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GuidanceThe demolition and disposition of public
housing is authorized under Section 18 of the Housing Act of 1937 (the Act), as
amended. HUD has promulgated a regulation, 24
CFR 970, detailing the administrative steps required to perform demolition/disposition
activity in accordance with the Act. A revision
to 24 CFR 970 was published in the Federal Register on October 24, 2006, and
took effect on November 24, 2006. A correction
to the revised 24 CFR 970 was published in the Federal Register on January
23, 2008. This webpage reflects the revised processing criteria. Although
demolition/disposition activity has always been permitted, HUD and its business
partners have begun to actively pursue it as a management strategy option in the
last ten years. This is due to the realization that some developments have difficulties
associated not only with physical deterioration, but also with the overall deterioration
of the surrounding community. It is also true that a large portion of the housing
now being proposed for demolition/disposition was built in the late 1940s and
early 1950s, and was built to a standard that is no longer acceptable for the
general public. Developments meeting that description have very often become the
housing of last resort within their communities. Potential
Reasons for Demolition/DispositionPublic Housing Agencies (PHAs) may decide
to demolish or dispose of an entire development, or a portion of a development,
for a variety of reasons, including: Demolition
- For the demolition of an entire development, the development is obsolete as
to physical condition, location, or other factors, making it unsuitable for housing
purposes, and no reasonable program of modifications is cost-effective to return
the public housing project or portion of the project to its useful life.
- For the demolition of a portion of a development, that portion
of the development is obsolete as to physical condition, location, or other factors,
making it unsuitable for housing purposes, and no reasonable program of modifications
is cost-effective to return that portion to its useful life, and the demolition
will allow the remaining portions of the development to be the partial demolition
will ensure the viability of the remaining portion of the development by reducing
density to permit better access by emergency, fire, or rescue services, or improving
the marketability by reducing density to that of the neighborhood or other developments
in the PHA’s inventory.
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evidence obsolescence, PHAs must show that the necessary modification and/or rehabilitation
to the property is not cost-effective. HUD generally considers modifications not
to be cost-effective if costs exceed 62.5% of total development costs (TDC) for
elevator structures and 57.14% for other types of structures.
The TDC
Notice for 2007 is PIH
2007-19(HA) and the TDC Notice for 2008 is PIH-2008-47(HA).
These Notices and all future year TDC Notices can be found at HUD
PIH Notices, Rules, and Regulations website |
Disposition:
- Due to a change in the neighborhood, the location of the development
is no longer conducive to residential use.
- The land on which
the development was built is sufficiently valuable that the PHA can replace the
existing development with an improved development at no cost to HUD.
- Leasing the development to another entity, or transferring the title
of the development via a sales contract, may be determined to be more cost-effective
or efficient way for the development to be used for low-income or mixed-income
housing, because that party will have access to funds not available to the PHA.
(Note that a lease of more than one year is considered to be a disposition by
HUD.)
- The development includes vacant land or non-dwelling
structures that exceeds the need of the development (after Date of Full Availability--DOFA).
- The development includes vacant land or non-dwelling structures
that are incidental to, or do not interfere with, the continued operation of the
remaining portion of the development.
- The PHA has otherwise
determined that the disposition is appropriate for reasons that are consistent
with its goals of the PHA and its PHA Plan and that are otherwise consistent with
the U.S. Housing Act of 1937.
Dispositions in
support of Housing developed pursuant to 24 CFR 941 (Subpart F)The revision
to 24 CFR 970 that was published on October 24, 2006, and took effect November
24, 2006, included a new provision at 24 CFR 970.3(12) which provides that dispositions
for mixed-finance housing developed in accordance with 24 CFR 941 (Subpart F)
are NOT subject to 24 CFR 970. However, these dispositions are still subject to
Section 18 of the Housing Act of 1937 (the “Act”). Accordingly, the SAC intends
to process these disposition applications under a "streamlined" review process
to verify the PHA is in compliance with the requirements of Section 18 of the
Act. While the SAC is not providing an exact turn-around time for these Subpart
F disposition requests, the reduced submission requirements for PHAs will greatly
expedite the SAC’s review process The submission requirements dispositions
of public housing in support of housing development pursuant to Part 941 can be
found in the new HUD-52860 (10/2007). Because the SAC need only verify that the
PHA is in compliance with the Section 18 of the Act and not 24 CFR 970, the submission
requirements for these dispositions are considerably less than those required
for other dispositions. Thus, the SAC intends to process these disposition applications
under a "streamlined" review process. While the SAC is not providing an exact
turn-around time for these disposition requests, the reduced submission requirements
for PHAs will greatly expedite the SAC’s review process.
Lease
DispositionsHUD considers a disposition of public housing property to
include both sales of fee title and ground leases longer than 1 year. Therefore,
a PHA may apply and receive a Section 18 disposition approval from the SAC for
a ground lease of public housing property for any duration between 1 year and
99+ years. If a ground lease terminates or expires prior to the length of time
in which the PHA would have been required to operate the property as public housing
as indicated in the chart below, the PHA must record a new Declaration of Trust
(DOT) or use restriction on the property in favor of HUD. Acquisition
or Development Funds | Property
acquired or developed with funds from the U.S. Housing Act of 1937 must be operated
as public housing for a 40-year period that begins on the date on which the project
becomes available for occupancy, as determined by HUD. This 40-year period is
extended if PHA receives other funding, such as Capital Funds or Operating Funds.
| Capital
Fund | Property
modernized or receiving assistance of Capital Funds from the U.S. Housing Act
of 1937 must be operated and maintained as public housing for a 20-year period
that begins on the latest date on which modernization is complete or assistance
is provided with Capital Funds covered by the Capital Fund ACC Amendment. The
20-year requirement may extend the use of the property as public housing beyond
the original 40-year ACC requirement or beyond any requirement incurred as a result
of receiving Operating Funds. | Operating
Fund | Property
that receives Operating Funds from the U.S. Housing Act of 1937 must be operated
as public housing for a 10-year period beginning upon the conclusion of the fiscal
year for which such amounts were provided. The 10-year requirement may extend
the use of the property as public housing beyond the original 40-year ACC requirement
or beyond any requirement incurred as a result of receiving Capital Funds. |
Upon
expiration/termination of a ground lease approved by HUD under Section 18, the
PHA should contact its HUD Field Office to discuss the following: - the
PHA’s plans for the future use of the property (e.g. ACC units, other low-income
housing units); and
- the correct form of DOT/use restriction that the
PHA should record against the property. HUD may require that a DOT/use restriction
contain certain use provisions and/or provisions which prohibit the PHA from selling
or otherwise encumbering the property without HUD approval.
Resident Consultation/Offer of SaleResident consultation is required
both at the development level, at the Housing Authority-wide level and with the
Resident Advisory Board (RAB) for all applications. A description of the manner
in which resident consultation was accomplished must be included with the application.
Copies of any written comments received, as well as the responses to those comments,
must also be included with the application. For some proposed disposition activities,
the Housing Authority must offer the development, or the portion of the development
affected by the proposed disposition activities, to: - The resident
organization in place for that development.
- Any group representing the
residents of the development that has expressed a previous interest in the development.
Replacement
Housing Plan (RHP)Except for disposition of developments based on the
value of the property, replacement housing plans are no longer required as part
of an application for Demolition/Disposition. Resident
RelocationThe Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, as amended (Uniform Act or URA) often does not apply to
Section 18 actions. However, there still are requirements for the relocation of
residents as well as record keeping duties an HA must perform to demonstrate due
diligence. The Office Of Community Planning and Development (CPD) relocation staff
have assisted SAC by preparing the guidance materials below, to meet these needs.
This guidance should be used by HA's to formulate their relocation plans, as well
as by Field Offices in their monitoring of an HA's Section 18 implementation.
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Section 18 TA & Recordkeeping Policy (This document is currently
under revision. Thank you for your patience) |
Method
of Sale/Future Use Information If a PHA is proposing to dispose of public
housing property in order to allow for the development of other housing, the PHA
should provide detailed information to the SAC about that future housing development
(i.e. name of acquiring entity, number of ACC units, number of low-income housing
units, number of market-rate units, etc.). An example of the chart that will be
included in SAC’s approval documents is as follows: Development
Name, Development Number Building/s: xx, Units: xx, Acres: xx | Total
Units to be Redeveloped: xxx | Low-Income
Less than 80% of AMI | | | ACC | Non-ACC | Market
Rate | Rental | Xx | Xx | Xx | Sale | Xx | Xx | Xx | Acquiring
Entity | ABC
Development, LLC | Method
of Sale | Negotiated
Sale at less than FMV, Ground Lease for XX Years etc. | Sale
Price or Lease Price | $250,000,
Donation, Nominal, $xx per year etc. | Purpose | Development
of Housing Development pursuant to 24 CFR 941(F), LIHTC Units, Day Care
Center, etc. |
Property
Approved for Disposition at Below Fair Market Value—Future Use of PropertyIf
the SAC’s disposition approval is for an amount at less than FMV, the SAC approval
documents will specify the approved future use of the property. The PHA is responsible
for ensuring that the approved future use is complied with for the length of time
in which the PHA would have been required to operate the property as public housing
as indicated in the chart below: Acquisition
or Development Funds | Property
acquired or developed with funds from the U.S. Housing Act of 1937 must be operated
as public housing for a 40-year period that begins on the date on which the project
becomes available for occupancy, as determined by HUD. This 40-year period is
extended if PHA receives other funding, such as Capital Funds or Operating Funds.
| Capital
Fund | Property
modernized or receiving assistance of Capital Funds from the U.S. Housing Act
of 1937 must be operated and maintained as public housing for a 20-year period
that begins on the latest date on which modernization is complete or assistance
is provided with Capital Funds covered by the Capital Fund ACC Amendment. The
20-year requirement may extend the use of the property as public housing beyond
the original 40-year ACC requirement or beyond any requirement incurred as a result
of receiving Operating Funds. | Operating
Fund | Property
that receives Operating Funds from the U.S. Housing Act of 1937 must be operated
as public housing for a 10-year period beginning upon the conclusion of the fiscal
year for which such amounts were provided. The 10-year requirement may extend
the use of the property as public housing beyond the original 40-year ACC requirement
or beyond any requirement incurred as a result of receiving Capital Funds. |
If
a PHA’s plans change and the PHA no longer wants the property to be used as approved
by the SAC, the PHA must apply to the SAC for an amendment to the disposition
approval.
HUD Field Offices are not authorized to approve an amendment
of the use of the property. However, HUD Field Offices may monitor the term of
the future use for compliance with the disposition approval documents. If HUD
finds that the property is not being used according to the approved use, it may
take any actions it deems to be appropriate, including actions related to the
PHA’s enforcement of any reversion/termination provisions in the disposition documents.
If the property does revert to PHA ownership, the PHA must record a new Declaration
of Trust (DOT) on the property for the duration for which the PHA was required
to operate the property as public housing had the property not been disposed.
Use of ProceedsSales Proceeds from Section
18 Dispositions PHAs may realize gross proceeds from a disposition
action. With HUD approval, PHAs are permitted to use proceeds to pay the reasonable
costs of the disposition, including costs associated with relocation of displaced
residents and remediation costs. Pursuant to Section 18(a)(5)(A) and unless waived
by HUD (24 CFR 970.9(b) and 5.110), PHAs must use any remaining net proceeds to
retire outstanding debt used to finance the original development. The SAC automatically
assumes that PHAs wish to request a waiver to repay outstanding obligations issued
to finance the original development and will begin the process of obtaining any
necessary waivers from HUD's Assistant Secretary of Public and Indian Housing
(PIH) upon receipt of a disposition application from a PHA. If any net proceeds
remain after the disposition costs and debt (if applicable) have been paid, with
written HUD-approval, the PHA may use net proceeds for any eligible purpose listed
under Section 18(a)(5) of the Act, which provides that proceeds may be used for:
(i) the provision of low-income housing or to benefit the residents of the PHA;
or (ii) leveraging amounts for securing commercial enterprises, on-site in public
housing projects of the PHA, that are appropriate to serve the needs of the residents.
The Act defines low-income housing as decent, safe, and sanitary dwellings assisted
under the Act. Accordingly, the provision of low-income housing under Section
18(a)(5) of the Act is limited to public housing units under an ACC or housing
assisted by the Housing Choice Voucher Program. PHAs anticipating
net proceeds from a disposition should include a narrative description of how
they intend to use the net proceeds in their disposition applications. The SAC
will review the use specified by the PHA and, if it complies with the Act, approve
the use. Once HUD approves a disposition application and the PHA's stated intended
use for net proceeds, the PHA cannot change its use of those proceeds without
the prior written consent of HUD. PHAs are also advised that pursuant to 24 CFR
970.35, they must report the use of net proceeds to their HUD Field Office by
providing a financial statement showing how the funds were expended by item and
dollar amount. A non-exhaustive list of some of the acceptable uses of
sale proceeds from a Section 18 disposition include: (1) repair or rehabilitation
of existing ACC units; (2) development and/or acquisition of new ACC units; (3)
provision of social services for PHA residents; (4) implementation of a preventative
and routine maintenance strategy for specific single-family scattered-site ACC
units; (5) modernization of a portion of a residential building in the PHA's inventory
to develop a recreation room, laundry room, or day-care facility for PHA residents;
and (6) funding of a HUD-approved homeownership program authorized under Section
32, 9, 24 or any other Section of the Act, for assistance to purchasers, for reasonable
planning and implementation costs, and for acquisition and/or development of homeownership
units; (7) leveraging of proceeds in order to partner with a private entity for
the purpose of developing mixed-finance housing (that will include ACC units)
under 24 CFR 941 (Subpart F). If a PHA is proposing to use net proceeds
for the acquisition or development of new ACC units, it should indicate the approximate
number of units it plans to develop. If a PHA is proposing to rehabilitate existing
ACC units in its inventory, it should include the development number(s) of those
units, the number of units to be rehabilitated, a budget, and a statement of work.
If the PHA is proposing to provide social services or other benefits to its residents,
the PHA should include information on the number of families it will service and
what services it will provide. Sales at Less than Fair Market Value:
Requirement of Reverter Clause Although HUD normally requires PHAs
to dispose of public housing property for not less than fair market value (FMV),
HUD may approve a sale at less than FMV if a PHA is able to demonstrate to HUD
that the disposition will result in a commensurate public benefit and will be
in the best interest of the PHA or the federal government. However, as part of
its approval of such a negotiated sale at less than FMV, HUD will require that
the disposition documents (e.g. deed, ground lease, etc.) contain a reverter clause
to ensure that the property will be used for the purposes outlined in the disposition
application for the period that the Declaration of Trust (DOT) on the property
would have remained but for the disposition. The reverter clause will provide
that if the property is not used for the intended purposes for this period, it
shall revert to the PHA. If a PHA has preferred reverter language that it would
like to use in its disposition documents, it is encouraged to submit that reverter
language to the SAC as part of its disposition application. If a PHA
is proposing to dispose of public housing property at FMV, HUD will not require
a reverter clause. Sale Proceeds and Asset Management (Section 18
Disposition) In its written approval letter, the SAC will restrict
the use of any proceeds that a PHA may realize from a Section 18 disposition to
a specific low-income housing purpose (e.g. ACC, Section 32, or Section 8). Accordingly,
under asset management, proceeds from Section 18 dispositions will always be restricted
program assets and will always maintain their federalized identity. When a
PHA realizes net proceeds from a Section 18 disposition, it should recognize any
gain or loss on sale on the income statement associated with the balance sheet
where that asset is recorded. If approval has been obtained to use the sales proceeds
for activities outside the original AMP, the PHA should then, when the time is
appropriate, transfer those proceeds to the other project or program where the
use has been permitted. For example, if the SAC approves the use of Section 18
proceeds for the modernization of a certain AMP, the PHA should, first, recognize
the gain on the income statement of the original project but then transfer the
funds to the project where the modernization work will occur. Any retained sales
proceeds should be reflected as a “restricted” asset on the balance sheet (restricted
for the uses specifically approved by the SAC). A PHA must use net proceeds in
accordance with the spending and financial reporting requirements under the revised
24 CFR Part 990. Please consult a HUD financial manager for additional guidance
and/or clarification of these reporting requirements.
Demolition/Disposition Technical Assistance PackageTechnical assistance,
in the form of a Demolition/Disposition Technical Assistance Package for application
preparation, is available and can be downloaded from this site. Please note that
Form HUD-52680 is included in the package. Technical Assistance is also available
from Special Applications Center Management.
Local Approvals PHA Board Resolution: Applications must receive
formal approval from the Housing Authority's Board of Commissioners in the form
of a resolution. The resolution must be dated after the date of the last resident
meeting, after the date of all letters of support from appropriate local government
officials, and after the offer of sale, if applicable. Local Government
Consultation: The PHA must obtain a letter from each appropriate local government
official with jurisdiction over the affected development that the local government
supports the proposed demolition/disposition action. In addition, the PHA must
include in its application to the SAC a description of the process of its consultation
with local government officials which summarizes the dates, meetings, and issues
raised by the local government officials, and the PHA’s responses to those issues.
Phased Demolition ApplicationsDue to the
potential impact on a PHA’s asset-repositioning fee (or phase out of operating
subsidy) based on the relocation date in the PHA’s demolition or disposition application,
a PHA may wish to demolish (or dispose of) different buildings in one development
in multiple phases (e.g. a PHA has three high-rise buildings or scattered-site
units in one development that it wishes to demolish pursuant to a staggered timeline).
Rather than submitting an application for a partial demolition or partial disposition
(which may trigger additional statutory or regulatory requirements), a PHA may
do this by breaking down the submission of ONE demolition and/or disposition application
into multiple application numbers in PIC (e.g. so that each phase of the demolition
and/or disposition will have a different DDA number). However, if the same supporting
documentation applies to all application (DDA) numbers, the PHA need only submit
supporting documentation (e.g. board resolution, government consultation, etc.)
with only one application. By creating a separate application number for each
phase, the PHA will be able to designate a separate relocation date(s) for the
buildings/units for each phase. HUD will approve the removal for all of the units
in a development at the same time and up-front, even though a PHA will be able
to implement the removal (and relocation) in stages. A PHA can also request that
a HOPE VI demolition be broken down into multiple application numbers. In HUD’s
approval documents for such a removal, the different relocation dates will be
referred to by application number. An example is as follows: Number
of days after HUD approval that the PHA will begin relocation of residents | Application
Number (for Phase of Application) | Number
of Days | DDA0001111
| 90 | DDA0001112
| 180 | DDA0001113
| 270 |
Application
Review and Approval SAC will accept only electronic submissions made via
the PIC Inventory Removals module. For those applications, which cannot be made
electronically, they may be sent to the SAC for review. For any applications or
attachments sent as paper to SAC applicants should also send copies of the application
to their local HUD field office. Field
Office Input Since
the SAC is working for the local Field office, it will be asking their opinion
of the application. The Field also has the responsibility to sign-off on any environmental
reviews conducted in connection with the application. SAC will be documenting
its review file by asking the field to provide the information in a document similar
to the one below: Field
Office Certification Demo-Dispo (MS-Word,
31KB)
Submission requirementsThe Executive Director's
signature on the certification page may be FAXed or scanned and attached electronically
to the rest of the application. Note: When attaching supporting documents
to the application, PIC users can attach documents with filenames with spaces
provided filenames are no longer than 25 characters (including file type ending,
e.g., ".doc"), and as long as filenames conform to Windows Explorer file naming
rules: filenames with spaces must be enclosed in quotation marks. Example:
Filename as shown in MS Word: PIC FAQ Ideas.doc Filename to attach
to PIC application: “PIC FAQ Ideas.doc" For hard copy applications,
applicants should submit one original of the application to the Special Applications
Center in Chicago for review and a copy of the application to their local Public
Housing servicing office. The address for the SAC is listed below:
Special Applications Center US Department of Housing and Urban Development
77 West Jackson Boulevard Room 2401 Chicago, IL 60604-3507 Telephone:
(312) 886-9754 Fax: (312) 886-6413 |