of
Conversion (Sec. 972.213 of the Proposed Rule; Sec. 972.224 of This
Final Rule)
The proposed rule at Sec. 972.213 provided that a conversion
assessment is required for any PHA that seeks approval to convert a
property to tenant-based assistance. The assessment must demonstrate
that the conversion of the development will: (1) Not be more expensive
than continuing to operate the development (or a portion of it) as
public housing; (2) principally benefit the residents of the public
housing development (or portion thereof) to be converted, the PHA, and
the community; and (3) not adversely affect the availability of
affordable housing in the community. (The corresponding provisions of
this final rule are located at Sec. 972.224.)
Comment: HUD should provide additional guidance on what it means to
``principally benefit'' residents of public housing, the PHA, and the
community. Two commenters made this recommendation. One of the
commenters wrote that, in determining whether conversion will
principally benefit residents, HUD should consider such factors as the
availability of participating Section 8 landlords, as well as access to
schools, jobs, and transportation.
HUD Response. HUD agrees with the commenters and has revised the
rule accordingly. Specifically, this final rule clarifies that in
determining whether conversion will principally benefit public housing
residents, the PHA, and the community, the PHA must consider the
availability of landlords providing Section 8 tenant-based assistance
and access to schools, jobs, and transportation. Further, the final
rule provides that, in determining whether a conversion will
principally benefit residents, the PHA, and the community, HUD will
consider whether the conversion will conflict with any litigation
settlement agreements, voluntary compliance agreements, or other
remedial agreements signed by the PHA with HUD.
D. Comments Regarding the Public and Resident Consultation Process for
Developing a Conversion Plan (Sec. 972.215 of the Proposed Rule; Sec.
972.227 of This Final Rule)
The proposed rule at Sec. 972.215 provided that a conversion plan
must be developed in consultation with appropriate public officials and
with significant participation by residents of the development. (The
corresponding provisions of this final rule are located at Sec.
972.227.)
Comment: Final rule should expand the resident and public
participation process. Two commenters recommended the expansion of the
public and resident participation standards. One of the commenters
objected to the language of the proposed rule, which provided that a
PHA could
[[Page 54616]]
satisfy the resident consultation requirement by holding a meeting with
the residents. The commenter wrote that ``[h]olding one meeting to
present a plan that has already been developed based on complex
calculations and studies * * * is not `significant participation' in
the development of the plan.'' Both commenters made various specific
suggestions for enhancing the consultation process, including:
1. Requiring the PHA to consult with the development's resident
council and the PHA-wide Resident Advisory Board;
2. Requiring that the required meeting with residents take place at
least 45 days before the PHA submits the conversion plan to HUD;
3. Requiring that the consultation process include adequate notice
to residents and an opportunity for residents to comment. Further, HUD
should require that a PHA give due consideration to all comments from
residents and the public;
4. Providing resident access to independent technical assistance;
and
5. Requiring that any relevant documents be provided to residents
at least six months in advance of the public meeting. According to the
commenter making this suggestion, this is necessary due to the
complexity of the issues related to voluntary conversion.
HUD Response. HUD does not believe that it is necessary to revise
the proposed rule to adopt the suggestions made by these commenters.
Existing regulatory requirements already ensure meaningful and timely
public input in the development of the conversion plans. For example,
the conversion plan must be part of the PHA's Annual Plan. The
conversion plans, therefore, are subject to the extensive public
participation requirements for the development of the PHA Annual Plans
(see 24 CFR part 903). The consultation requirements at Sec. 972.227
supplement the PHA Plan requirements, they do not replace them.
Among other requirements, the PHA Plan regulations require that
PHAs establish Resident Advisory Boards to assist and make
recommendations in the development of the PHA Annual Plans (see 24 CFR
903.13). PHAs are also required to conduct a public meeting in
developing their Annual Plans, and to conduct reasonable outreach
activities to encourage broad public participation in the PHA Plans
(see 24 CFR 903.17). Considered in their totality, the consultation
procedures contained in both the voluntary conversion and PHA Plan
regulations require that a PHA undertake good faith efforts to ensure
that residents understand and have a voice in the implementation of
voluntary conversions.
For purposes of clarity, HUD has made one change to the proposed
consultation requirements. Specifically, the final rule clarifies that
the public housing residents with whom the PHA must meet include any
duly elected resident council that covers the development in question.
Although HUD has not adopted many of the suggestions made by the
commenters, HUD agrees that meaningful public and resident
participation is essential to the success of the voluntary conversion
process. Accordingly, in addition to requiring consultation with
residents during the development of a conversion plan, this final rule
also requires that PHAs consult with residents during the preparation
of the conversion assessment. The conversion assessment consultation
process established by this final rule is similar to the consultation
process for conversion plans. The new consultation requirements will
help to ensure that PHAs solicit resident input as early as possible in
the conversion process.
The conversion assessment procedures at Sec. 972.224 require that
a PHA hold at least one public meeting with residents of the affected
site (including the duly elected Resident Council, if any, that covers
the development in question). At the meeting, the PHA must explain the
voluntary conversion requirements (especially as they apply to
residents of affected developments), and provide draft copies of the
conversion assessment to the residents. The PHA must also provide the
residents with a reasonable period of time to submit comments on the
draft conversion assessment. The conversion assessment submitted to HUD
must contain a summary of the resident comments, as well as the PHA
responses to any significant issues raised by the commenters.
Comment: The final rule should clarify that a PHA may decide not to
proceed with conversion based on comments from residents and the
public. Two commenters made this suggestion.
HUD Response. HUD does not believe that the requested change is
necessary. This final rule requires that a PHA consider the resident
comments in developing the conversion plan. A PHA may decide, based on
its consideration of the comments, not to proceed with a proposed
conversion. Further, HUD will also consider the public comments in its
review of the conversion plan and will not approve a conversion plan
unless it is satisfied that the concerns of residents and the public
have been adequately addressed by the PHA.
E. Comments Regarding the Components of a Conversion Plan (Sec.
972.217 of the Proposed Rule; Sec. 972.230 of This Final Rule)
The proposed rule at Sec. 972.217 described the various elements
that must be included in a conversion plan. (The corresponding
provisions of this final rule are located at Sec. 972.230.)
Comment: More notice of displacement should be required. The
proposed rule would have required that a PHA notify families residing
in the development 90 days before displacement. One commenter wrote
that the 90-day notice is inadequate. The commenter wrote that, under
the Section 8 rental voucher program, families generally have 120 days
to locate housing. The commenter also wrote that, for families with
school-age children, relocation during the school term will seriously
disrupt the children's education and jeopardize related child-care
arrangements.
HUD Response. In accordance with URA, this final rule provides that
a family will not be required to move without at least 90-days advance
written notice of the earliest date by which the family may be required
to move, and that the family will not be required to move permanently
until the family is offered comparable housing, in accordance with the
final rule. In addition, the final rule provides that, where Section 8
voucher assistance is being used for relocation, the vouchers must be
provided to the family at least 90 days before conversion. PHAs should
consider all relevant factors that might affect a family's ability to
relocate (such as school age children) in determining the appropriate
time frames, and should ensure that families are provided with adequate
time to locate new housing.
Comment: Reimbursement of relocation expenses should include
security deposits. The proposed rule would have required that a PHA
reimburse a family for ``actual and reasonable relocation expenses that
[the family] incur[s] as a result of the conversion.'' One commenter
suggested that the final rule explicitly provide for reimbursement of
security deposits.
HUD Response. Utility and security deposits are not considered an
eligible relocation cost under URA since these deposits are refundable
and, therefore, not an expense. PHAs may elect to assist residents to
pay any increased or additional deposits that may be required at their
replacement unit by advancing funds under a repayment agreement.
[[Page 54617]]
HUD, however, does not believe it would be appropriate to identify by
regulation all ``actual and reasonable'' relocation expenses. HUD
believes that it is more appropriate to leave the definition of whether
a relocation cost is ``actual and reasonable'' to the individual PHAs,
who are more familiar with local circumstances and housing conditions.
The final rule, therefore, clarifies that the PHA must reimburse a
family for ``actual and reasonable relocation expenses, as determined
by the PHA'' that the family incurs as a result of the conversion.
Comment: Relocation requirements should be split off and set forth
in a separate section. One commenter made this recommendation.
HUD Response. HUD does not believe it would be reader-friendly to
adopt the commenter's suggestion. It might be confusing to separate the
required elements of the conversion plan into separate regulatory
sections. Accordingly, the final rule continues to set forth all of the
necessary components of the conversion plan, including the relocation
requirements, in a single section (Sec. 972.230). The relocation
requirements are all contained in paragraph (g) of Sec. 972.230.
Comment: Final rule should reference applicability of URA. One
commenter suggested that the final rule should provide that URA applies
to families displaced pursuant to a voluntary conversion.
HUD Response. HUD has adopted the commenter's suggestion. The final
rule adds a new Sec. 972.215, which affirms that, to the extent that
tenants are displaced as a direct result of the demolition,
acquisition, or rehabilitation of federally-assisted property converted
pursuant to this final rule, the requirements of URA and the
implementing regulations issued by the Department of Transportation at
49 CFR part 24, apply. Further, for purposes of clarity, HUD has
revised the proposed rule to more closely conform to the notice
requirements of the URA and the implementing regulations. As required
by 49 CFR 24.203, if a voluntary conversion is subject to the URA, PHAs
must provide families scheduled to be displaced with a General
Information Notice, a Notice of Relocation Eligibility or Notice of
Non-displacement (as applicable), and a 90-day advance notice of the
earliest date by which a resident may be required to move.
F. Comments Regarding HUD Actions With Respect to Conversion Plans
(Sec. 972.223 of the Proposed Rule; Sec. 972.239 of This Final Rule)
The proposed rule at Sec. 972.223 described the standards that HUD
will use to review a conversion plan submitted by a PHA, and the
grounds for HUD disapproval of a conversion plan. (The corresponding
provisions of this final rule are located at Sec. 972.239.)
Comment: HUD grounds for disapproval should be expanded. Two
commenters suggested that the final rule should provide additional
reasons for HUD to disapprove a proposed voluntary conversion.
Specifically, the commenters suggested that a conversion plan not be
approved:
1. Unless converted housing is replaced on a one-for-one basis.
2. Unless the PHA has financing commitments in place for
redevelopment of the housing to be converted.
3. If conversion will result in reduction in fair housing choice.
4. Unless the conversion plan is consistent with the Consolidated
Plan.
HUD Response. HUD does not believe it is necessary to revise the
rule to adopt the suggestions made by these commenters. The regulatory
provisions regarding HUD disapproval of conversion plans are identical
to the statutory language of section 22 of the 1937 Act. Section 22
provides that ``[t]he Secretary shall disapprove a conversion plan only
if (1) the plan is plainly inconsistent with the conversion assessment
* * *; (2) there is reliable information and data available to the
Secretary that contradicts the conversion assessment; or (3) the plan
otherwise fails to meet the requirements of this section.''
HUD believes that the statutory language is sufficiently flexible
to permit HUD to address the concerns raised by the commenters. The PHA
is already required to consider most of the issues raised by the
commenter (such as the impact of the conversion on fair housing choice
and the availability of replacement housing) as part of the conversion
assessment process. The broad disapproval authority granted to HUD by
section 22 will allow it to disapprove a conversion plan that fails to
adequately address these concerns when they rise to the level
contemplated by the statute.
G. Comments Regarding the Timing of Voluntary Conversion (Sec. 972.225
of the Proposed Rule; Sec. 972.212 of This Final Rule)
The proposed rule at Sec. 972.225 provided that a PHA may proceed
to convert a development covered by a conversion plan only after
receiving written approval of the conversion plan from HUD. Once a
conversion plan is approved, tenants may be relocated using tenant-
based assistance. A PHA must apply for Section 8 tenant-based
assistance, and the PHA will be given a priority for receiving tenant-
based assistance. As the development is removed from the public housing
inventory, public housing operating subsidy and modernization funding
will phase out under the usual process. HUD might require that funding
for the initial year of tenant-based assistance be provided from the
public housing Capital Fund, Operating Fund, or both.
Comment: HUD should not require that funding for the first year of
tenant-based assistance be provided from the Capital or Operating
Funds. Three commenters objected to this provision of the proposed
rule. The commenters agreed that ``[t]he effect of siphoning off and
further reducing public housing funds for tenant-based assistance will
be the continued deterioration of public housing.'' ``[O]perating and
capital funds are appropriated to ensure the preservation of public
housing as an affordable housing resource and, as such, any funds
attributable to developments identified for conversion should be re-
invested in the public housing stock.'' One of the commenters wrote
that this provision contradicts the statutory language of section 533
of QHWRA, which provides that ``the funds used by the [PHA] to provide
tenant-based assistance shall be added to the annual contributions
contract administered by the [PHA].''
HUD Response. HUD has not adopted the change requested by the
commenter. The final rule does not mandate that the initial year of
tenant-based assistance be provided from the Capital and Operating
Funds. Rather, the final rule, as did the proposed rule before it,
merely provides for this possibility. HUD continues to believe that the
flexibility provided by this provision is necessary to ensure that
adequate funding is available for voluntary conversions. HUD disagrees
with the commenter who wrote that this provision contradicts the
language of section 533 of QHWRA. The statute provides that the
necessary funds will be added to the annual contributions contract only
``[t]o the extent approved by the Secretary.'' Nothing in the statutory
language prohibits the use of the Operating and Capital Funds for such
purposes.
Comment: HUD should provide additional guidance regarding post-
conversion funding. One commenter
[[Page 54618]]
wrote that it would be helpful for HUD to clarify the timing of the
phased process for substituting assistance and, particularly, whether
local funding would be applied before or after deducting subsidy for
the units being converted.
HUD Response. Converted public housing would be phased out using
currently applicable procedures. Subject to appropriations, new Section
8 funding would be committed and provided to PHAs for the provision of
tenant-based voucher assistance.
H. Comments on Issues Highlighted for Public Comment
Although HUD welcomed public comment on all aspects of the July 23,
1999, proposed rule, the preamble to the proposed rule specifically
invited comments on the following issues (see 64 FR 40242, beginning on
the middle column):
1. Whether the voluntary conversion process should be used to
promote deconcentration; and
2. Whether a description should be required, as part of a full
conversion assessment, of the proposed conversion's impact on racial
and ethnic minorities and persons with disabilities.
In addition, the preamble solicited comments on a third issue
regarding the cost methodology used for conversions. Specifically, HUD
solicited comments on whether it is more appropriate to use a housing
construction cost component of Total Development Cost (TDC) for
purposes of calculating accrual. As noted above, HUD is issuing a
separate proposed rule, published elsewhere in today's Federal
Register, regarding the cost methodology. The proposed rule addresses
the public comments received on whether PHA capital costs should be
included as part of the cost-comparison between public housing and
vouchers.
1. Comments Regarding Deconcentration
Comment: Voluntary conversion process should not be used to promote
deconcentration. Two commenters opposed the use of the voluntary
conversion process to promote deconcentration. The commenters wrote
that promoting deconcentration is not authorized by section 533 of
QHWRA and that ``conversion to Section 8 vouchers decreases the amount
of needed hard units for low-income tenants.'' One of the commenters
also wrote that ``PHAs across the country have successfully used the
mixed finance provisions to achieve income mix and improve public
housing sites.'' This commenter believes that use of the voluntary
conversion process to achieve the same goals ``will only complicate and
confuse the HUD approval process.''
HUD Response. After careful consideration, HUD has decided not to
revise the proposed rule to specifically address the use of voluntary
conversions to promote deconcentration. The rule provides PHAs with the
flexibility to use the conversion process as a tool in their
deconcentration efforts.
Comment: Final rule should establish safeguards if HUD decides to
use conversion to promote deconcentration. One commenter suggested that
if HUD decides to use conversion to promote deconcentration, it should
require that, ``at the very least,'' the conversion plan specify how
deconcentration will occur. Further, the commenter wrote that the
conversion plan should include a ``realistic mobility project, adequate
funding for the project, and monitoring to make sure that the promised
deconcentration actually occurs.'' The commenter suggested that HUD
impose appropriate sanctions if the promised deconcentration does not
occur, including the ``withdrawal of the approval for voluntary
conversion, or a cessation of the conversion process until there is a
substantial measurable progress on deconcentration.''
HUD Response. HUD has not adopted the suggestions made by the
commenter. As noted in the response to the previous comments, HUD has
not revised the rule to specifically address the use of the voluntary
conversion process to promote deconcentration.
2. Comments Regarding Fair Housing Assessment
Two commenters opposed the preparation of a fair housing impact
assessment. One of the commenters noted that no such analysis is
required for mandatory conversions under section 537 of QHWRA. The
commenter also wrote that much of the information generated by such an
analysis would already have been captured in the neighborhood impact
portion of the conversion assessment. The second commenter wrote that
the ``statutory requirements for public notice and consultation, along
with existing housing discrimination law, sufficiently protects
vulnerable groups.''
Two other commenters, however, recommended that the final rule
should require the preparation of a fair housing impact analysis. The
commenters wrote that HUD and PHAs have an obligation to avoid
discriminatory impacts and to affirmatively further fair housing. One
commenter suggested that the fair housing assessment and supporting
data should be made available to the residents and the public for
comment.
The commenters suggested that the fair housing analysis should:
1. Consider the impact of conversion on each protected class:
racial and ethnic minorities, persons with disabilities, and families
with children;
2. Consider the impact not only on current residents, but also on
persons likely to apply for housing;
3. Determine whether the proposed conversion will increase fair
housing choice for each protected class, or perpetuate segregation;
4. Determine whether the proposed conversion will decrease fair
housing choice (according to the commenter this would generally be true
if the overall amount of assisted housing is reduced or if public
housing units located outside high poverty areas with concentrations of
minorities are converted);
5. Analyze the rate at which minority families and other protected
groups are able to find housing under the Section 8 voucher program in
areas that are racially integrated and have low poverty rates;
6. Analyze whether all families in housing proposed to be converted
will receive housing assistance and be able to remain in the area if
they choose;
7. Analyze the need and cost for higher payment standards in non-
poverty areas; and
8. Analyze the availability of participating Section 8 landlords.
The commenter suggested that a PHA should be required to provide an
advance list of landlords willing to participate.
HUD Response. After careful consideration, HUD has determined that
the proposed rule adequately addresses fair housing considerations, and
that a regulatory change is unnecessary. As part of their conversion
assessments, PHAs are required to evaluate the rental market conditions
for residents of the converted development, including ``any particular
characteristics of the specific residents of the public housing which
may affect their ability to be housed.'' This assessment should take
into consideration the rental market conditions for ethnic and racial
minorities and for persons with disabilities. PHAs are also required to
analyze the impact of conversion on the neighborhood, which should
include the potential impacts relevant to fair housing.
Further, other regulatory requirements help to ensure that PHAs
consider the fair housing implications of their conversion activities.
As noted above, the conversion plan must be part of the PHA's Annual
Plan. HUD's PHA Plan
[[Page 54619]]
regulations require that a PHA certify that it will carry out its
Annual Plan and 5-Year Plan in conformity with applicable statutory
fair housing and nondiscrimination requirements, and must affirmatively
further fair housing. This, of course, includes any voluntary
conversion activities. As noted above, HUD has also added language to
the final rule further emphasizing the need for adequate mobility
counseling.
VI. Findings and Certifications
Public Reporting Burden
The information collection requirements contained in Sec. Sec.
972.218 and 972.230 have been approved by the Office of Management and
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB Control Number 2577-0234. In accordance with the
Paperwork Reduction Act, HUD may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless the
collection displays a currently valid OMB control number.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) (the RFA), has reviewed and approved this final rule,
and in so doing certifies that this rule will not have a significant
economic impact on a substantial number of small entities.
The entities that are subject to this rule are public housing
agencies that administer public housing. Under the definition of
``Small governmental jurisdiction'' in section 601(5) of the RFA, the
provisions of the RFA are applicable only to those public housing
agencies that are part of a political jurisdiction with a population of
under 50,000 persons. The number of entities potentially affected by
this rule is therefore not substantial. Further, this final rule
establishes policies and procedures governing voluntary conversions of
public housing developments to tenant-based assistance. Accordingly, to
the extent that the rule imposes any economic costs on PHAs, it does so
as a result of actions undertaken voluntarily by the PHAs. Ultimately,
the goal of the rule is to promote more efficient delivery of
affordable housing to residents of current public housing developments.
This efficiency should benefit small PHAs and large PHAs alike.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made at the proposed rule stage, in accordance with HUD regulations
at 24 CFR part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4223). That Finding remains
applicable to this final rule and is available for public inspection
between the hours of 7:30 a.m. and 5:30 p.m. weekdays in the Office of
the Rules Docket Clerk, Office of General Counsel, Room 10276, U.S.
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Washington, DC 20410-0500.
Federalism Impact
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This final rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) establishes requirements for federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This final rule does not impose any
federal mandates on any State, local, or tribal governments or the
private sector within the meaning of the Unfunded Mandates Reform Act
of 1995.
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, entitled ``Regulatory Planning and Review.'' OMB
determined that this rule is a ``significant regulatory action'' as
defined in section 3(f) of the Order (although not an economically
significant regulatory action under the Order). Any changes made to
this rule as a result of that review are identified in the docket file,
which is available for public inspection in the office of the
Department's Rules Docket Clerk, Office of General Counsel, Room 10276,
451 Seventh Street, SW., Washington, DC 20410-0500.
Catalog of Federal Domestic Assistance Number
The Catalog of Federal Domestic Assistance number for the program
affected by this rule is 14.850.
List of Subjects in 24 CFR Part 972
Grant programs--housing and community development, Low and moderate
income housing, Public housing.
0
For the reasons discussed in the preamble, HUD amends title 24 of the
Code of Federal Regulations, chapter IX, part 972 as follows:
PART 972--CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE
0
1. The authority citation for part 972 continues to read as follows:
Authority: 42 U.S.C. 1437t, 1437z, and 3535(d).
0
2. Revise subpart B to read as follows:
Subpart B--Voluntary Conversion of Public Housing Developments
Purpose; Definition of Conversion
Sec.
972.200 Purpose.
972.203 Definition of ``conversion.''
Required Initial Assessments
972.206 Required initial assessments.
Voluntary Conversion Procedure
972.209 Procedure for voluntary conversion of public housing
developments to tenant-based assistance.
972.212 Timing of voluntary conversion.
972.215 Applicability of Uniform Relocation Act.
Conversion Assessments
972.218 Conversion assessment components.
972.221 Timing of submission of conversion assessments to HUD.
972.224 Necessary conditions for HUD approval of conversion.
Conversion Plans
972.227 Public and resident consultation process for developing a
conversion plan.
972.230 Conversion plan components.
972.233 Timing of submission of conversion plans to HUD.
972.236 HUD process for approving a conversion plan.
972.239 HUD actions with respect to a conversion plan.
Subpart B--Voluntary Conversion of Public Housing Developments
Purpose; Definition of Conversion
Sec. 972.200 Purpose.
This subpart implements section 22 of the United States Housing Act
of 1937 (42 U.S.C. 1437t). The purposes of this subpart are to:
(a) Require PHAs to perform an assessment which considers
developments for which conversion of public housing may be appropriate;
and
[[Page 54620]]
(b) Provide a basis for a PHA to take action for conversion on a
voluntary basis.
Sec. 972.203 Definition of ``conversion.''
For purposes of this subpart, the term ``conversion'' means the
removal of public housing units from the inventory of a Public Housing
Agency (PHA), and the provision of tenant-based, or project-based
assistance for the residents of the public housing that is being
removed. The term ``conversion,'' as used in this subpart, does not
necessarily mean the physical removal of the public housing development
from the site.
Required Initial Assessments
Sec. 972.206 Required initial assessments.
(a) General. A PHA must conduct a required initial assessment
(which consists of the certification described in paragraph (b) of this
section), in accordance with this section, once for each of its
developments, unless:
(1) The development is subject to required conversion under 24 CFR
part 971;
(2) The development is the subject of an application for demolition
or disposition that has not been disapproved by HUD;
(3) A HOPE VI revitalization grant has been awarded for the
development; or
(4) The development is designated for occupancy by the elderly and/
or persons with disabilities (i.e., is not a general occupancy
development).
(b) Certification procedure. For each development, the PHA shall
certify that it has:
(1) Reviewed the development's operation as public housing;
(2) Considered the implications of converting the public housing to
tenant-based assistance; and
(3) Concluded that conversion of the development may be:
(i) Appropriate because removal of the development would meet the
necessary conditions for voluntary conversion described in Sec.
972.224; or
(ii) Inappropriate because removal of the development would not
meet the necessary conditions for voluntary conversion described Sec.
972.224.
(c) Documentation. A PHA must maintain documentation of the
reasoning with respect to each required initial assessment.
(d) Timing of submission. Consistent with statutory submission
requirements, the results of each required initial assessment
(consisting of the certification described in paragraph (b) of this
section) must be submitted to HUD as part of the next PHA Annual Plan
after its completion.
Voluntary Conversion Procedure
Sec. 972.209 Procedure for voluntary conversion of public housing
developments to tenant-based assistance.
A PHA that wishes to convert a public housing development to
tenant-based assistance must comply with the following process:
(a) The PHA must perform a conversion assessment, in accordance
with Sec. Sec. 972.218-972.224 and submit it to HUD as part of the
next PHA Annual Plan submission.
(b) The PHA must prepare a conversion plan, in accordance with
Sec. 972.227-972.233, and submit it to HUD, as part of its PHA Annual
Plan, within one year after submitting the conversion assessment. The
PHA may submit the conversion plan in the same Annual Plan as the
conversion assessment.
(c) The PHA may proceed to convert the development if HUD approves
the conversion plan.
Sec. 972.212 Timing of voluntary conversion.
(a) A PHA may proceed to convert a development covered by a
conversion plan only after receiving written approval of the conversion
plan from HUD. This approval will be separate from the approval that
the PHA receives for its PHA Annual Plan. A PHA may apply for tenant-
based assistance in accordance with Section 8 program requirements and
will be given priority for receiving tenant-based assistance to replace
the public housing units.
(b) A PHA may not demolish or dispose of units or property until
completion of the required environmental review under part 58 of this
title (if a Responsible Entity has assumed environmental responsibility
for the project) or part 50 of this title (if HUD is performing the
environmental review). Further, HUD will not approve a conversion plan
until completion of the required environmental review. However, before
completion of the environmental review, HUD may approve the targeted
units for deprogramming and may authorize the PHA to undertake other
activities proposed in the conversion plan that do not require
environmental review (such as certain activities related to the
relocation of residents), as long as the buildings in question are
adequately secured and maintained.
(c) For purposes of determining operating subsidy eligibility, the
submitted conversion plan will be considered the equivalent of a formal
request to remove dwelling units from the PHA's inventory and Annual
Contributions Contract (ACC). Units that are vacant or are vacated on
or after the written notification date will be treated as approved for
deprogramming under Sec. 990.108(b)(1) of this title, and will also be
provided the phase down of subsidy pursuant to Sec. 990.114 of this
title.
(d) HUD may require that funding for the initial year of tenant-
based assistance be provided from the public housing Capital Fund,
Operating Fund, or both.
Sec. 972.215 Applicability of the Uniform Relocation Act.
To the extent that tenants are displaced as a direct result of the
demolition, acquisition, or rehabilitation of federally-assisted
property converted under this subpart, the requirements of the Uniform
Relocation Assistance and Real Property Acquisition Policies Act of
1970 (42 U.S.C. 4601) (URA), and the implementing regulations issued by
the Department of Transportation at 49 CFR part 24, apply.
Conversion Assessments
Sec. 972.218 Conversion assessment components.
The conversion assessment contains five elements, as described
below:
(a) Cost analysis. A PHA must conduct a cost analysis comparing the
cost of providing Section 8 tenant-based assistance with the cost of
continuing to operate the development as public housing for the
remainder of its useful life. The cost methodology necessary to conduct
the cost comparisons for voluntary conversions has not yet been
finalized. PHAs may not undertake conversions under this subpart until
the effective date of the cost methodology, which will be announced in
the Federal Register. Once effective, the cost methodology will be
codified as an appendix to this part.
(b) Analysis of the market value. (1) A PHA must have an
independent appraisal conducted to compare the market value of the
development before and after rehabilitation. In both cases, the market
value must be based on the use of the development as public housing.
(2) In addition, the appraisal must compare:
(i) The market value of the development before rehabilitation,
based on the use of the development as public housing, with the market
value of the development after conversion; with
(ii) The market value of the development after rehabilitation,
based on the use of the development as public housing, with the market
value of the development after conversion.
[[Page 54621]]
(3) A copy of the appraisal findings and the analysis of market
value of the development in the conversion assessment must be provided
in the conversion assessment.
(c) Analysis of rental market conditions. (1) A PHA must conduct an
analysis of the likely success of using tenant-based assistance for the
residents of the public housing development. This analysis must include
an assessment of the availability of decent, safe, and sanitary
dwelling units rented at or below the applicable Section 8 payment
standard established for the jurisdiction or designated part of the FMR
area in which the development is located.
(2) In conducting this assessment, a PHA must take into account:
(i) Its overall use of rental certificates or vouchers under lease
and the success rates of using Section 8 tenant-based assistance in the
community for the appropriate bedroom sizes, including recent success
rates for units renting at or below the established payment standard;
and
(ii) Any particular characteristics of the specific residents of
the public housing which may affect their ability to be housed (such as
large household size or the presence of an elderly or disabled family
member).
(d) Impact analysis. A PHA must describe the likely impact of
conversion of the public housing development on the neighborhood in
which the public housing is located. This must include:
(1) The impact on the availability of affordable housing in the
neighborhood;
(2) The impact on the concentration of poverty in the neighborhood;
and
(3) Other substantial impacts on the neighborhood.
(e) Conversion implementation. If a PHA intends to convert the
development (or a portion of it) to tenant-based assistance, the
conversion assessment must include a description of any actions the PHA
plans to take in converting the development. This must include a
general description of the planned future uses of the development, and
the means and timetable for accomplishing such uses.
Sec. 972.221 Timing of submission of conversion assessments to HUD.
(a) Submission with PHA Plan. A PHA that wishes to convert a public
housing development to tenant-based assistance must submit a conversion
assessment to HUD with its next PHA Annual Plan.
(b) Updated conversion assessment. Where a PHA proposes to convert
a development to tenant-based assistance, it must submit an updated
conversion assessment if the conversion assessment otherwise would be
more than one year older than the conversion plan to be submitted to
HUD. To update a conversion assessment, a PHA must ensure that the
analysis of rental market conditions is based on the most recently
available data, and must include any data that have changed since the
initial conversion assessment. A PHA may submit the initial cost
analysis and comparison of the market value of the public housing
before and after rehabilitation and/or conversion if there is no reason
to believe that such information has changed significantly.
Sec. 972.224 Necessary conditions for HUD approval of conversion.
(a) Conditions. In order to convert a public housing development,
the PHA must conduct a conversion assessment that demonstrates that the
conversion of the development:
(1) Will not be more expensive than continuing to operate the
development (or portion of it) as public housing;
(2) Will principally benefit the residents of the public housing
development (or portion thereof) to be converted, the PHA, and the
community; and
(3) Will not adversely affect the availability of affordable
housing in the community.
(b) Evidence. (1) Relative expense. The relative expense of
continuing operation as public housing or conversion to tenant-based
assistance may be demonstrated by the cost analysis and market value
analysis.
(2) Benefit to residents, PHA, and the community. (i) The benefit
to residents, the PHA, and the community may be demonstrated in the
rental market analysis, the analysis of the impact on the neighborhood,
the market value analysis, and the proposed future use of the
development. In determining whether a conversion will principally
benefit residents, the PHA, and the community, HUD will consider
whether the conversion will conflict with any litigation settlement
agreements, voluntary compliance agreements, or other remedial
agreements signed by the PHA with HUD.
(ii) In making the determination of whether a conversion would
principally benefit residents, the PHA, and the community, the PHA must
consider such factors as the availability of landlords providing
tenant-based assistance, as well as access to schools, jobs, and
transportation.
(iii) To determine the benefit to residents, the PHA must hold at
least one public meeting with residents of the affected site (including
the duly elected Resident Council, if any, that covers the development
in question). At the meeting, the PHA must:
(A) Explain the requirements of section 22 of the United States
Housing Act of 1937 and these regulations, especially as they apply to
residents of affected developments;
(B) Provide draft copies of the conversion assessment to the
residents; and
(C) Provide the residents with a reasonable period of time to
submit comments on the draft conversion assessment.
(iv) The conversion assessment submitted to HUD must contain a
summary of the resident comments, and the PHA responses to any
significant issues raised by the commenters.
(3) Impact on affordable housing. The impact on affordable housing
may be demonstrated in the rental market analysis and the analysis of
the impact of conversion on the neighborhood.
Conversion Plans
Sec. 972.227 Public and resident consultation process for developing
a conversion plan.
(a) A conversion plan must be developed in consultation with
appropriate public officials and with significant participation by
residents of the development.
(b) The requirement for consultation with public officials may be
satisfied by obtaining a certification from the appropriate state or
local officials that the conversion plan is consistent with that
jurisdiction's Consolidated Plan. This may be the same certification as
is required for the PHA Annual Plan that includes the conversion plan,
so long as the certification specifically addresses the conversion
plan.
(c) To satisfy the requirement for significant participation by
residents of the development, in addition to the public participation
requirements for the PHA Annual Plan, a PHA must:
(1) Hold at least one meeting with the residents of the affected
sites (including the duly elected Resident Council, if any, that covers
the development in question) at which the PHA must:
(i) Explain the requirements of section 22 of the United States
Housing Act of 1937 and these regulations, especially as they apply to
residents of affected developments; and
(ii) Provide draft copies of the conversion plan to them.
(2) Provide a reasonable comment period for residents; and
(3) Summarize the resident comments (as well as the PHA responses
to the significant issues raised by the commenters) for HUD, and
consider these comments in developing the final conversion plan.
[[Page 54622]]
Sec. 972.230 Conversion plan components.
A conversion plan must:
(a) Describe the conversion and future use or disposition of the
public housing development. If the future use of the development is
demolition or disposition, the PHA is not required to submit a
demolition or disposition application, so long as the PHA submits, and
HUD approves, a conversion plan that includes a description of the
future uses of the development.
(b) Include an impact analysis of the conversion on the affected
community. This may include the description that is required as part of
the conversion assessment.
(c) Include a description of how the conversion plan is consistent
with the findings of the conversion assessment undertaken in accordance
with Sec. 972.218.
(d) Include a summary of the resident comments received when
developing the conversion plan, and the PHA responses to the
significant issues raised by the commenters (including a description of
any actions taken by the PHA as a result of the comments).
(e) Confirm that any proceeds received from the conversion are
subject to the limitations under section 18(a)(5) of the United States
Housing Act of 1937 (42 U.S.C. 1437p(a)(5)) applicable to proceeds
resulting from demolition or disposition.
(f) Summarize why the conversion assessment for the public housing
project supports the three conditions necessary for conversion
described in Sec. 972.224.
(g) Include a relocation plan that incorporates all of the
information identified in paragraphs (g)(1) through (g)(4) of this
section. In addition, if the required conversion is subject to the URA,
the relocation plan must also contain the information identified in
paragraph (g)(5) of this section. The relocation plan must incorporate
the following:
(1) The number of households to be relocated, by bedroom size, by
the number of accessible units.
(2) The relocation resources that will be necessary, including a
request for any necessary Section 8 funding and a description of actual
or potential public or other assisted housing vacancies that can be
used as relocation housing and budget for carrying out relocation
activities.
(3) A schedule for relocation and removal of units from the public
housing inventory (including the schedule for providing actual and
reasonable relocation expenses, as determined by the PHA, for families
displaced by the conversion).
(4) Provide for issuance of a written notice to families residing
in the development in accordance with the following requirements:
(i) Timing of notice. If the voluntary conversion is not subject to
the URA, the notice shall be provided to families at least 90 days
before displacement. If the voluntary conversion is subject to the URA
the written notice shall be provided to families no later than the date
the conversion plan is submitted to HUD. For purposes of a voluntary
conversion subject to the URA, this written notice shall constitute the
General Information Notice (GIN) required by the URA.
(ii) Contents of notice. The written notice shall include all of
the following:
(A) The development will no longer be used as public housing and
that the family may be displaced as a result of the conversion;
(B) The family will be offered comparable housing, which may
include tenant-based or project-based assistance, or occupancy in a
unit operated or assisted by the PHA (if tenant-based assistance is
used, the comparable housing requirement is fulfilled only upon
relocation of the family into such housing);
(C) Any necessary counseling with respect to the relocation will be
provided, including any appropriate mobility counseling (the PHA may
finance the mobility counseling using Operating Fund, Capital Fund, or
Section 8 administrative fee funding);
(D) The family will be relocated to other decent, safe, sanitary,
and affordable housing that is, to the maximum extent possible, housing
of their choice;
(E) If the development is used as housing after conversion, the PHA
must ensure that each resident may choose to remain in the housing,
using tenant-based assistance towards rent;
(F) Where Section 8 voucher assistance is being used for
relocation, the family will be provided with the vouchers at least 90
days before displacement;
(5) Additional information required for conversions subject to the
URA. If the voluntary conversion is subject to the URA, the written
notice described in paragraph (g)(4) must also provide that:
(i) The family will not be required to move without at least 90-
days advance written notice of the earliest date by which the family
may be required to move, and that the family will not be required to
move permanently until the family is offered comparable housing as
provided in paragraph (g)(4)(ii)(B) of this section;
(ii) Any person who is an alien not lawfully present in the United
States is ineligible for relocation payments or assistance under the
URA, unless such ineligibility would result in exceptional and
extremely unusual hardship to a qualifying spouse, parent, or child, as
provided in the URA regulations at 49 CFR 24.208.
(iii) The family has a right to appeal the PHA's determination as
to the family's application for relocation assistance for which the
family may be eligible under this subpart and URA.
(iv) Families residing in the development will be provided with the
URA Notice of Relocation Eligibility or Notice of Non-displacement (as
applicable) as of the date HUD approves the conversion plan (for
purposes of this subpart, the date of HUD's approval of the conversion
plan shall be the ``date of initiation of negotiations'' as that term
is used in URA and the implementing regulations at 49 CFR part 24).
(v) Any family that moves into the development after submission of
the conversion plan to HUD will also be eligible for relocation
assistance, unless the PHA issues a written move-in notice to the
family prior to leasing and occupancy of the unit advising the family
of the development's possible conversion, the impact of the conversion
on the family, and that the family will not be eligible for relocation
assistance.
Sec. 972.233 Timing of submission of conversion plans to HUD.
A PHA that wishes to convert a public housing project to tenant-
based assistance must submit a conversion plan to HUD. A PHA must
prepare a conversion plan, in accordance with Sec. 972.230, and submit
it to HUD, as part of the next PHA Annual Plan within one year after
submitting the full conversion assessment, or as a significant
amendment to that Annual Plan. The PHA may also submit the conversion
plan in the same Annual Plan as the conversion assessment.
Sec. 972.236 HUD process for approving a conversion plan.
Although a PHA will submit its conversion plan to HUD as part of
the PHA Annual Plan, the conversion plan will be treated separately for
purposes of HUD approval. A PHA needs a separate written approval from
HUD in order to proceed with conversion. HUD anticipates that its
review of a conversion plan will ordinarily occur within 90 days
following submission of a complete plan by the PHA. A longer process
may be required where HUD's
[[Page 54623]]
initial review of the plan raises questions that require further
discussion with the PHA. In any event, HUD will provide all PHAs with a
preliminary response within 90 days following submission of a
conversion plan. A lack of a HUD response within this time frame will
constitute automatic HUD approval of the conversion plan.
Sec. 972.239 HUD actions with respect to a conversion plan.
(a) When a PHA submits a conversion plan to HUD, HUD will review it
to determine whether:
(1) The conversion plan is complete and includes all of the
information required under Sec. 972.230; and
(2) The conversion plan is consistent with the conversion
assessment the PHA submitted.
(b) HUD will disapprove a conversion plan only if HUD determines
that:
(1) The conversion plan is plainly inconsistent with the conversion
assessment;
(2) There is reliable information and data available to the
Secretary that contradicts the conversion assessment; or
(3) The conversion plan is incomplete or otherwise fails to meet
the requirements under Sec. 972.230.
Dated: August 11, 2003.
Michael M. Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 03-23027 Filed 9-16-03; 8:45 am]
BILLING CODE 3210-33-P