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Public Housing Total Development Cost
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[Federal Register: January 4, 2001 (Volume 66, Number 3)]
[Proposed Rules]
[Page 1007-1011]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ja01-24]
[[Page 1007]]
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Part V
Department of Housing and Urban Development
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24 CFR Part 941
Public Housing Total Development Cost; Proposed Rule
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 941
[Docket No. FR-4489-P-01]
RIN 2577-AC05
Public Housing Total Development Cost
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend HUD's regulations governing
Total Development Cost (TDC) for the development of public housing. The
amendments would implement statutory changes made to the statutory TDC
requirements. Among other changes, this proposed rule would limit the
amount of public housing funds that a public housing agency may use to
pay for housing construction costs. The rule would also provide that
demolition and environmental hazard remediation costs are included in
TDC only to the extent that such costs are associated with the
replacement of public housing units on the project site.
DATES: Comments Due Date: March 5, 2001.
ADDRESSES: Interested persons are invited to submit written comments
regarding this proposed rule to the Rules Docket Clerk, Office of
General Counsel, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410. Comments
should refer to the above docket number and title. A copy of each
comment submitted will be available for public inspection and copying
between 7:30 a.m. and 5:30 p.m. weekdays at the above address.
Facsimile (FAX) comments will not be accepted.
FOR FURTHER INFORMATION CONTACT: William Flood, Office of Public and
Indian Housing, Room 4134, U.S. Department of Housing and Urban
Development, 451 Seventh St., SW., Washington, DC 20410; telephone
(202) 708-1640 (this is not a toll-free telephone number). Hearing or
speech-impaired individuals may access this number via TTY by calling
the toll-free Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Statutory Background
The United States Housing Act (42 U.S.C. 1437 et seq.) (the 1937
Act) establishes the statutory framework for HUD's public and assisted
housing programs. The 1937 Act authorizes HUD to assist public housing
agencies (PHAs) with the development and operation of public housing
projects, and sets forth several requirements regarding public housing
development. Two such statutory requirements regarding the development
of public housing are found in sections 3(c)(1) and 6(b) of the 1937
Act.
Section 3(c)(1) of the 1937 Act (42 U.S.C. 1437a(c)(1)) defines the
terms ``development'' and ``development cost.'' Specifically, section
3(c)(1) defines development to mean ``any and all undertakings
necessary for planning, land acquisition, demolition, construction, or
equipment, in connection with a'' public housing project. Further,
section 3(c)(1) specifies that development cost ``comprises the costs
incurred by a [PHA] in such undertakings and their necessary financing
(including the payment of carrying charges), and in otherwise carrying
out the development of'' the public housing project.
Section 6(b)(1) of the 1937 Act (42 U.S.C. 1437d(b)(1)) limits the
amount of public housing funds provided by HUD that a PHA may use to
pay for the costs of developing a public housing project, unless HUD
provides otherwise. (For purposes of this preamble, the term ``public
housing funds'' includes public housing Capital Funds, public housing
development funds, modernization funds converted to development
purposes, and HOPE VI program funds.)
Section 6(b)(2) of the 1937 Act (42 U.S.C. 1437d(b)(2)) directs HUD
to determine total development cost by multiplying the ``construction
cost guideline'' for the project ``by averaging the current
construction costs, as listed in not less than two nationally
recognized residential construction cost indices, for publicly bid
construction of a good and sound quality.'' The construction cost
guideline is then multiplied by 1.6 for elevator type structures and by
1.75 for non-elevator construction. The statutory total development
cost (TDC) limit is calculated by adding the resulting amounts for all
units in the public housing project.
II. Public Housing Reform
On October 21, 1998, President Clinton signed into law HUD's fiscal
year (FY) 1999 Appropriations Act, which includes the Quality Housing
and Work Responsibility Act of 1998 (title V of the FY 1999 HUD
Appropriations Act; Public Law 105-276; 112 Stat. 2461) (referred to in
this preamble as the ``Public Housing Reform Act''). The Public Housing
Reform Act constitutes a substantial overhaul of HUD's public housing
and Section 8 assistance programs. The Public Housing Reform Act enacts
into law many of the reforms originally proposed in Secretary Andrew
Cuomo's HUD 2020 Management Reform Plan, HUD's public housing bill and
Congressional bills that are directed at revitalizing and improving
HUD's public housing and Section 8 tenant-based programs.
Section 520 of the Public Housing Reform Act (entitled ``Total
Development Costs'') makes three revisions to the public housing
development requirements set forth in the 1937 Act. First, section
520(a) amends the statutory definition of ``development cost'' to
specify that such cost ``does not include the costs associated with
demolition of or remediation of environmental hazards associated with
public housing units that will not be replaced on the project site, or
other extraordinary site costs as determined by the Secretary'' of HUD.
Section 520(b) of the Public Housing Reform Act amends section 6(b)
of the 1937 Act to provide that the statutory TDC limit applies only to
public housing funds provided by HUD for use in the development of
public housing, and does not apply to other funding--such as funding
under the HOME Investment Partnerships Program or funding under the
Community Development Block Grants (CDBG) Program.
Section 520(b) also provides that HUD may limit the amount of
public housing funds that a PHA may use to pay for housing construction
costs, including ``the actual hard costs for the construction of units,
builder's overhead and profit, utilities from the street, and finish
landscaping.''
III. This Proposed Rule
HUD's regulations implementing the public housing development
requirements of the 1937 Act are located at 24 CFR part 941. This
proposed rule would update part 941 and incorporate the statutory
amendments made by section 520 of the Public Housing Reform Act. The
following summarizes the major amendments that would be made to part
941 by this proposed rule:
A. Amendments to the Definition of TDC (Sec. 941.103)
1. TDC sub-allocations. In order to better understand and control
the actual costs involved in the development of a project, the proposed
rule would amend the definition of TDC in Sec. 941.103 to provide that
the maximum TDC allocation consists of two sub-
[[Page 1009]]
allocations: housing construction costs and community renewal costs.
This will enable HUD to identify the actual costs associated with the
different aspects of the whole development program.
Housing construction costs are the costs allocated to construct the
dwelling units. The proposed rule would define the TDC housing
construction sub-allocation to include costs attributable to:
Dwelling unit hard costs (including construction and
equipment);
Builder's overhead and profit;
On site streets and utilities from the street;
Finish landscaping; and
Davis-Bacon wage rates, as applicable.
Community renewal costs are the balance of the development costs
remaining within the TDC limit after the housing construction cost
allocation is subtracted from the TDC limit. Community renewal costs
include the costs allocated to renewal of the community, as well as
certain other costs associated with the development of the public
housing project. The proposed rule would define the community renewal
sub-allocation to include costs attributable to:
Planning (including proposal preparation);
Administration;
Site acquisition;
Relocation;
Demolition and site remediation of environmental hazards
associated with public housing units that will be replaced on the
project site;
Interest and carrying charges;
Off-site facilities;
Community buildings and other HUD-approved non-dwelling
facilities;
A contingency allowance;
Insurance premiums; and
Any initial operating deficit.
2. Demolition and site remediation costs. The proposed rule would
revise the definition of TDC to provide that demolition and site
remediation costs are included in TDC only to the extent that such
costs are associated with the development of public housing units on
the project site.
3. Extraordinary site costs. In accordance with section 520 of the
Public Housing Reform Act, the proposed rule would also specify that
extraordinary site costs as approved by HUD are not included in TDC.
The proposed rule provides that extraordinary site costs may include,
but are not limited to: (1) removal or replacement of extensive
underground utility systems; (2) extensive rock and/or soil removal and
replacement; (3) construction of extensive street and other public
improvements; and (4) dealing with unusual site conditions such as
slopes, terraces, water catchments, and lakes. The proposed rule would
require that extraordinary site costs be verified by an independent
certified engineer and approved by HUD.
4. TDC limit for purposes of the Annual Contributions Contract.
Currently, the definition of TDC in Sec. 941.103 contains the following
provision:
The total development cost in the proposal, when reviewed and
approved by HUD, becomes the maximum total development cost stated
in the ACC. Upon completion of the project, the actual development
cost is determined, and this becomes the maximum total development
cost of the project for purposes of the ACC.
For purposes of clarity, this proposed rule would relocate this
provision to Sec. 941.306, which sets forth the maximum development
cost requirements for public housing development.
B. Amendments to Maximum Development Cost Requirements (Sec. 941.306)
The proposed rule would entirely revise Sec. 941.306, which
establishes the maximum development cost requirements. The following
summarizes the major changes that would be made to Sec. 941.306 by this
proposed rule:
1. Exceptions to TDC limit. Section 6(b) of the 1937 Act permits
the Secretary of HUD to approve development costs higher than the TDC
for a public housing project. Section 941.306(a) describes the
conditions under which the Secretary would approve an exception to the
TDC. HUD has recently undertaken an intensive process of analysis and
consultation to establish appropriate cost limits and, therefore, does
not foresee circumstances under which an exception would be warranted.
Accordingly, this proposed rule would remove the regulatory language
regarding exceptions to the TDC limits.
2. Elaboration of TDC calculation procedures. Currently,
Sec. 941.306(b) provides that ``HUD will determine the maximum * * *
TDC in accordance with section 6 of the'' 1937 Act. For the convenience
of readers, this proposed rule would revise Sec. 941.306(b) to provide
greater detail regarding the procedures used by HUD in determining the
TDC for a public housing project.
In Senate colloquy before passage of the Public Housing Reform Act,
Senator Mack noted that HUD ``should interpret [section 6(b)(2) of the
1937 Act] as requiring the use of indices such as the R.S. Means cost
index for construction of `average' quality and the Marshal & Swift
cost index for construction of `good' quality'' (Congressional Record
of October 8, 1998, S. 11840). Accordingly, the proposed rule would
also specify that HUD will be using these two indices to calculate TDC.
HUD has the discretion to change the cost indices to other such indices
which reflect comparable housing construction quality.
3. Limit on housing construction costs. In accordance with section
520 of the Public Housing Reform Act, HUD has decided to limit the
amount of public housing funds that a PHA may use to pay for housing
construction costs.
HUD will determine the limit on housing construction costs by
averaging the housing construction costs listed in at least two
nationally recognized residential housing construction cost indices for
specific bedroom sizes and structure types. This formula is the same as
that used in determining the project TDC, with the exception that the
multipliers (for elevator type structures and non-elevator type
structures) are not applied to the average of the two construction
indices. HUD will use the R.S. Means cost index for construction of
``average'' quality and the Marshall & Swift cost index for
construction of ``good'' quality to calculate the limit on housing
construction costs (HUD has the discretion to change the cost indices
to other such indices which reflect comparable housing construction
quality). The balance of the public housing funds provided by HUD for
the development of the project (up to the maximum TDC allocation) may
be used to pay for community renewal costs.
4. TDC applicability to public housing funds. The proposed rule
clarifies that the TDC limit applies only to costs paid from public
housing funds provided by HUD to a PHA for use in the development of
public housing. As provided in section 520 of the Public Housing Reform
Act, the TDC limit does not apply to other funding provided by HUD to a
PHA. A PHA may use funding sources not subject to the maximum TDC
limitation (such as CDBG funds, HOME funds, low-income tax credits,
private donations, and private financing) to cover project costs that
exceed the housing cost cap or the maximum TDC amount.
IV. Findings and Certifications
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
[[Page 1010]]
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 an economically significant
regulatory action under the Order). Any changes made to this rule as a
result of that review are identified in the docket file, which is
available for public inspection in the office of the Department's Rules
Docket Clerk, Room 10276, 451 Seventh Street, SW., Washington, DC
20410-0500.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4223). The Finding is available for public inspection
between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules
Docket Clerk, Office of General Counsel, Room 10276, Department of
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC.
Federalism Impact
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on State and local
governments and is not required by statute, or the rule preempts State
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This proposed rule would 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.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) (the RFA), has reviewed and approved this proposed rule
and in so doing certifies that this rule will not have a significant
economic impact on a substantial number of small entities. The reasons
for HUD's determination are as follows:
(1) A Substantial Number of Small Entities Will Not Be Affected.
The proposed rule is exclusively concerned with public housing agencies
that receive capital assistance provided by HUD for the development of
public housing. The proposed rule would update HUD's public housing
development regulations at 24 CFR part 941 to incorporate the statutory
amendments made by section 520 of the Public Housing Reform Act. Under
the definition of ``Small governmental jurisdiction'' in section 601(5)
of the RFA, the provisions of the RFA are applicable only to those few
public housing agencies that are part of a political jurisdiction with
a population of under 50,000 persons. The number of entities
potentially affected by this rule is therefore not substantial.
(2) No Significant Economic Impact. The proposed regulatory
amendments will not change the amount of capital funding available to
public housing agencies for the development of public housing.
Accordingly, the economic impact of this rule will not be significant,
and it will not affect a substantial number of small entities.
Notwithstanding HUD's determination that this rule will not have a
significant economic effect on a substantial number of small entities,
HUD specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This proposed rule does not impose
any Federal mandates on any State, local, or tribal governments or the
private sector within the meaning of Unfunded Mandates Reform Act of
1995.
List of Subjects in 24 CFR Part 941
Grant programs--housing and community development, Loan programs--
housing and community development, Public housing, Reporting and
recordkeeping requirements.
For the reasons stated in the preamble, HUD proposes to amend 24
CFR part 941 as follows:
PART 941--PUBLIC HOUSING DEVELOPMENT
1. The authority citation for 24 CFR part 941 continues to read as
follows:
Authority: 42 U.S.C. 1437b, 1437c, 1437g, and 3535(d).
2. Revise Sec. 941.102(b)(3) to read as follows:
Sec. 941.102 Development methods and funding.
* * * * *
(b) * * *
(3) Funds available to it from any other source, consistent with
Sec. 941.306(e), or as may be otherwise approved by HUD.
* * * * *
3. In Sec. 941.103 revise the definition of ``Total development
cost (TDC)'' to read as follows:
Sec. 941.103 Definitions.
* * * * *
Total Development Cost (TDC). (1) The sum of all HUD-approved:
(i) Housing construction costs (as defined in paragraph (2) of this
definition); and
(ii) Community renewal costs (as defined in paragraph (3) of this
definition).
(2) Housing construction costs are the development costs
attributable to:
(i) The dwelling unit hard costs (including construction and
equipment);
(ii) Builder's overhead and profit;
(iii) On-site streets and utilities from the street;
(iv) Finish landscaping;
(v) Davis-Bacon wage rates, as applicable.
(3) Community renewal costs are the development costs attributable
to:
(i) Planning (including proposal preparation);
(ii) Administration;
(iii) Site acquisition;
(iv) Relocation;
(v) Demolition and site remediation of environmental hazards
associated with public housing units that will be replaced on the
project site;
(vi) Interest and carrying charges;
(vii) Off-site facilities;
(viii) Community buildings and non-dwelling facilities;
(ix) A contingency allowance;
(x) Insurance premiums; and
(xi) Any initial operating deficit.
(4) TDC does not include extraordinary site costs, or demolition or
environmental remediation costs associated with public housing units
that will not be replaced on the site. Extraordinary site costs must be
verified by an independent certified engineer and approved by HUD.
Examples of extraordinary site costs include, but are not limited to:
(i) Removal or replacement of extensive underground utility
systems;
(ii) Extensive rock and/or soil removal and replacement;
(iii) Construction of extensive street and other public
improvements; and
(iv) Dealing with unusual site conditions such as slopes, terraces,
water catchments, lakes, etc.
* * * * *
4. Revise Sec. 941.306 to read as follows:
Sec. 941.306 Maximum development cost.
(a) Limit on approved HUD funds to TDC. (1) No funds provided by
HUD
[[Page 1011]]
under the Act or the HOPE VI program may be used to pay development
costs in excess of the TDC.
(2) The total development cost in the proposal, when reviewed and
approved by HUD, becomes the maximum TDC stated in the ACC. Upon
completion of the project, the actual development cost is determined,
and this becomes the maximum TDC of the project for purposes of the
ACC.
(b) Determination of maximum TDC. HUD will determine the maximum
TDC for a public housing project as follows:
(1) Step 1: Unit construction cost guideline. HUD will first
determine the ``construction cost guideline'' for the project by
averaging the current construction costs as listed in two nationally
recognized residential construction cost indices for publicly bid
construction of a good and sound quality for specific bedroom sizes and
structure types. The two indices HUD will use for this purpose are the
R.S. Means cost index for construction of ``average'' quality and the
Marshal & Swift cost index for construction of ``good'' quality. HUD
has the discretion to change the cost indices to other such indices
which reflect comparable housing construction quality.
(2) Step 2: Bedroom size and structure types. The construction cost
guideline is then multiplied by the number of units for each bedroom
size and structure type.
(3) Step 3: Elevator and non-elevator type structures. HUD will
then multiply the resulting amounts from step 2 by 1.6 for elevator
type structures and by 1.75 for non-elevator type structures.
(4) Step 4: Maximum TDC. The maximum TDC for a project is
calculated by adding the resulting amounts from step 3 for all units in
the project.
(c) Limit on housing construction costs. (1) General. As described
in the definition of TDC in Sec. 941.103, the maximum TDC allocation is
composed of two sub-allocations: housing construction costs and
community renewal costs. A PHA may not use funds provided by HUD under
the Act to pay housing construction costs in excess of the ``housing
cost cap'' established by HUD.
(2) Determination of housing cost cap. HUD will determine the
housing cost cap by averaging the housing construction costs listed in
at least two nationally recognized residential housing construction
cost indices for specific bedroom sizes and structure types. The two
indices HUD will use for this purpose are the R.S. Means cost index for
construction of ``average'' quality and the Marshal & Swift cost index
for construction of ``good'' quality. HUD has the discretion to change
the cost indices to other such indices which reflect comparable housing
construction quality.
(3) Balance of TDC allocation. The balance of the funds provided by
HUD under the Act for the development of the project (up to the maximum
TDC allocation) may be used to pay for community renewal costs.
(d) Funds not subject to TDC limit. (1) As noted in paragraph (a)
of this section, the maximum TDC limit applies only to funds provided
by HUD under the Act or the HOPE VI program to a PHA and used for the
development of public housing.
(2) A PHA may use funding sources not subject to the maximum TDC
limitation (such as CDBG funds, HOME funds, low-income tax credits,
private donations, and private financing) to cover project costs that
exceed the housing cost cap or the maximum TDC amount. The added
funding, however, may not be used for items that would result in
substantially increased operating, maintenance or replacement costs,
and must meet the requirements of section 102 of the HUD Reform Act (42
U.S.C. 3545).
(3) Although certain funding sources are not subject to the TDC
limitations or housing cost cap described in paragraphs (a) and (c) of
this section, these funds must be included in the project development
cost budget, and legally acceptable written commitments for such funds
must be provided by the PHA for HUD approval.
Dated: December 8, 2000.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 01-212 Filed 1-3-01; 8:45 am]
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