Rule to Deconcentrate Poverty and Promote Integration in Public Housing

Note: EPA no longer updates this information, but it may be useful as a reference or resource.
 [Federal Register: December 22, 2000 (Volume 65, Number 247)]
[Rules and Regulations]
[Page 81213-81229]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22de00-23]

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Part VII

Department of Housing and Urban Development

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24 CFR Part 903

Rule to Deconcentrate Poverty and Promote Integration in Public
Housing; Final Rule

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 903

[Docket No. FR-4420-F-10]
RIN 2577-AB89


Rule to Deconcentrate Poverty and Promote Integration in Public
Housing

AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's Public Housing Agency Plan
regulations to fully reflect the importance of deconcentration by
income and affirmatively furthering fair housing in a PHA's admission
policy, consistent with the directive to achieve ``One America,'' and
to provide further direction to PHAs on the implementation of
deconcentration and affirmatively furthering fair housing. This final
rule follows publication of an April 17, 2000 proposed rule and takes
into consideration public comment received on the proposed rule. The
amendments made by this final rule concerning the deconcentration
component of a PHA's admission policy are applicable to PHAs with
fiscal years commencing on and after July 1, 2001.

DATES: January 22, 2001.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant
Secretary, Office of Policy, Program and Legislative Initiatives,
Office of Public and Indian Housing, Department of Housing and Urban
Development, 451 Seventh Street, SW, Room 4116, Washington, DC 20410;
telephone (202) 708-0713 (this is not a toll-free number). Persons with
hearing or speech impairments may access that number via TTY by calling
the Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--April 17, 2000 Proposed Rule

    On April 17, 2000 (65 FR 20686), HUD published a rule that proposed
to amend the deconcentration provisions of HUD's October 21, 1999
Public Housing Agency Plan final rule to achieve two purposes: (1) to
assure that PHAs know what they must do to deconcentrate poverty in the
public housing program; and (2) to assure that PHAs know what they must
do to affirmatively further fair housing, as it relates to admissions
to public housing.
    The approach to deconcentrate property provided in HUD's April 17,
2000 proposed rule generally would have required public housing
agencies (PHAs) to determine an overall average income for tenants in
their family developments; characterize each building as higher income
or lower income based on whether the average income in the building is
above or below the overall average; and require that lower income
families be admitted to higher income buildings and higher income
families be admitted to lower income buildings.

II. Changes Made at the Final Rule Stage

    As will be discussed in more detail below in Section IV of this
preamble, HUD received many good suggestions and recommendations on
modification of HUD's April 17, 2000 proposal and on alternative
strategies and methods that could be utilized by PHAs to deconcentrate
poverty in public housing. After careful consideration of all comments,
this final rule adopts a deconcentration of poverty approach similar to
that provided in the proposed rule, an approach that focuses on a
determination of average income, but with some significant changes that
increase flexibility for PHAs in addressing concentration of poverty
specific to their communities.
    The approach adopted at this final rule stage is as follows:

Deconcentration of Poverty in Public Housing

Public Housing Developments Exempt from Deconcentration and Income
Mixing Requirements
    After further consideration of how the deconcentration and income
mixing provisions would apply to various types of public housing
developments, HUD determined that certain developments should be exempt
from the requirement to deconcentrate poverty because of the
development's resident population, type or types of units, or number of
units. Public housing developments that are exempt from application of
the requirement to deconcentrate poverty and mix incomes are the
following:
     Public housing developments operated by a PHA with fewer
than 100 public housing units;
     Public housing developments operated by a PHA which house
only elderly persons or persons with disabilities, or both;
     Public housing developments operated by a PHA that
operates only one general occupancy, family public housing development;
     Public housing developments approved for demolition or for
conversion to tenant-based assistance; and
     Public housing developments which include public housing
units operated in accordance with a HUD-approved mixed-finance plan
using HOPE VI or public housing funds awarded before the effective date
of this rule, provided that the PHA certifies (and includes reasons for
the certification) as part of its PHA Plan (which may be accomplished
either in the annual Plan submission or as a significant amendment to
its PHA Plan) that exemption from the regulation is necessary to honor
an existing contractual agreement or be consistent with a mixed finance
plan, including provisions regarding the incomes of public housing
residents to be admitted to that development, which has been developed
in consultation with residents with rights to live at the affected
development and other interested persons.
    Analyzing Concentration of Poverty as Part of PHA Annual Planning
Process. The final rule clarifies that as part of a PHA's annual
planning process, a PHA must submit with its Annual Plan an admissions
policy designed to provide for deconcentration of poverty and income-
mixing by bringing higher income tenants into lower income developments
and lower income tenants into higher income developments. To comply
with this statutory requirement, the rule provides that a PHA must
conduct an analysis of the incomes of the families residing in public
housing developments that are subject to the requirement to
deconcentrate poverty. Public housing developments that are subject to
the requirement to deconcentrate poverty are general occupancy, family
public housing developments, excluding those developments, identified
earlier in this preamble, as being exempt from the requirement, and are
referred to as ``covered developments.''
    Promoting Deconcentration of Poverty and Income Mixing in
Developments with Concentration of Poverty. To meet the statutory
requirement to develop an admissions policy designed to provide for
deconcentration of poverty and income mixing in covered developments
identified to have a concentration of poverty, the rule provides for a
PHA to undertake the following steps.
    Step 1--Determine Average Income of All Families Residing in All
Covered Developments. For Step 1, a PHA shall determine the average
income of all families residing in all covered developments. A PHA may
use median incomes, instead of average income,

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provided that the PHA includes a written explanation in its PHA Annual
Plan justifying use of median incomes in the PHA's Annual Plan.
    Step 2--Determine Average Income of Families in Each Covered
Development. For Step 2, a PHA shall determine the average income of
all families residing in each covered development. In determining
average income for each development, a PHA has the option of adjusting
its income analysis for unit size in accordance with procedures
prescribed by HUD. The range of incomes calculated by a PHA using this
method is referred to as the Established Income Range.
    Step 3--Determining Which Developments Are Outside the Established
Income Range. For Step 3, a PHA shall determine whether each of its
covered developments falls above, within or below the Established
Income Range, which is defined as those covered developments where the
average income is between 85 percent and 115 percent (inclusive of
those percentages) of the PHA-wide average for covered developments.
    Step 4--Option to Provide Reasons Developments Are Outside of the
Established Income Range. For Step 4, a PHA which has covered housing
developments with average incomes outside the Established Income Range
may explain or justify the development income profile for these
developments as being consistent with and furthering both the goals of
deconcentration as specified by the statute (bringing higher income
tenants into lower income developments and vice versa) and the local
goals and strategies contained in the PHA Annual Plan. Elements of
explanations or justifications that may satisfy these requirements may
include, but shall not be limited to the following:
    (1) The covered development or developments are subject to consent
decrees or other resident selection and admission plans mandated by
court action;
    (2) The covered development or developments are part of the PHA's
programs, strategies or activities specifically authorized by statute,
such as mixed-income or mixed-finance developments, homeownership
programs, self-sufficiency strategies, or other strategies designed to
deconcentrate poverty, promote income mixing in public housing, or
increase the incomes of public housing residents, or the income mix is
otherwise subject to individual review and approval by HUD;
    (3) The covered development's or developments' size, location and/
or configuration promote income deconcentration, such as scattered site
or small developments;
    (4) The income characteristics of the covered development or
developments are explained by other circumstances.
    Step 5--Policy for Deconcentrating Poverty and Income Mixing in
Developments Outside the Established Income Range. Where the income
profile for a covered development is not sufficiently explained or
justified in the PHA Annual Plan submission, the PHA shall include in
its admissions policy specific strategies to promote deconcentration of
poverty and income mixing in such covered development. Compliance with
the statutory deconcentration requirement is not intended to impair or
adversely affect the PHA's ability to exercise the authority to
institute or implement other provisions in the statute such as local
preferences or site-based waiting lists. Depending on local
circumstances, a PHA's deconcentration strategy, included as part of
the PHA's admissions policy (which may be undertaken in conjunction
with other efforts such as efforts to increase self-sufficiency or
current residents), may include but is not limited to one or more of
the following:
    (1) Providing incentives designed to encourage families with
incomes below the Established Income Range to accept units in
developments with incomes above the Established Income Range or the
reverse situation--to encourage families with incomes above the
Established Income Range to accept units in developments with incomes
below the Established Income Range. Incentives include rent incentives,
affirmative marketing plans, or added amenities;
    (2) Targeting investment and capital improvements toward
developments with an average income below the Established Income Range
to encourage applicant families whose income is above the Established
Income Range to accept units in those developments;
    (3) A preference for admission of working families in developments
below the Established Income Range;
    (4) PHAs may skip a family on the waiting list to reach another
family in an effort to further the goals of the PHA's deconcentration
policy. Skipping to promote deconcentration shall not be considered an
adverse action;
    (5) Other strategies as permitted by statute and determined by the
PHA in consultation with the residents and the community, through the
PHA Annual Plan process, to be responsive to the local context and the
PHA's strategic objectives.
    Consistent with the Public Housing Reform Act, a PHA's admissions
policy and any specific deconcentration strategies that are part of the
admissions policy may not impose or require any specific income or
racial quotas for any developments.
    Determining Compliance with Deconcentration and Income Mixing
Requirements. HUD shall consider a PHA to be in compliance with the
deconcentration requirements if:
    (1) The PHA's income analysis shows that the PHA has no general
occupancy family developments to which the deconcentration requirements
apply--that is the average incomes of the covered development are
within the Established Income Range;
    (2) The PHA has covered developments with average incomes above or
below the Established Income Range and the PHA provides a sufficient
explanation in its Annual Plan that supports that (1) the income mix is
consistent with the requirements for deconcentration of poverty and
income mixing, despite the categorization of the covered developments
as above and below the Established Income Range, and (ii) the income
mix of such development or developments is consistent with and furthers
the locally determined goals of the PHA's Annual and Five Year Plans;
or
    (3) The PHA incorporates in its admissions policy, specific
strategies the PHA will take that can be expected to promote
deconcentration of poverty and income mixing in developments with
average incomes outside of the Established Income Range and implements
this admissions policy.
Fair Housing Regional Approaches and Voucher Housing Search Assistance
    The final rule does not contain any changes from the proposed rule
with respect to fair housing requirements. HUD, nevertheless, is taking
this opportunity to emphasize the potential importance of regional
approaches as PHAs pursue their responsibilities to affirmatively
further fair housing, pursue deconcentration of poverty and attempt to
offer their families maximum housing choices. In many urban areas, the
limited jurisdictions of individual PHAs and these PHAs' individual
waiting lists, forms and rules may limit to the extent to which
families move across PHA lines even when there are work or school-
related reasons to do so. PHAs can and should address these issues
through measures such as providing lists of other public housing
agencies and federally assisted housing in the metropolitan area and
participating in regional counseling and

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mobility efforts to assist voucher holders.
    With respect to voucher holders, housing counseling and
transportation assistance may help accomplish these goals and
contribute to voucher holders' success. Such expenses are eligible
voucher administrative fee expenses. In addition, HUD may allow PHAs to
convert voucher program funds to administrative fees for this purpose
where the PHA shows that these expenditures will not reduce the number
of families that otherwise would receive and successfully use vouchers
in that fiscal year. HUD will issue further guidance on this matter by
January 15, 2001.

III. Implementation of Amended Deconcentration and Income Mixing
Requirements

    The amendments made by this final rule concerning the
deconcentration component of a PHA's admission policy are applicable to
PHAs with fiscal years commencing on and after July 1, 2001.

IV. Public Comments on the April 17, 2000 Proposed Rule

    The public comment period for the April 17, 2000 proposed rule,
closed on June 1, 2000, and at the end of the comment period, HUD
received 193 public comments. In this section of the preamble, HUD
provides a summary of the public comments and HUD's responses to issues
or questions raised by the commenters. The heading ``Comment'' states
the comment made by a commenter or commenters and the heading
``Response'' presents HUD's response to the issue or issues raised by
the commenter or commenters.
    Comment: The final rule should provide an exemption for high
performing PHAs and certain standard performing PHAs. By exempting high
performing and certain standard performing PHAs, HUD will be following
the statutory and regulatory scheme of rewarding high performing and
standard performing PHAs for managing all aspects of their programs,
including deconcentration goals, in an effective manner.
    Response. HUD's Public Housing Assessment System, the system by
which PHAs are determined to be high performing, standard or troubled
agencies, does not assess the concentration of poverty in PHA
developments. Since this factor is not assessed as part of a PHA's
management of a development, an exemption on this basis would not be
appropriate.
    Comment: The rule should focus on neighborhoods not just
developments. HUD should concentrate on assisting localities to improve
their housing stock (housing production and neighborhood improvement)
in entire neighborhoods, as incentives to attract higher-income people.
The rule should not just focus on developments within a neighborhood.
    Response. The Public Housing Reform Act, in amending the U.S.
Housing Act of 1937, requires HUD to focus on income concentration in
buildings and developments. Paragraph (3)(B)(i) of section 16 of the
U.S. Housing Act of 1937, captioned ``Prohibition of Concentration of
Low-Income Families'' provides in relevant part as follows:

    A public housing agency shall submit with its annual public
housing agency plan under section 5A an admissions policy designed
to provide for deconcentration of poverty and income -mixing by
bringing higher income tenants into lower income projects and lower
income tenants into higher income projects. Although the Public
Housing Reform Act requires a focus on income

concentration in public housing developments, HUD recognizes that
efforts directed solely to the income makeup of a housing development
may not succeed in achieving deconcentration. Under its HOPE VI
Program, HUD has been successful in transforming entire neighborhoods,
including the physical structures of public housing. Under HUD's mixed-
finance programs, PHAs can leverage private capital with HUD funding
and create mixed-income communities. Recently, HUD published its
interim rule implementing a new Fair Market Rents policy that HUD
anticipates will also assist in promoting deconcentration of poverty.
HUD is working with its PHA partners to confront the problem of
concentration of poverty through several approaches.
    Comment: The goal of deconcentration is best achieved by
emphasizing economic development activities. Rather than the approach
advocated by the proposed rule, deconcentration is best achieved by
emphasizing such approaches as mobility counseling, incentives for the
development of regional strategies and the general support of economic
development activities. Promoting integration regionally can help
alleviate economic disparities among cities and their suburban
counterparts.
    Response: As noted in the response to the earlier comment, HUD
agrees that concentration of poverty should be addressed through
several approaches. With respect to the approaches recommended by the
commenter, HUD has been working with its PHA partners to provide
mobility counseling to applicants, landlord outreach and other steps to
increase housing choice in the voucher program and promote racial and
economic deconcentration.
    Comment: HUD's proposed rule contradicts the intent of the Public
Housing Reform Act which is to deregulate public housing and give PHAs
more flexibility. The intent of the Public Housing Reform Act is to
give PHAs the flexibility to fashion independent and localized economic
development strategies. HUD's April 17, 2000 proposed rule is in direct
conflict with statutory intent by mandating a certain approach to
deconcentration of poverty. Congress gave PHAs, not HUD, the discretion
to adopt deconcentration strategies.
    HUD Response. HUD has provided increased flexibility for PHAs to
develop more localized strategies to deconcentrate poverty.
    Comment: A deconcentration of poverty approach that focuses on
buildings, not developments, conflicts with the statute, causes
significant administrative difficulties, and adversely affects use of
site-based waiting lists. The proposed rule conflicts with the statute
because the proposed rule requires deconcentration on a building-by-
building basis, while the statute requires deconcentration on a
``project'' basis. A building-by-building approach creates significant
administrative difficulties. Managing individual waiting lists for each
building will require PHAs to hire additional staff to track income
information by building.
    Response. HUD believes that in including an income analysis of
buildings, HUD's April 17, 2000 proposed rule was not in conflict with
the statute. The statute speaks in terms of buildings and developments.
However, as discussed in Section II of this preamble, the rule was
revised at the final rule stage to address only developments.
    Comment: The deconcentration of income requirement appears to be in
conflict with the income targeting requirement. There will most likely
be conflicts in some situations between the income targeting
requirement and the deconcentration requirement because income
targeting dictates that a PHA target 40 percent of new admissions at
the 30 percent or less area median income level, and the
deconcentration policy may dictate that a higher income household be
placed in a vacant unit. At the final rule stage, HUD must clarify how
a PHA is to comply with both the deconcentration of income requirement
and the income targeting requirement.
    HUD Response. These two requirements were established to work

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in support of one another. Congress established the deconcentration
requirement to assure that the extremely low-income families targeted
by PHAs under the income targeting requirement or otherwise admitted to
public housing are not concentrated in one or more developments.
    Comment: Skipping over lower income families to offer units to
higher income families is unfair and would harm those persons that
badly need affordable housing. Skipping may adversely affect applicants
who have been on the waiting list a long time and desperately need
affordable housing. Skipping will either have the effect of denying
these longterm applicants housing or significantly delaying their
admission to housing. Skipping may also have the effect of denying very
low-income applicants the opportunities to participate in self-
sufficiency programs offered by PHAs. Skipping should only be used
where there is a significant difference in incomes among residents,
which is not the case in the majority of public housing developments.
    HUD Response. HUD understands the concerns about skipping but also
recognizes that skipping may be needed by a PHA to achieve the
objectives of deconcentration without adversely affecting the family or
families skipped. Any local preference system involves skipping from
the order otherwise required by a waiting list organized by date of
application. In that respect, skipping to achieve deconcentration goals
is the same.
    Comment: HUD's proposed rule exceeds statutory authority by using
race and income as measures of compliance with the deconcentration
requirement. The provisions in the proposed rule regarding
deconcentration of income are the only provisions derived from the
Public Housing Reform Act. References in HUD's proposed rule to racial
concentrations in public housing are subject to the provisions of the
Fair Housing Act and various civil rights laws, not the Public Housing
Reform Act. In view of the statute's permissive language regarding the
measures a PHA may utilize to achieve deconcentration, as well as the
specific statutory prohibition against income or racial quotas in the
implementation of deconcentration policies, HUD's proposed rule, by
including provisions to address racial concentration, is not consistent
with the clear intent of the Public Housing Reform Act.
    HUD Response. The provisions in the rule that address compliance
with the deconcentration of poverty requirement of the Public Housing
Reform Act are limited to a discussion of income deconcentration. There
is no discussion of racial concentration in these provisions. However,
in the proposed rule and this final rule, HUD does remind PHAs of their
responsibilities under the Fair Housing Act, and their responsibilities
to affirmatively further fair housing, and provides guidance on how
this obligation to affirmatively further fair housing may be carried
out.
    Implementation of the deconcentration of poverty requirement of the
Public Housing Reform Act does not preclude HUD from including in this
rule provisions or references to requirements imposed on PHAs by other
statutes or regulations. Further, section 511(d)(15) of the Public
Housing Reform Act (section 5A(d)(15) of the U.S. Housing Act), which
establishes the PHA Plan, requires a PHA to certify that it will carry
out its PHA Plan in conformity with the Fair Housing Act and other
nondiscrimination statutes and that it will affirmatively further fair
housing. This is the first time the PHAs have been required explicitly
by statute to comply with the affirmatively further fair housing
requirement. Part of the PHA's Annual Plan is the PHA's admissions
policy. HUD's rule properly addresses compliance with the statutory
deconcentration requirement and the statutory nondiscrimination
requirements.
    Comment: HUD should clarify that the provisions in the rule
concerning affirmatively further fair housing are applicable to
admissions. In the preamble to the proposed rule, HUD clearly states
that the rule is issued to fully reflect the importance of
deconcentration by income as well as the importance of affirmatively
furthering fair housing in a PHA's admission policy. The ``purpose''
section of the rule, Sec. 903.1, however, inadvertently omits reference
to affirmatively furthering fair housing ``in admissions.'' This
section simply refers to a PHA's responsibility to affirmatively
further fair housing. Because this section is directed towards a PHA's
admissions policy, which includes a deconcentration policy, the phrase
``in admissions'' must follow the phrase ``to affirmatively further
fair housing'' for clarity purposes.
    HUD Response. HUD agrees with the commenter and has added this
language to Sec. 903.1.
    Comment: The final rule should require specific deconcentration
steps to affirmatively further fair housing. A PHA should be required
to certify that it will use deconcentration steps that the PHA has
specifically identified and other actions as appropriate in order to
meet its obligation to affirmatively further fair housing. The final
rule should include specific performance criteria that will measure a
PHA's progress toward achieving deconcentration and desegregation
goals.
    HUD Response. HUD believes that its provisions in the rule, which
are unchanged from the proposed rule stage, strike the appropriate
balance of clarifying a PHA's obligation to affirmatively further fair
housing and providing guidance on how such obligation may be carried
out by PHAs.
    Comment: HUD oversteps its authority with the affirmatively
furthering fair housing requirement imposed on PHAs in this rule. HUD's
affirmatively furthering fair housing requirement seeks to create a new
fair housing enforcement mechanism whereby HUD may challenge a PHA's
civil rights certification if HUD believes that the PHA is not
achieving the desired outcomes of its deconcentration policy. PHAs are
committed to ensuring against discrimination in housing and
guaranteeing equal opportunity and meaningful choice in carrying out
their mission. PHAs have no legal duty to take undefined steps to
affirmatively furthering fair housing.
    HUD Response. As noted in an earlier response, the Public Housing
Reform Act requires a PHA to include with its Annual Plan a
certification that the PHA will carry out its PHA plan in conformity
with certain nondiscrimination statutes, including the Fair Housing
Act, and will affirmatively further fair housing. In view of this
certification, which can be challenged, HUD has an obligation to
provide PHAs with guidance on the types of actions that will be
recognized as actions to affirmatively further fair housing.
    Comment: PHAs should not be penalized if racial concentration in
their developments mirror that of the surrounding community. PHAs
should not be found to have discriminated on the basis of race if the
racial and ethnic characteristics of the PHA's development mirror that
of the surrounding community. Before HUD challenges a civil rights
certification, HUD should have documented evidence that a PHA is not in
compliance with its certification and representations to HUD.
    HUD Response. To determine if PHAs are complying with their
obligation to affirmatively further fair housing, HUD does not assess a
PHA on the racial makeup of its developments. A PHA is assessed by the
actions taken to offer housing choice or incentives that make

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a particular development more attractive, or to engage in marketing
efforts that are designed to reduce racial concentration, to name a few
examples from the rule. A HUD challenge to a civil rights certification
will be based on documented evidence that a PHA is not affirmatively
furthering fair housing or the PHA is not in compliance with civil
rights statutes, contrary to what the PHA has certified.
    Comment: HUD should not implement any deconcentration requirement
until the Multifamily Tenants Characteristics System (MTCS) can provide
accurate information on average tenant income for each family
development. Using MTCS data to compare each PHA development with the
corresponding authority-wide average would assist in the determination
of a standard income deviation from the overall norm. Developments
within the standard deviation would not be subject to deconcentration
efforts. However, using current MTCS data to determine poverty
concentrations would not work because MTCS does not separate data when
a PHA has, for instance, an elderly high-rise and a townhouse
development under the same HUD project number. MTCS does not aggregate
data if, for instance, townhouses have three different HUD project
numbers because they were built under three different development
budgets. There is also a problem with MTCS in that income amounts shown
on MTCS reports reflect only income used in rent calculations,
exclusive of income disregard as new earned income, non-reportable
income or earnings excluded under Jobs-Plus.
    HUD Response. The analysis to be done by PHAs to be in compliance
with the statutory requirement to deconcentrate poverty is not
dependent upon the MTCS data system, but HUD recognizes that this
system would facilitate the PHA's analysis. HUD has worked to correct
problems with MTCS and is continuing to work with PHAs to increase the
level of reporting.
    Comment: HUD's proposal to deconcentrate poverty without
modifications will not achieve the desired result. There are other
approaches to deconcentration that can be implemented more simply and
successfully than HUD's approach. The comments that HUD received on its
proposal to deconcentrate poverty ranged from a request to withdraw the
entire proposal to proceeding with the proposal as is. The majority of
the comments, however, stated that HUD's proposal was complicated and
would not achieve deconcentration of poverty in concentrated areas.
Many commenters offered suggestions on how HUD's proposal could be
improved and recommended certain modifications to the proposal. Other
commenters suggested alternative methods to deconcentrate poverty. All
the suggestions and recommendations were carefully considered and
Section II of this preamble reflects the recommendations that were
adopted at this final rule stage.
    In this preamble, HUD does not provide the details of all
recommendations for changes to its own proposal or the details of all
the alternative deconcentration methods that were suggested, but the
following provides an overview of the comments and critiques of HUD's
proposal to deconcentrate poverty, as provided in the April 17, 2000
proposed rule, as well as an overview of alternative deconcentration
approaches (HUD recognizes that there is overlap in these two
categories).
    Overview of comments on HUD's proposal to deconcentrate poverty.
The deconcentration of poverty approach proposed by HUD is complex and
will be difficult to administer. HUD's proposal does not include self-
sufficiency strategies which are crucial to improving the income of
residents and thereby helping to promote deconcentration. HUD's
proposal is too vague and imprecise to achieve the objectives of
deconcentration, and may in fact cause a higher concentration of
poverty. HUD's proposal will result in longer waiting lists for
housing. HUD's proposal does not take into account that some housing
authorities do not have large waiting lists from which to select
tenants. HUD's proposal does not focus sufficiently on incentives; the
statute encourages incentives to achieve deconcentration. HUD's
proposal prevents PHAs from fully implementing local preferences as
provided by the Public Housing Reform Act. HUD's proposal has the
effect of reinstituting Federal preferences that were eliminated by the
Public Housing Reform Act. HUD's proposal exceeds statutory authority
by requiring PHAs to use ``skipping'' for the purpose of
deconcentration while the Public Housing Reform Act allows, but does
not require, PHAs to use skipping. HUD's proposal will have the effect
of creating income and racial quotas, which is prohibited by the Public
Housing Reform Act. HUD's proposal will adversely affect PHAs' Family
Self-Sufficiency programs where certain developments have been
designated for occupancy by FSS families only. HUD's proposal will
undermine HOPE VI programs because most of all the HOPE VI buildings
would be classified as above income and therefore target only below-
average income families. HUD's proposal will only result in the
labeling of developments and income steering that HUD has worked so
hard in the past to eliminate. HUD's proposal provides no guidance
concerning the length of time that deconcentration procedures must be
followed; in other words, the proposal does not specify how many offers
to higher income families must be made before a unit can be offered to
a lower income family. Without clear direction in the rule, units could
remain vacant for months. Additionally, the delays in filling units
could negatively affect a PHA's PHAS score. HUD's deconcentration
approach does not address the issue of the proximity of buildings in
public housing developments; deconcentration will not be achieved if
the buildings are in close proximity to one another. HUD's
deconcentration approach does not address the issue of buildings that
are located in concentrated poverty neighborhoods. HUD's definition of
``building'' as one or more contiguous structures containing at least 8
public housing units is not clear and requires further elaboration
(e.g., what is meant by contiguous; does building mean 8 units in total
or 8 units in each structure). HUD's deconcentration approach does not
take into consideration the impact on elderly persons or persons with
disabilities. HUD's definition of building presents too small a
structure for deconcentration and would create an administrative burden
for PHAs. How does a PHA address deconcentration in the context of a
situation where the majority of the PHA's residents are low income
elderly persons or persons with disabilities. Generally, elderly
persons, as a result of social security income, are higher income
tenants, buildings occupied predominately by the elderly will be
classified as higher income, and elderly persons on the waiting list
may be skipped over for units in an elderly building. HUD's
deconcentration approach is costly. The delay in filling vacancies
which will result if this approach is implemented will adversely affect
a PHA's revenues. HUD needs to clarify what it means by higher income
families. HUD's proposal will have a detrimental impact on PHA's
voluntary transfer policies. HUD's proposal does not take into account
the source of a family's income. The rule should distinguish between
earned income and assistance. HUD's proposal conflicts with the policy
goals of HOPE VI and mixed finance developments.

[[Page 81219]]

    Overview of comments proposing alternative approaches to
deconcentrate poverty. HUD should adhere to the deconcentration
approach that was in the final PHA Plan rule published on October 21,
1999. The October 21, 1999 final rule provided a reasonable approach
and adequate guidance concerning deconcentration and income mixing by
PHAs. The appropriate deconcentration approach is a PHA specific
approach where each PHA establishes its own goals and specific plans to
reach those goals. It is virtually impossible for HUD to develop a
deconcentration policy that will address all of the variables found in
all PHAs' jurisdictions. A deconcentration policy must be left to the
PHAs to develop locally. Deconcentration methods should include
incentives such as flat rents and ceiling rents, lowering the
percentage of adjusted income that goes for rent from 30 percent to 25
percent and income deductions (e.g., for transportation, uniforms,
etc.) for working families. A suitable deconcentration approach would
be one that provides for PHAs to set separate goals for three
categories of developments: (1) developments in poverty areas; (2)
developments well outside of poverty areas, and (3) developments that
fall in between. The deconcentration approach that HUD noted in its
April 17, 2000 proposed rule was an approach that HUD considered but
did not adopt, is preferable to the approach that HUD proposed in the
April 17, 2000 rule. The second approach (not adopted) allows PHAs to
concentrate limited resources on areas with the greatest need of
deconcentration. The final rule should offer an option of
deconcentration methods from which PHAs may choose and also allow PHAs
to design their own method. Any deconcentration approach should exempt
tenant assignment and selection plans that are required by court order.
Deconcentration should be implemented through a ``metropolitan''
directive issued to PHAs and that focuses on creating affordable rental
housing opportunities in entire metropolitan areas. Properties located
in high poverty neighborhoods that have yet to undergo revitalization
should be exempted from the requirement to deconcentrate pending a site
or neighborhood redevelopment plan. Deconcentration methods should
focus on strategies to improve the incomes of current tenants, such as
targeted workforce development programs or more vigorous implementation
of section 3.\1\ Any deconcentration approach should exempt
developments that are occupied by elderly persons or persons with
disabilities. To include special populations as part of a
deconcentration strategy will negatively affect the ability of a PHA to
implement a designated housing plan. An effective deconcentration
approach is one that encourages and promotes the development of public
housing in non-concentrated areas. Small and medium-sized developments
should be exempt from the deconcentration requirement. Small PHAs (PHAs
with less than 250 units) should be exempt from the deconcentration
requirement; the purpose of deconcentration is to address the poverty
concentration problems of large urban housing authorities. PHAs with
small scattered sites (less than 50 units per development) should be
exempt from the deconcentration requirement. All scattered site
developments should be exempt from the deconcentration requirement
because the very nature of a scattered site program is to achieve
deconcentration. PHAs with one development and one building should be
exempt from the deconcentration requirement. For developments located
in Empowerment Zones or in census tracts that qualify for Empowerment
Zone status, a PHA should be allowed to skip over lower income
applicants to reach higher income applicants at any and all complexes
located in these areas. Moving to Work and the Jobs Plus demonstration
programs should be exempt from the requirement to deconcentrate poverty
because these programs are already designed to promote increased
diversity of income among residents. The term ``general occupancy
public housing development'' and ``general occupancy development
building'' when used in reference to the determination of average
income, should be defined to include buildings or developments with
family units and should exclude buildings or developments that are
serving exclusively the elderly, persons with disabilities or a
combination of the elderly and persons with disabilities. An effective
deconcentration approach should address adjustments in average income
by family size and number of bedrooms. Families residing in
developments approved for demolition or conversion for tenant-based
assistance should be excluded from the average-income calculation. A
deconcentration approach should not be dependent solely upon an
analysis of average incomes, but rather PHAs should be allowed to use
median incomes, census tract incomes, average incomes with standard
deviations or other income analyses. An effective deconcentration
approach should be based on thresholds that are a certain percentage of
median income and significantly different from a PHA's average income
(e.g., 25 percent or 50 percent) so that income mixing can actually be
achieved. Average income should be determined by site, not by
development or building. There needs to be a middle tier of buildings
that are neither higher nor lower income to which a deconcentration
policy would not apply. A PHA's deconcentration policy should consist
of a certification by the PHA that it has complied with the 40 percent/
30 percent income targeting requirement.
---------------------------------------------------------------------------

    \1\ Section 3 refers to section 3 of the Housing and Urban
Development Act of 1968 which requires, among other things,
recipients of certain HUD assistance, including public housing
assistance, to ensure that, to the greatest extent feasible,
training, employment and other economic opportunities will be
directed to low- and very low-income persons, particularly those who
are recipients of government assistance for housing.
---------------------------------------------------------------------------

    HUD Response. Again, HUD appreciates all the suggestions and
recommendations on how deconcentration of poverty may be achieved in
public housing. Section II of this preamble, which describes the
changes made at the final rule stage reflects the suggestions and
recommendations offered by the commenters that HUD has adopted.
    HUD is retaining the requirement that the PHAs determine the
average incomes of all families residing the public housing
developments that are not exempt and subject to the deconcentration of
poverty requirement (the covered developments). To design a policy, as
required by the Public Housing Reform Act, that requires bringing
higher income tenants in to lower income developments and lower income
tenants into higher income developments, necessitates an analysis by
the PHAs of the income characteristics of their developments. The final
rule, however, provides for exempted middle tiers of developments and
for various other exceptions. The final rule also allows PHAs more
flexibility in developing specific actions for covered developments
that the PHA believes will achieve deconcentration of poverty for those
developments.
    Comment: Skipping over families on the waiting list appears to
violate Fair Housing Act requirements. Because of the correlation
between income and race in most of the country's developments, the
impact of this rule would be felt disproportionately by minority
households which will be denied

[[Page 81220]]

housing for no other reason than that the available units are in lower
income buildings.
    HUD Response. Skipping is permitted by both the Public Housing
Reform Act and this rule; skipping is not in violation of Fair Housing
Act requirements provided it is uniformly applied by the PHA. If
skipping is not applied in an objective and uniform manner by a PHA,
then the PHA may be vulnerable to a charge of violation of Fair Housing
Act requirements. The circumstances under which a PHA will skip a
family to achieve deconcentration of poverty should be specified in the
PHA's deconcentration policy. Skipping is permitted but not required
and will occur less frequently because of the additional flexibility in
the final rule.
    Comment: Deconcentration can be achieved by HUD identifying problem
developments and requiring corrective action. MTCS data contains all
relevant information for HUD to comply with the statutory requirement
that the Secretary review the income and occupancy characteristics of
public housing developments. Once it is determined that there are
violations then the Secretary has the authority to require appropriate
corrective action. This is the best strategy to address the perceived
income concentration problem.
    HUD Response. The statutory requirement to deconcentrate poverty
does not impose an obligation only on HUD to review the income and
occupancy characteristics of public housing developments. The statute
requires a PHA to include as part of the PHA's Annual Plan submission
an admissions policy designed to provide for deconcentration of poverty
and income-mixing by bringing higher income tenants into lower income
developments and vice versa. The statute envisions a preventive
approach, not simply a corrective approach. The purpose of HUD's rule
is to help PHAs achieve a successful preventive approach to poverty
concentration. Moreover, under this final rule only those general
occupancy developments with average incomes significantly above or
below the PHA average must be addressed.
    Comment: HUD's final rule should clarify that it does not apply to
State Housing Finance Agencies (HFAs) and other similar state housing
agencies. The rule is ambiguous as to whether it applies to state HFAs.
The rule should be rewritten to provide a clear exemption for statewide
agencies, such as state HFAs.
    HUD Response. The deconcentration provisions do not apply to
statewide agencies except to the extent that they are operating public
housing; they apply to all public housing except for those developments
exempted by the deconcentration provisions. In all the rulemaking
stages of the PHA Plan rule, this is the first time this question has
been raised. HUD believes that this is clear, and no additional
statement is needed in the rule.
    Comment: Is deconcentration applicable to a public housing
development undergoing modernization? HUD needs to clarify at the final
rule stage whether the requirement to deconcentrate is applicable to a
development undergoing modernization which requires the residents to be
relocated to other developments.
    HUD Response. A PHA's deconcentration policy is not applicable to
involuntary transfers among developments as this final rule makes
clear.
    Comment: HUD should clarify that a PHA's deconcentration policy
applies to all mixed-finance developments/buildings that receive HUD
operating subsidy. HUD should provide at the final rule stage that the
deconcentration requirement does not apply to existing mixed-finance
where investors, developers and PHAs have already entered into HUD-
approved contracts which require the income mix in the developments,
and should not apply to future developments. The following highlights
the differences among commenters on the applicability of the
deconcentration requirement to mixed-finance developments:
    The final rule should make clear that it applies to any mixed
finance development or building or unit that receives HUD operating
subsidy. It should not matter that the development is owned or managed
by an entity other than the PHA. These developments should not be
exempt from the requirement to deconcentrate poverty.
    The final rule must exempt, at a minimum, existing mixed-finance
developments. PHAs and developers contractually obligate themselves to
maintain specified income tiers and follow a prescribed admissions and
occupancy policy in operating these properties. HOPE VI/mixed finance
transactions (both closed and future transactions) should be
specifically excluded from the deconcentration rule. HUD is already
successful in achieving in income mixing in HOPE VI and mixed finance
units, and application of the deconcentration requirement will reduce
not increase the success rates of these types of units in achieving
income mixing.
    HUD Response. The final rule exempts public housing units operated
in accordance with a HUD-approved mixed finance plan using HOPE VI or
public housing funds awarded before the effective date of this final
rule, provided that the PHA certifies (and includes reasons for the
certification) as part of its PHA Plan (which may be accomplished
either in the annual Plan submission or as a significant amendment to
its PHA Plan) that exemption from the regulation is necessary to honor
an existing contractual agreement or be consistent with a mixed finance
plan, including provisions regarding the incomes of public housing
residents to be admitted to that development, which has been developed
in consultation with residents with rights to live at the affected
development and other interested persons. HUD recognizes that for many
of these developments, as commenters have indicated, PHAs are
contractually obligated to maintain specified income tiers, or their
HOPE VI funding proposal assumed such tiers.
    HUD, however, is not granting a blanket exemption for all mixed-
finance or HOPE VI developments. As noted in the October 21, 1999 final
rule, in response to a similar comment received under that rulemaking,
the Public Housing Reform Act does not limit applicability of the
deconcentration requirement to traditional public housing. (See 64 FR
56854, middle column.)
    Comment: Data by development and building should be collected on an
annual basis to determine effectiveness of income growth policies.
HUD's rule should require yearly collection of data by development and
by building even for developments or buildings that may be exempt from
the deconcentration requirement.
    HUD Response. The PHA's deconcentration policy must be included
each year in the PHA's Annual Plan submission. The required steps for
deconcentrating poverty, as provided in the rule, include a
determination of the average income of all families residing in covered
developments and an assessment of which developments fall outside the
Established Income Range. At the final rule stage, HUD has limited the
PHA's average income determination to developments, and not buildings.
After consideration of comments, HUD acknowledges the concerns that an
analysis of income by building may result in increased administrative
burden for PHAs without a corresponding increased benefit in promoting
deconcentration of poverty. HUD declines the commenter's

[[Page 81221]]

suggestion to require an income determination for developments that are
not subject to deconcentration.
    Comment: The incomes of public housing residents constantly
fluctuate which makes annual determinations of average income
unreliable. PHAs may experience significant differences in income
levels from year to year because residents initiate and terminate
employment fairly frequently. PHAs should have the option of
recalculating the average development incomes more often than once a
year if they so choose. Because income fluctuates constantly, does
compliance with the deconcentration requirement mean that families
would have to move if the ``higher income building'' in which they
reside decreases (i.e., becomes a low income building) or vice-versa?
    HUD Response. HUD believes that the additional flexibility provided
by this final rule addresses this concern.
    Comment: A family's return to a development should not be limited
to a right of return to the same site. Some HOPE VI proposals include
scattered sites which may include the original site that is being
revitalized along with other sites or may include entirely new sites.
The deconcentration policy should not interfere with any PHA commitment
to families who have the right of return to this type of HOPE VI
development or other development.
    HUD Response. Neither the statutory requirement to deconcentrate
poverty nor the requirements of this rule interfere with any
commitments made by a PHA to a family with respect to a family's right
to return to a site, including new sites, following revitalization.
    Comment: The rule needs to address more fully unit refusal by a
family and whether removing a family from a waiting list for refusal to
accept a unit constitutes an adverse action against the family.
Removing a family from the waiting list for reasons due entirely or in
part to the family's refusal to accept a deconcentration offer of a
unit constitutes an adverse action against the family. The rule needs
to clearly provide that a family cannot be removed for refusing a
deconcentration offer of a unit.
    HUD Response. Removing a family from the waiting list for the
family's refusal to accept a unit offered as part of the PHA's strategy
to deconcentrate poverty is an adverse action prohibited by the
statute. A family cannot be removed from the waiting list for this
reason. However, a PHA may uniformly limit the number of offers to each
applicant.
    Comment: The proposed rule violates the statutory requirement that
HUD finalize the agency plan rule only after considering comments
presented through an enhanced rulemaking process. Congress mandated
that the final rule implement the PHA Agency Plans be subject to an
enhanced rulemaking process that would allow for more public input into
the process. HUD was required to convene two public forums at which
those making recommendations could respond to concerns regarding the
proposed agency plan rule prior to implementation. While HUD conducted
such forums, the deconcentration provisions in the April 17, 2000
proposed rule were not included in the prior rule and were not the
subject of discussion at these forums.
    HUD Response. HUD complied with the statutory mandate to undertake
enhanced rulemaking before implementation of the PHA Plan final rule,
which was issued on October 21, 1999. This enhanced rulemaking covered
all aspects of the PHA Plan. Moreover, the statute does not require HUD
to undertake enhanced rulemaking for every amendment or change HUD
subsequently makes to the PHA Plan rule. The April 17, 2000 proposed
rule was limited to clarifying a PHA's requirements to deconcentrate by
income and affirmatively furthering fair housing, and adding language
that allowed for HUD to further simplify the PHA Plan submission for
PHAs permitted to submit a streamlined plan. (HUD already has
implemented the streamlining amendment through a final rule published
on August 14, 2000 (65 FR 49484).) Although HUD republished the entire
PHA Plan rule on April 17, 2000, with the exception of these two areas,
no substantive changes were made to the rule. The rule was republished
for the convenience of the reader, and to make plain language changes.
    Comment: The rule is not in compliance with the Regulatory
Flexibility Act, Unfunded Mandates Reform Act and the Executive Order
on Federalism. HUD's proposed rule would have a significant economic
impact on a substantial number of small entities and would impose an
unfunded federal mandate and substantial direct compliance costs on
local jurisdictions. Compliance with the deconcentration requirement
will require software modifications and additional data entry on a
building-by-building analysis, and the creation and implementation of
new procedure manuals and these actions will have a significant
economic impact on housing authorities.
    HUD Response. HUD disagrees with the commenters that the proposed
rule would have imposed a significant economic impact on a substantial
number of small entities. HUD, however, appreciates these comments, and
specifically solicited comments about the impact on small entities
under its Regulatory Flexibility Act statement on whether PHAs believed
the proposed rule would have a significant economic impact on small
entities. HUD believes that the changes made in the rule at the final
rule stage minimize concerns raised by the commenters. The rule is not
in violation of the Executive Order on Federalism or Unfunded Mandates.
Public housing is federally funded and the deconcentration requirement
established by Congress is to ensure that every effort is made to
address concentration of poverty in federally funded housing.

V. Findings and Certifications

Paperwork Reduction Act Statement

    The information collection requirements contained in the PHA Plan
were previously approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), at the time of publication of the PHA Plan final rule on October
21, 1999, and assigned OMB control number 2577-0226. This final rule
published today only makes changes to the deconcentration component of
the PHA Annual Plan's statement of the PHA's deconcentration and other
policies that govern eligibility, selection and admissions. A
modification to HUD's existing and approved information collection
requirements for this rule has been submitted to OMB for review and
approval under the Paperwork Reduction Act. The modification, when
approved, will be announced through separate notice. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this rule, and in so doing
certifies that this rule does not have a significant economic impact on
a substantial number of small entities. This rule amends HUD's Public
Housing Agency Plan regulations to fully reflect the importance of
deconcentration by income in public housing and the importance of
affirmatively furthering

[[Page 81222]]

fair housing. This rule does not create an undue burden on small PHAs.
This rule exempts several types of developments, including developments
with fewer than 100 units, from the requirement to deconcentrate
poverty in public housing.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on State and local governments and
is not required by statute, or preempts State law, unless the relevant
requirements of section 6 of the Executive Order are met. This 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.

Environmental Impact

    The Finding of No Significant Impact with respect to the
environment was prepared during the interim rulemaking stage of the
Public Housing Agency Plan regulations in accordance with HUD
regulations in 24 CFR part 50 that implement section 102(2)(C) of the
National Environmental Policy Act of 1969 (42 U.S.C. 4223). That
Finding remains applicable to this rule, and is available for public
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of
the Rules Docket Clerk, Office of General Counsel, Room 10276,
Department of Housing and Urban Development, 451 7th Street, SW,
Washington, DC 20410.

Regulatory Review

    The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, 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 economically significant, as
provided in section 3(f)(1) of the Order). Any changes made to the
final rule after its submission to OMB are identified in the docket
file, which is available for public inspection in the office of the
Department's Office of General Counsel, Regulations Division, Room
10276, 451 Seventh Street, SW, Washington, DC 20410-0500.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on State,
local, and tribal governments, and on the private sector. This rule
does not impose any Federal mandates on any State, local, or tribal
governments, or on the private sector, within the meaning of the UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers applicable to
the programs affected by this rule are 14.850 and 14.855.

List of Subjects in 24 CFR Part 903

    Administrative practice and procedure, Public housing, Reporting
and recordkeeping requirements

    For the reasons stated in the preamble, HUD revises part 903 of
title 24 of the Code of Federal Regulations to read as follows:

PART 903--PUBLIC HOUSING AGENCY PLANS

Sec.
Subpart A--Deconcentration of Poverty and Fair Housing in Program
Admissions
903.1   What is the purpose of this subpart?
903.2   With respect to admissions, what must a PHA do to
deconcentrate poverty in its developments and comply with fair
housing requirements?
Subpart B--PHA Plans
903.3  What is the purpose of this subpart?
903.4  What are the public housing agency plans?
903.5  When must a PHA submit the plans to HUD?
903.6  What information must a PHA provide in the 5-Year Plan?
903.7  What information must a PHA provide in the Annual Plan?
903.9  May HUD request additional information in the Annual Plan of
a troubled PHA?
903.11  Are certain PHAs eligible to submit a streamlined Annual
Plan?
903.13  What is a Resident Advisory Board and what is its role in
development of the Annual Plan?
903.15  What is the relationship of the public housing agency plans
to the Consolidated Plan?
903.17  What is the process for obtaining public comment on the
plans?
903.19  When is the 5-Year Plan or Annual Plan ready for submission
to HUD?
903.21  May the PHA amend or modify a plan?
903.23  What is the process by which HUD reviews, approves, or
disapproves an Annual Plan?
903.25  How does HUD ensure PHA compliance with its plans?

    Authority. 42 U.S.C. 1437c; 42 U.S.C. 3535(d).

Subpart A--Deconcentration of Poverty and Fair Housing in Program
Admissions

Sec. 903.1  What is the purpose of this subpart?

    The purpose of this subpart is to specify the process which a
Public Housing Agency, as part of its annual planning process and
development of an admissions policy, must follow in order to develop
and apply a policy that provides for deconcentration of poverty and
income mixing in certain public housing developments and to
affirmatively further fair housing in admissions.
    References to the ``1937 Act'' in this part refer to the U.S.
Housing Act of 1937 (42 U.S.C. 1437 et seq.)

Sec. 903.2  With respect to admissions, what must a PHA do to
deconcentrate poverty in its developments and comply with fair housing
requirements?

    (a) General. The PHA's admission policy includes the PHA's policy
designed to promote deconcentration of poverty and income mixing in
accordance with section 16(a)(3)(B) of the 1937 Act (42 U.S.C. 1437n),
which is submitted to HUD as part of the PHA Annual Plan process.
Deconcentration of poverty and income mixing is promoted by a policy
that provides for bringing higher income tenants into lower income
developments and lower income tenants into higher income developments.
    (1) The provisions of this section apply to applicants to and
residents seeking voluntary transfers within covered public housing
developments (``covered developments'' as specified in paragraph (b) of
this section).
    (2) The statutory requirement to design a policy to provide for
deconcentration and income mixing is not to be construed to impose or
require any specific income or racial quotas for any development or
developments.
    (b) Applicability of deconcentration of poverty and income mixing
requirements.
    (1) Developments subject to deconcentration of poverty and income
mixing requirements. The deconcentration requirements of this subpart
apply to general occupancy, family public housing developments,
excluding those developments listed in paragraph (b)(2) of this
section. Developments to which this subpart is applicable are referred
to as ``covered developments''.
    (2) Developments not subject to deconcentration of poverty and
income mixing requirements. This subpart does not apply to the
following public housing developments:

[[Page 81223]]

    (i) Public housing developments operated by a PHA with fewer than
100 public housing units;
    (ii) Public housing developments operated by a PHA which house only
elderly persons or persons with disabilities, or both;
    (iii) Public housing developments operated by a PHA which consist
of only one general occupancy, family public housing development;
    (iv) Public housing developments approved for demolition or for
conversion to tenant-based assistance; and
    (v) Public housing developments which include public housing units
operated in accordance with a HUD-approved mixed-finance plan using
HOPE VI or public housing funds awarded before the effective date of
this rule, provided that the PHA certifies (and includes reasons for
the certification) as part of its PHA Plan (which may be accomplished
either in the annual Plan submission or as a significant amendment to
its PHA Plan) that exemption from the regulation is necessary to honor
an existing contractual agreement or be consistent with a mixed finance
plan, including provisions regarding the incomes of public housing
residents to be admitted to that development, which has been developed
in consultation with residents with rights to live at the affected
development and other interested persons.
    (c) Deconcentration of poverty and income mixing.
    (1) Steps for implementation. To implement the statutory
requirement to deconcentrate poverty and provide for income mixing in
covered public housing developments, a PHA must comply with the
following steps:
    (i) Step 1. A PHA shall determine the average income of all
families residing in all the PHA's covered developments. A PHA may use
median income, instead of average income, provided that the PHA
includes a written explanation in its PHA Annual Plan justifying use of
median income in the PHA's Annual Plan.
    (ii) Step 2. A PHA shall determine the average income of all
families residing in each covered development. In determining average
income for each development, a PHA has the option of adjusting its
income analysis for unit size in accordance with procedures prescribed
by HUD.
    (iii) Step 3. A PHA shall determine whether each of its covered
developments falls above, within or below the Established Income Range.
The Established Income Range is 85 percent to 115 percent (inclusive of
85 percent and 115 percent) of the PHA-wide average income for covered
developments as defined in Step 1.
    (iv) Step 4. A PHA with covered developments having average incomes
outside the Established Income Range may explain or justify the income
profile for these developments as being consistent with and furthering
two sets of goals: the goals of deconcentration of poverty and income
mixing as specified by the statute (bringing higher income tenants into
lower income developments and vice versa); and the local goals and
strategies contained in the PHA Annual Plan. Elements of explanations
or justifications that may satisfy these requirements may include, but
shall not be limited to the following:
    (A) The covered development or developments are subject to consent
decrees or other resident selection and admission plans mandated by
court action;
    (B) The covered development or developments are part of PHA's
programs, strategies or activities specifically authorized by statute,
such as mixed-income or mixed-finance developments, homeownership
programs, self-sufficiency strategies, or other strategies designed to
deconcentrate poverty, promote income mixing in public housing,
increase the incomes of public housing residents, or the income mix is
otherwise subject to individual review and approval by HUD;
    (C) The covered development's or developments' size, location, and/
or configuration promote income deconcentration, such as scattered site
or small developments;
    (D) The income characteristics of the covered development or
developments are sufficiently explained by other circumstances.
    (v) Step 5. Where the income profile for a covered development is
not explained or justified in the PHA Annual Plan submission, the PHA
shall include in its admission policy its specific policy to provide
for deconcentration of poverty and income mixing in applicable covered
developments. Depending on local circumstances, a PHA's deconcentration
policy (which may be undertaken in conjunction with other efforts such
as efforts to increase self-sufficiency or current residents) may
include but is not limited to providing for one or more of the
following actions:
    (A) Providing incentives designed to encourage families with
incomes below the Established Income Range to accept units in
developments with incomes above the Established Income Range, or vice
versa, including rent incentives, affirmative marketing plans, or added
amenities;
    (B) Targeting investment and capital improvements toward
developments with an average income below the Established Income Range
to encourage applicant families whose income is above the Established
Income Range to accept units in those developments;
    (C) Establishing a preference for admission of working families in
developments below the Established Income Range;
    (D) Skipping a family on the waiting list to reach another family
in an effort to further the goals of the PHA's deconcentration policy;
    (E) Providing such other strategies as permitted by statute and
determined by the PHA in consultation with the residents and the
community, through the PHA Annual Plan process, to be responsive to the
local context and the PHA's strategic objectives.
    (2) Determination of compliance with deconcentration requirement.
HUD shall consider a PHA to be in compliance with this subpart if:
    (i) The PHA's income analysis shows that the PHA has no general
occupancy family developments to which the deconcentration requirements
apply; that is, the average incomes of all covered developments are
within the Established Income Range;
    (ii) The PHA has covered developments with average incomes above or
below the Established Income Range and the PHA provides a sufficient
explanation in its Annual Plan that supports that the income mix of
such development or developments is consistent with and furthers the
goal of deconcentration of poverty and income mixing and also the
locally determined goals of the PHA's Annual and Five Year Plans, and
the PHA therefore need not take further action to deconcentrate poverty
and mix incomes; or
    (iii) The PHA's deconcentration policy provides specific strategies
the PHA will take that can be expected to promote deconcentration of
poverty and income mixing in developments with average incomes outside
of the Established Income Range.
    (3) Right of return. If a PHA has provided that a family that
resided in a covered public housing development has a right to
admission to a public housing unit in that development after
revitalization, the requirements of paragraph (c) of this section do
not preclude fulfilling that commitment or a PHA's commitment to return
a family to another development after revitalization.
    (4) Family's discretion to refuse a unit. A family has the sole
discretion

[[Page 81224]]

whether to accept an offer of a unit made under a PHA's deconcentration
policy. The PHA may not take any adverse action toward any eligible
family for choosing not to accept an offer of a unit under the PHA's
deconcentration policy. In accordance with the PHA's established
policies, the PHA may uniformly limit the number of offers received by
applicants.
    (5) Relationship to income targeting requirement. Nothing in this
section relieves a PHA of the obligation to meet the requirement to
admit annually at least 40 percent families whose incomes are below 30
percent of area median income as provided by section 16(a)(2) of the
1937 Act, 42 U.S.C. 1437n(a)(2).
    (d) Fair housing requirements. All admission and occupancy policies
for public housing and Section 8 tenant-based housing programs must
comply with Fair Housing Act requirements and with regulations to
affirmatively further fair housing. The PHA may not impose any specific
income or racial quotas for any development or developments.
    (1) Nondiscrimination. A PHA must carry out its PHA Plan in
conformity with the nondiscrimination requirements in Federal civil
rights laws, including title VI of the Civil Rights Act of 1964 and the
Fair Housing Act. A PHA cannot assign persons to a particular section
of a community or to a development or building based on race, color,
religion, sex, disability, familial status or national origin for
purposes of segregating populations (Sec. 1.4(b)(1)(ii) of this title).
    (2) Affirmatively Furthering Fair Housing. PHA policies that govern
eligibility, selection and admissions under its PHA Plan should be
designed to reduce racial and national origin concentrations. Any
affirmative steps or incentives a PHA plans to take must be stated in
the admission policy.
    (i) HUD regulations provide that PHAs should take affirmative steps
to overcome the effects of conditions which resulted in limiting
participation of persons because of their race, national origin or
other prohibited basis (Sec. 1.4(b)(1)(iii) and (6)(ii) of this title).
    (ii) Such affirmative steps may include but are not limited to,
appropriate affirmative marketing efforts; additional applicant
consultation and information; and provision of additional supportive
services and amenities to a development.
    (3) Validity of certification. (i) HUD will take action to
challenge the PHA's certification under Sec. 903.7(o) where it appears
that a PHA Plan or its implementation:
    (A) Does not reduce racial and national origin concentration in
developments or buildings and is perpetuating segregated housing; or
    (B) Is creating new segregation in housing.
    (ii) If HUD challenges the validity of a PHA's certification, the
PHA must establish that it is providing a full range of housing
opportunities to applicants and tenants or that it is implementing
actions described in paragraph (d)(2)(ii) of this section.
    (e) Relationship between poverty deconcentration and fair housing.
The requirements for poverty deconcentration in paragraph (c) of this
section and for fair housing in paragraph (d) of this section arise
under separate statutory authorities and are independent.

Subpart B--PHA Plans

Sec. 903.3  What is the purpose of this subpart?

    (a) This subpart specifies the requirements for PHA plans, required
by section 5A of the United States Housing Act of 1937 (42 U.S.C.
1437c-1).
    (b) The purpose of the plans is to provide a framework for:
    (1) Local accountability; and
    (2) An easily identifiable source by which public housing
residents, participants in the tenant-based assistance program, and
other members of the public may locate basic PHA policies, rules and
requirements concerning the PHA's operations, programs and services.

Sec. 903.4  What are the public housing agency plans?

    (a) Types of plans. There are two public housing agency plans. They
are:
    (1) The 5-Year Plan (the 5-Year Plan) that a public housing agency
(PHA) must submit to HUD once every five PHA fiscal years. The 5-Year
Plan covers the five PHA fiscal years immediately following the date on
which the 5-Year Plan is due to HUD; and
    (2) The Annual Plan (Annual Plan) that the PHA must submit to HUD
for each fiscal year immediately following the date on which the Annual
Plan is due to HUD and for which the PHA receives:
    (i) Section 8 tenant-based assistance (under section 8(o) of the
U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)) (tenant-based
assistance); or
    (ii) Amounts from the public housing operating fund or capital fund
(under section 9 of the U.S. Housing Act of 1937 (42 U.S.C. 1437g)
(public housing)).
    (b) Format. HUD may prescribe the format of submission (including
electronic format submission) of the plans. HUD also may prescribe the
format of attachments to the plans and documents related to the plan
that the PHA does not submit but may be required to make available
locally. PHAs will receive appropriate notice of any prescribed format.
    (c) Applicability. The requirements of this subpart only apply to a
PHA that receives the type of assistance described in paragraph (a) of
this section.
    (d) Authority for waivers. In addition to the waiver authority
provided in Sec. 5.110 of this title, the Secretary may, subject to
statutory limitations, waive any provision of this title on a program-
wide basis, and delegate this authority in accordance with section 106
of the Department of Housing and Urban Development Reform Act of 1989
(42 U.S.C. 3535(q)) where the Secretary determines that such waiver is
necessary for the effective implementation of this part.

Sec. 903.5  When must a PHA submit the plans to HUD?

    (a) 5-Year Plan. (1) The first PHA fiscal year that is covered by
the requirements of this part as amended on December 22, 2000, is the
PHA fiscal year that begins July 2001. This 5-Year Plan submitted by a
PHA must be submitted for the 5-year period beginning July 1, 2001.
    (2) For all PHAs, the first 5-Year Plans are due 75 days before the
commencement of their fiscal year.
    (3) For all PHAs, after submission of their first 5-Year Plan, all
subsequent 5-Year Plans must be submitted once every 5 PHA fiscal
years, no later than 75 days before the commencement of the PHA's
fiscal year.
    (4) PHAs may choose to update their 5-Year Plans every year as good
management practice and must update their 5-Year Plans that were
submitted for PHA fiscal years beginning before July 1, 2001, to comply
with the requirements of this part as amended on December 22, 2000, at
the time they submit their next Annual Plan for fiscal years beginning
on or after July 1, 2001. PHAs must explain any substantial deviation
from their 5-Year Plans in their Annual Plans. (Substantial deviation
is determined by the PHA in accordance with criteria provided by the
PHA in its Annual Plan in accordance with Sec. 903.7(r).)
    (b) The Annual Plan. (1) The first PHA fiscal year that is covered
by the requirements of this part as amended on December 22, 2000, is
the PHA fiscal year that begins July 1, 2001.

[[Page 81225]]

    (2) For all PHAs, the first Annual Plans are due 75 days before the
commencement of their fiscal year.
    (3) For all PHAs, after submission of the first Annual Plan, all
subsequent Annual Plans will be due no later than 75 days before the
commencement of their fiscal year.

Sec. 903.6  What information must a PHA provide in the 5-Year Plan?

    (a) A PHA must include in its 5-Year Plan a statement of:
    (1) The PHA's mission for serving the needs of low-income, very
low-income and extremely low-income families in the PHA's jurisdiction;
and
    (2) The PHA's goals and objectives that enable the PHA to serve the
needs of the families identified in the PHA's Annual Plan. For HUD, the
PHA and the public to better measure the success of the PHA in meeting
its goals and objectives, the PHA must adopt quantifiable goals and
objectives for serving those needs wherever possible.
    (b) After submitting its first 5-Year Plan, a PHA in its succeeding
5-Year Plans, must address:
    (1) The PHA's mission, goals and objectives for the next 5 years;
and
    (2) The progress the PHA has made in meeting the goals and
objectives described in the PHA's previous 5-Year Plan.

Sec. 903.7  What information must a PHA provide in the Annual Plan?

    With the exception of the first Annual Plan submitted by a PHA, the
Annual Plan must include the information provided in this section. HUD
will advise PHAs by separate notice, sufficiently in advance of the
first Annual Plan due date, of the information, described in this
section that must be part of the first Annual Plan submission, and any
additional instructions or directions that may be necessary to prepare
and submit the first Annual Plan. The information described in this
section applies to both public housing and tenant-based assistance,
except where specifically stated otherwise. The information that the
PHA must submit for HUD approval under the Annual Plan includes the
discretionary policies of the various plan components or elements (for
example, rent policies) and not the statutory or regulatory
requirements that govern these plan components and that provide no
discretion on the part of the PHA in implementation of the
requirements. The PHA's Annual Plan must be consistent with the goals
and objectives of the PHA's 5-Year Plan.
    (a) A statement of housing needs. (1) This statement must address
the housing needs of the low-income and very low-income families who
reside in the jurisdiction served by the PHA, and other families who
are on the public housing and Section 8 tenant-based assistance waiting
lists, including:
    (i) Families with incomes below 30 percent of area median
(extremely low-income families);
    (ii) Elderly families and families with disabilities;
    (iii) Households of various races and ethnic groups residing in the
jurisdiction or on the waiting list.
    (2) A PHA must make reasonable efforts to identify the housing
needs of each of the groups listed in paragraph (a)(1) of this section
based on information provided by the applicable Consolidated Plan,
information provided by HUD, and other generally available data.
    (i) The identification of housing needs must address issues of
affordability, supply, quality, accessibility, size of units and
location.
    (ii) The statement of housing needs also must describe the ways in
which the PHA intends, to the maximum extent practicable, to address
those needs, and the PHA's reasons for choosing its strategy.
    (b) A statement of the PHA's deconcentration and other policies
that govern eligibility, selection, and admissions. This statement must
describe the PHA's policies that govern resident or tenant eligibility,
selection and admission. This statement also must describe any PHA
admission preferences, and any occupancy policies that pertain to
public housing units and housing units assisted under section 8(o) of
the 1937 Act, as well as any unit assignment policies for public
housing. This statement must include the following information:
    (1) Deconcentration Policy. The PHA's deconcentration policy
applicable to public housing, as described in Sec. 903.2(a).
    (2) Waiting List Procedures. The PHA's procedures for maintaining
waiting lists for admission to the PHA's public housing developments.
The statement must address any site-based waiting lists, as authorized
by section 6(s) of the 1937 Act (42 U.S.C. 1437d(s)), for public
housing. Section 6(s) of the 1937 Act permits PHAs to establish a
system of site-based waiting lists for public housing that is
consistent with all applicable civil rights and fair housing laws and
regulations. Notwithstanding any other regulations, a PHA may adopt
site-based waiting lists where:
    (i) The PHA regularly submits required occupancy data to HUD's
Multifamily Tenant Characteristics Systems (MTCS) in an accurate,
complete and timely manner;
    (ii) The system of site-based waiting lists provides for full
disclosure to each applicant of any option available to the applicant
in the selection of the development in which to reside, including basic
information about available sites (location, occupancy, number and size
of accessible units, amenities such as day care, security,
transportation and training programs) and an estimate of the period of
time the applicant would likely have to wait to be admitted to units of
different sizes and types (e.g., regular or accessible) at each site;
    (iii) Adoption of site-based waiting lists would not violate any
court order or settlement agreement, or be inconsistent with a pending
complaint brought by HUD;
    (iv) The PHA includes reasonable measures to assure that adoption
of site-based waiting lists is consistent with affirmatively furthering
fair housing, such as reasonable marketing activities to attract
applicants regardless of race or ethnicity;
    (v) The PHA provides for review of its site-based waiting list
policy to determine if the policy is consistent with civil rights laws
and certifications through the following steps:
    (A) As part of the submission of the Annual Plan, the PHA shall
assess changes in racial, ethnic or disability-related tenant
composition at each PHA site that may have occurred during the
implementation of the site-based waiting list, based upon MTCS
occupancy data that has been confirmed to be complete and accurate by
an independent audit (which may be the annual independent audit) or is
otherwise satisfactory to HUD;
    (B) At least every three years the PHA uses independent testers or
other means satisfactory to HUD, to assure that the site-based waiting
list is not being implemented in a discriminatory manner, and that no
patterns or practices of discrimination exist, and providing the
results to HUD;
    (C) Taking any steps necessary to remedy the problems surfaced
during the review; and
    (D) Taking the steps necessary to affirmatively further fair
housing.
    (3) Other admissions policies. The PHA's admission policies that
include any other PHA policies that govern eligibility, selection and
admissions for the public housing (see part 960 of this title) and
tenant-based assistance programs (see part 982, subpart E of this
title). (The information requested on site-based waiting lists and

[[Page 81226]]

deconcentration is applicable only to public housing.)
    (c) A statement of financial resources. This statement must address
the financial resources that are available to the PHA for the support
of Federal public housing and tenant-based assistance programs
administered by the PHA during the plan year. The statement must
include a listing, by general categories, of the PHA's anticipated
resources, such as PHA operating, capital and other anticipated Federal
resources available to the PHA, as well as tenant rents and other
income available to support public housing or tenant-based assistance.
The statement also should include the non-Federal sources of funds
supporting each Federal program, and state the planned uses for the
resources.
    (d) A statement of the PHA's rent determination policies. This
statement must describe the PHA's basic discretionary policies that
govern rents charged for public housing units, applicable flat rents,
and the rental contributions of families receiving tenant-based
assistance. For tenant-based assistance, this statement also shall
cover any discretionary minimum tenant rents and payment standard
policies.
    (e) A statement of the PHA's operation and management. (1) This
statement must list the PHA's rules, standards, and policies that
govern maintenance and management of housing owned, assisted, or
operated by the PHA.
    (2) The policies listed in this statement must include a
description of any measures necessary for the prevention or eradication
of pest infestation. Pest infestation includes cockroach infestation.
    (3) This statement must include a description of PHA management
organization, and a listing of the programs administered by the PHA.
    (4) The information requested on a PHA's rules, standards and
policies regarding management and maintenance of housing applies only
to public housing. The information requested on PHA program management
and listing of administered programs applies to public housing and
tenant-based assistance.
    (f) A statement of the PHA grievance procedures. This statement
describes the grievance and informal hearing and review procedures that
the PHA makes available to its residents and applicants. These
procedures include public housing grievance procedures and tenant-based
assistance informal review procedures for applicants and hearing
procedures for participants.
    (g) A statement of capital improvements needed. With respect to
public housing only, this statement describes the capital improvements
necessary to ensure long-term physical and social viability of the
PHA's public housing developments, including the capital improvements
to be undertaken in the year in question and their estimated costs, and
any other information required for participation in the Capital Fund.
PHAs also are required to include 5-Year Plans covering large capital
items.
    (h) A statement of any demolition and/or disposition. (1) Plan for
Demolition/Disposition. With respect to public housing only, a
description of any public housing development, or portion of a public
housing development, owned by the PHA for which the PHA has applied or
will apply for demolition and/or disposition approval under section 18
of the 1937 Act (42 U.S.C. 1437p), and the timetable for demolition
and/or disposition. The application and approval process for demolition
and/or disposition is a separate process. Approval of the PHA Plan does
not constitute approval of these activities.
    (2) Interim Plan for Demolition/Disposition. (i) Before submission
of the first Annual Plan, a PHA may submit an interim PHA Annual Plan
solely for demolition/disposition. The interim plan must provide:
    (A) The required description of the action to be taken;
    (B) A certification of consistency with the Consolidated Plan;
    (C) A description of how the plan is consistent with the
Consolidated Plan;
    (D) A relocation plan that includes the availability of units in
the area and adequate funding; and
    (E) Confirmation that a public hearing was held on the proposed
action and that the resident advisory board was consulted.
    (ii) Interim plans for demolition/disposition are subject to PHA
Plan procedural requirements in this part (see Secs. 903.13, 903.15,
903.17, 903.19, 903.21, 903.23, 903.25), with the following exception.
If a resident advisory board has not yet been formed, the PHA may seek
a waiver of the requirement to consult with the resident advisory board
on the grounds that organizations that adequately represent residents
for this purpose were consulted.
    (iii) The actual application for demolition or disposition may be
submitted at the same time as submission of the interim plan or at a
later date.
    (i) A statement of the public housing developments designated as
housing for elderly families or families with disabilities or elderly
families and families with disabilities.
    (1) With respect to public housing only, this statement identifies
any public housing developments owned, assisted, or operated by the
PHA, or any portion of these developments, that:
    (i) The PHA has designated for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities; and
    (ii) The PHA will apply for designation for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities as provided by
section 7 of the 1937 Act (42 U.S.C. 1437e).
    (2) The designated housing application and approval process is a
separate process. Approval of the PHA Plan does not constitute approval
of these activities.
    (j) A statement of the conversion of public housing to tenant-based
assistance. (1) This statement describes:
    (i) Any building or buildings that the PHA is required to convert
to tenant-based assistance under section 33 of the 1937 Act (42 U.S.C.
1437z-5);
    (ii) The status of any building or buildings that the PHA may be
required to convert to tenant-based assistance under section 202 of the
Fiscal Year 1996 HUD Appropriations Act (42 U.S.C. 14371 note); or
    (iii) The PHA's plans to voluntarily convert under section 22 of
the 1937 Act (42 U.S.C. 1437t).
    (2) The statement also must include an analysis of the developments
or buildings required to be converted under section 33.
    (3) For both voluntary and required conversions, the statement must
include the amount of assistance received commencing in Federal Fiscal
Year 1999 to be used for rental assistance or other housing assistance
in connection with such conversion.
    (4) The application and approval processes for required or
voluntary conversions are separate approval processes. Approval of the
PHA Plan does not constitute approval of these activities.
    (5) The information required under this paragraph (j) of this
section is applicable to public housing and only that tenant-based
assistance which is to be included in the conversion plan.
    (k) A statement of homeownership programs administered by the PHA.
    (1) This statement describes:

[[Page 81227]]

    (i) Any homeownership programs administered by the PHA under
section 8(y) of the 1937 Act (42 U.S.C. 1437f(y));
    (ii) Any homeownership programs administered by the PHA under an
approved section 5(h) homeownership program (42 U.S.C. 1437c(h));
    (iii) An approved HOPE I program (42 U.S.C. 1437aaa); or
    (iv) Any homeownership programs for which the PHA has applied to
administer or will apply to administer under section 5(h), the HOPE I
program, or section 32 of the 1937 Act (42 U.S.C. 1437z-4).
    (2) The application and approval process for homeownership under
the programs described in paragraph (k) of this section, with the
exception of the section 8(y) homeownership program, are separate
processes. Approval of the PHA Plan does not constitute approval of
these activities.
    (l) A statement of the PHA's community service and self-sufficiency
programs. (1) This statement describes:
    (i) Any PHA programs relating to services and amenities
coordinated, promoted or provided by the PHA for assisted families,
including programs provided or offered as a result of the PHA's
partnership with other entities;
    (ii) Any PHA programs coordinated, promoted or provided by the PHA
for the enhancement of the economic and social self-sufficiency of
assisted families, including programs provided or offered as a result
of the PHA's partnerships with other entities, and activities under
section 3 of the Housing and Community Development Act of 1968 and
under requirements for the Family Self-Sufficiency Program and others.
The description of programs offered shall include the program's size
(including required and actual size of the Family Self-Sufficiency
program) and means of allocating assistance to households.
    (iii) How the PHA will comply with the requirements of section
12(c) and (d) of the 1937 Act (42 U.S.C. 1437j(c) and (d)). These
statutory provisions relate to community service by public housing
residents and treatment of income changes in public housing and tenant-
based assistance recipients resulting from welfare program
requirements. PHAs must address any cooperation agreements, as
described in section 12(d)(7) of the 1937 Act (42 U.S.C. 1437j(d)(7)),
that the PHA has entered into or plans to enter into.
    (2) The information required by paragraph (l) of this section is
applicable to both public housing and tenant-based assistance, except
that the information regarding the PHA's compliance with the community
service requirement applies only to public housing.
    (m) A statement of the PHA's safety and crime prevention measures.
    (1) With respect to public housing only, this statement describes
the PHA's plan for safety and crime prevention to ensure the safety of
the public housing residents that it serves. The plan for safety and
crime prevention must be established in consultation with the police
officer or officers in command of the appropriate precinct or police
departments. The plan also must provide, on a development-by-
development or jurisdiction wide-basis, the measures necessary to
ensure the safety of public housing residents.
    (2) The statement regarding the PHA's safety and crime prevention
plan must include the following information:
    (i) A description of the need for measures to ensure the safety of
public housing residents;
    (ii) A description of any crime prevention activities conducted or
to be conducted by the PHA; and
    (iii) A description of the coordination between the PHA and the
appropriate police precincts for carrying out crime prevention measures
and activities.
    (3) If the PHA expects to receive drug elimination program grant
funds, the PHA must submit, in addition to the information required by
paragraph (m)(1) of this section, the plan required by HUD's Public
Housing Drug Elimination Program regulations (see part 761 of this
title).
    (4) If HUD determines at any time that the security needs of a
public housing development are not being adequately addressed by the
PHA's plan, or that the local police precinct is not assisting the PHA
with compliance with its crime prevention measures as described in the
Annual Plan, HUD may mediate between the PHA and the local precinct to
resolve any issues of conflict.
    (n) A statement of the PHA's policies and rules regarding ownership
of pets in public housing. This statement describes the PHA's policies
and requirements pertaining to the ownership of pets in public housing.
The policies must be in accordance with section 31 of the 1937 Act (42
U.S.C. 1437a-3).
    (o) Civil rights certification. (1) The PHA must certify that it
will carry out its plan in conformity with title VI of the Civil Rights
Act of 1964 (42 U.S.C. 2000d-2000d-4), the Fair Housing Act (42 U.S.C.
3601-19), section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
794), and title II of the Americans with Disabilities Act of 1990 (42
U.S.C. 12101 et seq.). The PHA also must certify that it will
affirmatively further fair housing.
    (2) The certification is applicable to both the 5-Year Plan and the
Annual Plan.
    (3) A PHA shall be considered in compliance with the certification
requirement to affirmatively further fair housing if the PHA fulfills
the requirements of Sec. 903.2(b) and:
    (i) Examines its programs or proposed programs;
    (ii) Identifies any impediments to fair housing choice within those
programs;
    (iii) Addresses those impediments in a reasonable fashion in view
of the resources available;
    (iv) Works with local jurisdictions to implement any of the
jurisdiction's initiatives to affirmatively further fair housing that
require the PHA's involvement; and
    (v) Maintains records reflecting these analyses and actions.
    (p) Recent results of PHA's fiscal year audit. This statement
provides the results of the most recent fiscal year audit of the PHA
conducted under section 5(h)(2) of the 1937 Act (42 U.S.C. 1437c(h)).
    (q) A statement of asset management. To the extent not covered by
other components of the PHA Annual Plan, this statement describes how
the PHA will carry out its asset management functions with respect to
the PHA's public housing inventory, including how the PHA will plan for
long-term operating, capital investment, rehabilitation, modernization,
disposition, and other needs for such inventory.
    (r) Additional information to be provided. (1) For all Annual Plans
following submission of the first Annual Plan, a PHA must include a
brief statement of the PHA's progress in meeting the mission and goals
described in the 5-Year Plan;
    (2) A PHA must identify the basic criteria the PHA will use for
determining:
    (i) A substantial deviation from its 5-Year Plan; and
    (ii) A significant amendment or modification to its 5-Year Plan and
Annual Plan.
    (3) A PHA must include such other information as HUD may request of
PHAs, either on an individual or across-the-board basis. HUD will
advise the PHA or PHAs of this additional information through advance
notice.

Sec. 903.9  May HUD request additional information in the Annual Plan
of a troubled PHA?

    HUD may request that a PHA that is at risk of being designated as
troubled or is designated as troubled in accordance with section
6(j)(2) of the

[[Page 81228]]

1937 Act (42 U.S.C. 1437d(j)(2)), the Public Housing Management
Assessment Program (part 901 of this title) or the Public Housing
Assessment System (part 902 of this chapter) include its operating
budget. The PHA also must include or reference any applicable
memorandum of agreement with HUD or any plan to improve performance,
and such other material as HUD may prescribe.

Sec. 903.11  Are certain PHAs eligible to submit a streamlined Annual
Plan?

    (a) Yes, the following PHAs may submit a streamlined Annual Plan,
as described in paragraph (b) of this section:
    (1) PHAs that are determined to be high performing PHAs as of the
last annual or interim assessment of the PHA before the submission of
the 5-Year or Annual Plan;
    (2) PHAs with less than 250 public housing units (small PHAs) and
that have not been designated as troubled in accordance with section
6(j)(2) of the 1937 Act; and
    (3) PHAs that only administer tenant-based assistance and do not
own or operate public housing.
    (b) All streamlined plans must provide information on how the
public may reasonably obtain additional information on the PHA policies
contained in the standard Annual Plan, but excluded from their
streamlined submissions.
    (c) A streamlined plan must include the information provided in
this paragraph (c). The Secretary may reduce the information
requirements of streamlined Plans further, with adequate notice.
    (1) For high performing PHAs, the streamlined Annual Plan must
include the information required by Sec. 903.7(a), (b), (c), (d), (g),
(h), (k), (m), (n), (o), (p) and (r). The information required by
Sec. 903.7(m) must be included only to the extent this information is
required for PHA's participation in the public housing drug elimination
program and the PHA anticipates participating in this program in the
upcoming year. The information required by Sec. 903.7(k) must be
included only to the extent that the PHA participates in homeownership
programs under section 8(y).
    (2) For small PHAs that are not designated as troubled or that are
not at risk of being designated as troubled under section 6(j)(2) of
the 1937 Act the streamlined Annual Plan must include the information
required by Sec. 903.7(a), (b), (c), (d), (g), (h), (k), (m), (n), (o),
(p) and (r). The information required by Sec. 903.7(k) must be included
only to the extent that the PHA participates in homeownership programs
under section 8(y). The information required by Sec. 903.7(m) must be
included only to the extent this information is required for the PHA's
participation in the public housing drug elimination program and the
PHA anticipates participating in this program in the upcoming year.
    (3) For PHAs that administer only tenant-based assistance, the
streamlined Annual Plan must include the information required by
Sec. 903.7(a), (b), (c), (d), (e), (f), (k), (l), (o), (p) and (r).

Sec. 903.13  What is a Resident Advisory Board and what is its role in
development of the Annual Plan?

    (a) A Resident Advisory Board refers to a board or boards, as
provided in paragraph (b) of this section, whose membership consists of
individuals who adequately reflect and represent the residents assisted
by the PHA.
    (1) The role of the Resident Advisory Board (or Resident Advisory
Boards) is to assist and make recommendations regarding the development
of the PHA plan, and any significant amendment or modification to the
PHA plan.
    (2) The PHA shall allocate reasonable resources to assure the
effective functioning of Resident Advisory Boards. Reasonable resources
for the Resident Advisory Boards must provide reasonable means for them
to become informed on programs covered by the PHA Plan, to communicate
in writing and by telephone with assisted families and hold meetings
with those families, and to access information regarding covered
programs on the internet, taking into account the size and resources of
the PHA.
    (b) Each PHA must establish one or more Resident Advisory Boards,
as provided in paragraph (b) of this section.
    (1) If a jurisdiction-wide resident council exists that complies
with the tenant participation regulations in part 964 of this title,
the PHA shall appoint the jurisdiction-wide resident council or the
council's representatives as the Resident Advisory Board. If the PHA
makes such appointment, the members of the jurisdiction-wide resident
council or the council's representatives shall be added or another
Resident Advisory Board formed to provide for reasonable representation
of families receiving tenant-based assistance where such representation
is required under paragraph (b)(2) of this section.
    (2) If a jurisdiction-wide resident council does not exist but
resident councils exist that comply with the tenant participation
regulations, the PHA shall appoint such resident councils or their
representatives to serve on one or more Resident Advisory Boards. If
the PHA makes such appointment, the PHA may require that the resident
councils choose a limited number of representatives.
    (3) Where the PHA has a tenant-based assistance program of
significant size (where tenant-based assistance is 20% or more of
assisted households), the PHA shall assure that the Resident Advisory
Board (or Boards) has reasonable representation of families receiving
tenant-based assistance and that a reasonable process is undertaken to
choose this representation.
    (4) Where or to the extent that resident councils that comply with
the tenant participation regulations do not exist, the PHA shall
appoint Resident Advisory Boards or Board members as needed to
adequately reflect and represent the interests of residents of such
developments; provided that the PHA shall provide reasonable notice to
such residents and urge that they form resident councils with the
tenant participation regulations.
    (c) The PHA must consider the recommendations of the Resident
Advisory Board or Boards in preparing the final Annual Plan, and any
significant amendment or modification to the Annual Plan, as provided
in Sec. 903.21 of this title.
    (1) In submitting the final plan to HUD for approval, or any
significant amendment or modification to the plan to HUD for approval,
the PHA must include a copy of the recommendations made by the Resident
Advisory Board or Boards and a description of the manner in which the
PHA addressed these recommendations.
    (2) Notwithstanding the 75-day limitation on HUD review, in
response to a written request from a Resident Advisory Board claiming
that the PHA failed to provide adequate notice and opportunity for
comment, HUD may make a finding of good cause during the required time
period and require the PHA to remedy the failure before final approval
of the plan.

Sec. 903.15  What is the relationship of the public housing agency
plans to the Consolidated Plan?

    (a) The PHA must ensure that the Annual Plan is consistent with any
applicable Consolidated Plan for the jurisdiction in which the PHA is
located. The Consolidated Plan includes a certification that requires
the preparation of an Analysis of Impediments to Fair Housing Choice.
    (1) The PHA must submit a certification by the appropriate State or
local officials that the Annual Plan is consistent with the
Consolidated Plan

[[Page 81229]]

and include a description of the manner in which the applicable plan
contents are consistent with the Consolidated Plans.
    (2) For State agencies that are PHAs, the applicable Consolidated
Plan is the State Consolidated Plan.
    (b) A PHA may request to change its fiscal year to better
coordinate its planning with the planning done under the Consolidated
Plan process, by the State or local officials, as applicable.

Sec. 903.17  What is the process for obtaining public comment on the
plans?

    (a) The PHA's board of directors or similar governing body must
conduct a public hearing to discuss the PHA plan (either the 5-Year
Plan and/or Annual Plan, as applicable) and invite public comment on
the plan(s). The hearing must be conducted at a location that is
convenient to the residents served by the PHA.
    (b) Not later than 45 days before the public hearing is to take
place, the PHA must:
    (1) Make the proposed PHA plan(s), the required attachments and
documents related to the plans, and all information relevant to the
public hearing to be conducted, available for inspection by the public
at the principal office of the PHA during normal business hours; and
    (2) Publish a notice informing the public that the information is
available for review and inspection, and that a public hearing will
take place on the plan, and the date, time and location of the hearing.
    (c) PHAs shall conduct reasonable outreach activities to encourage
broad public participation in the PHA plans.

Sec. 903.19  When is the 5-Year Plan or Annual Plan ready for
submission to HUD?

    A PHA may adopt its 5-Year Plan or its Annual Plan and submit the
plan to HUD for approval only after:
    (a) The PHA has conducted the public hearing;
    (b) The PHA has considered all public comments received on the
plan;
    (c) The PHA has made any changes to the plan, based on comments,
after consultation with the Resident Advisory Board or other resident
organization.

Sec. 903.21  May the PHA amend or modify a plan?

    (a) A PHA, after submitting its 5-Year Plan or Annual Plan to HUD,
may amend or modify any PHA policy, rule, regulation or other aspect of
the plan. If the amendment or modification is a significant amendment
or modification, as defined in Sec. 903.7(r)(2), the PHA:
    (1) May not adopt the amendment or modification until the PHA has
duly called a meeting of its board of directors (or similar governing
body) and the meeting, at which the amendment or modification is
adopted, is open to the public; and
    (2) May not implement the amendment or modification, until
notification of the amendment or modification is provided to HUD and
approved by HUD in accordance with HUD's plan review procedures, as
provided in Sec. 903.23.
    (b) Each significant amendment or modification to a plan submitted
to HUD is subject to the requirements of Secs. 903.13, 903.15, and
903.17.

Sec. 903.23  What is the process by which HUD reviews, approves, or
disapproves an Annual Plan?

    (a) Review of the plan. When the PHA submits its Annual Plan to
HUD, including any significant amendment or modification to the plan,
HUD reviews the plan to determine whether:
    (1) The plan provides all the information that is required to be
included in the plan;
    (2) The plan is consistent with the information and data available
to HUD;
    (3) The plan is consistent with any applicable Consolidated Plan
for the jurisdiction in which the PHA is located; and
    (4) The plan is not prohibited or inconsistent with the 1937 Act or
any other applicable Federal law.
    (b) Disapproval of the plan. (1) HUD may disapprove a PHA plan, in
its entirety or with respect to any part, or disapprove any significant
amendment or modification to the plan, only if HUD determines that the
plan, or one of its components or elements, or any significant
amendment or modification to the plan:
    (i) Does not provide all the information that is required to be
included in the plan;
    (ii) Is not consistent with the information and data available to
HUD;
    (iii) Is not consistent with any applicable Consolidated Plan for
the jurisdiction in which the PHA is located; or
    (iv) Is not consistent with applicable Federal laws and
regulations.
    (2) Not later than 75 days after the date on which the PHA submits
its plan or significant amendment or modification to the plan, HUD will
issue written notice to the PHA if the plan or a significant amendment
or modification has been disapproved. The notice that HUD issues to the
PHA must state with specificity the reasons for the disapproval. HUD
may not state as a reason for disapproval the lack of time to review
the plan.
    (3) If HUD fails to issue the notice of disapproval on or before
the 75th day after the date on which the PHA submits its plan or
significant amendment or modification to the plan, HUD shall be
considered to have determined that all elements or components of the
plan required to be submitted and that were submitted, and to be
reviewed by HUD were in compliance with applicable requirements and the
plan has been approved.
    (4) The provisions of paragraph (b)(3) of this section do not apply
to troubled PHAs. The plan of a troubled PHA must be approved or
disapproved by HUD through written notice.
    (c) Designation of due date as submission date for first plan
submissions. For purposes of the 75-day period described in paragraph
(b) of this section, the first 5-year and Annual Plans submitted by a
PHA will be considered to have been submitted no earlier than the due
date as provided in Sec. 903.5.
    (d) Public availability of the approved plan. Once a PHA's plan has
been approved, a PHA must make the approved plan and the required
attachments and documents related to the plan, available for review and
inspection, at the principal office of the PHA during normal business
hours.

Sec. 903.25  How does HUD ensure PHA compliance with its plan?

    A PHA must comply with the rules, standards and policies
established in the plans. To ensure that a PHA is in compliance with
all policies, rules, and standards adopted in the plan approved by HUD,
HUD shall, as it deems appropriate, respond to any complaint concerning
PHA noncompliance with its plan. If HUD should determine that a PHA is
not in compliance with its plan, HUD will take whatever action it deems
necessary and appropriate.

    Dated: December 14, 2000.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 00-32550 Filed 12-21-00; 8:45 am]
BILLING CODE 4210-33-P
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