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Public Housing Agency Plans: Deconcentration--Amendments to ``Established Income Range'' Definition
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[Federal Register: August 6, 2002 (Volume 67, Number 151)]
[Rules and Regulations]
[Page 51029-51033]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06au02-25]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 903
[Docket No. FR-4677-F-02]
RIN 2577-AC31
Public Housing Agency Plans: Deconcentration--Amendments to
``Established Income Range'' Definition
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends the deconcentration component of HUD's
Public Housing Agency (PHA) Plans regulations and revises the
definition of Established Income Range (EIR) to include within the EIR
those developments in which the average income level is at or below 30
percent of the area median income, and therefore ensure that such
developments cannot be categorized as having average income ``above''
the EIR. An income level that is at or below 30 percent of the area
median income is defined as ``extremely low income'' in HUD's
regulations. HUD believes that developments with an average family
income at or below 30 percent of the area median income should not be
categorized as higher income developments for purposes of income mixing
because efforts to place lower income families into these developments
would not result in income deconcentration as contemplated by the
statute. This rule follows publication of an August 15, 2001, proposed
rule, takes into consideration public comment received on the proposed
rule, and slightly revises the proposed rule for clarity.
DATES: Effective Date: September 5, 2002.
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
On December 22, 2000 (65 FR 81214), HUD amended the deconcentration
provisions of its Public Housing Agency (PHA) Plan regulations 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 December 22, 2000,
final rule was preceded by an April 17, 2000, proposed rule, and took
into consideration public comment received on the proposed rule. By a
final rule published on February 5, 2001 (66 FR 8897), HUD amended the
December 22, 2000, final rule to provide that the first PHA fiscal year
that is covered by the new deconcentration requirements of the December
2000 final rule is the PHA fiscal year that begins October 1, 2001.
(The December 22, 2000, final rule provided that the first PHA fiscal
year that is covered by the new deconcentration requirements is the PHA
fiscal year that begins July 1, 2001.)
Following issuance of the December 22, 2000, final rule, HUD
received additional feedback from PHAs. PHAs advised HUD that in
determining Established Income Range (EIR) for certain developments, in
accordance with the procedures of the rule, the EIR for these
developments is sufficiently low that some developments for which the
average income is at or below 30 percent of the area median income,
actually fall above the EIR. Developments that fall above the EIR are
categorized as ``higher income developments'' and, in accordance with
the deconcentration requirements, PHAs must undertake efforts to place
lower income families into higher income developments. HUD regulations
issued in December 2000 defined an income level that is at or below 30
percent of the area median income as ``extremely low income'' (24 CFR
5.603(b)). HUD agreed with PHA concerns that in all practicality
deconcentration would not be fostered through efforts to place lower
income families in developments categorized as higher income in which
the average family income is in fact at the extremely low-income level.
While HUD's regulations issued on December 22, 2000, allowed a PHA
to seek an exemption from income mixing by explaining why, in a given
case, efforts to income mix would not effectively promote income
deconcentration, HUD believed that this situation was widespread enough
to merit a change in the regulation rather than PHAs and HUD having to
treat developments in which the average family income is extremely low
income on a case-by-case basis. On August 15, 2001 (66 FR 42926), HUD
therefore published a proposed rule that would amend the
deconcentration component of HUD's PHA Plans regulations to revise the
definition of EIR to include within the EIR those developments in which
the average income level is at or below 30 percent of the area median
income.
II. This Final Rule
This final rule follows the August 15, 2001 proposed rule and is
issued to help ensure that developments in which the average income
level is at or below 30 percent of the median income cannot be
categorized as having average income ``above'' the EIR. This final rule
takes into consideration the public comments received on the proposed
rule and slightly revises the proposed rule for clarity.
III. Public Comments Generally
The public comment period for the proposed rule closed on October
15, 2001. HUD received ten comments. Seven of the comments received
were from PHAs; the remaining three comments were from legal service
organizations. Most of the commenters expressed their support for HUD's
proposed amendment to the deconcentration rule. However, most of the
commenters also expressed that, while they supported HUD's efforts to
revise the definition of EIR, they did not support the overall rule to
deconcentrate. Several commenters in support of HUD's deconcentration
efforts wrote that developments with average annual income at or below
30 percent of the area median income should not be categorized as
``higher income'' developments. Another commenter wrote that it is
impractical to place ``higher income'' families in lower income
developments as a mechanism to raise the average household income in
these developments. All ten commenters offered suggestions to clarify
and strengthen the deconcentration policy to better serve the housing
community.
HUD also sought comments from PHAs on the requirements of the
December 22, 2000, final rule for placing ``higher income families''
into ``lower income developments''. No changes were being proposed to
those requirements in this rule. In requesting comments on this issue,
however, HUD recognized that the success of income mixing actions may
depend on marketability of a development and therefore may be beyond
the PHA's control, at least to a certain extent; and that PHA efforts
to achieve deconcentration by supporting resident self-sufficiency
efforts as well as
[[Page 51031]]
necessary admissions efforts should be encouraged. HUD was therefore
interested in PHA comments and feedback on the suitability of the
December 22, 2000, final rule in this regard. In particular, HUD
requested comments on whether the current rule's provisions that allow
for explanations and justifications (and require corrective actions in
the event HUD determines the explanations are not adequate) are
sufficiently flexible to take into account these concerns. The
following section of the preamble presents a summary of the significant
issues raised by the public commenters on the August 15, 2001, proposed
rule and HUD's responses to these comments.
IV. Discussion of Public Comments Received on the August 15, 2001,
Proposed Rule
Comment: In the August 15 proposed rule HUD proposes to exclude
from the requirement public housing developments with average incomes
below 30 percent of area median income. The commenter wrote that should
the amendment be adopted, every public housing development in its State
would be exempt and there would be no need for the rule. The commenter
noted further that should the amendment be adopted, such a result,
could not have been anticipated by Congress.
HUD Response: According to HUD data about 82 percent of public
housing family developments have average incomes below 30 percent of
the area median income and 18 percent of public housing family
developments have average incomes above 30 percent of the area median
income. HUD believes that developments with an average family income at
or below 30 percent of the area median income should not be categorized
as higher income developments for purposes of income mixing because
efforts to place lower income families into these developments would
not result in income deconcentration as contemplated by the statute.
Also, the deconcentration and income mixing policy should address only
extensive income disparities among developments within a PHA.
Comment: HUD should consider changing ``the 30 percent of median''
criteria to ``30 percent of the national median income'' or, 30 percent
of area median, whichever is higher. The commenter wrote that pursuant
to HUD Notice PDR-2001-03 (April 6, 2001), the national median income
is $52,500. Thirty percent of that amount is $15,750. The commenter
noted that $15,750 is no more high-income than 30 percent of the
median-income ($11,040) in their jurisdiction, and it is illogical to
put lower income people into a $15,750 development to bring down the
average as it is to put them into an $11,040 average development to
bring down that average.
HUD Response: It is appropriate for HUD to take into account local
market conditions when calculating median incomes. This method is used
for public housing as well as HUD's other assisted housing programs
when calculating median incomes.
Comment: HUD should abandon the deconcentration proposal in order
to avoid harming low-income families in high-income states. One
commenter wrote that in a state that has a much higher cost of living
than most other wealthy states, low-income families with incomes that
may be much higher than incomes elsewhere may be in greater distress.
The commenter further noted that these families should not be deprived
of the opportunity to reside in better and newer housing in less
impacted neighborhoods.
HUD Response: As mentioned above, HUD's method for calculating
median incomes takes into account local market conditions and makes
adjustments for unusually high housing costs to income relationships.
Also, nothing in this rule excludes low-income families from residing
in better or newer housing. Admission policies, including preferences,
are established at the local level.
Comment: HUD has failed to justify the need for the rule. One
commenter wrote that HUD's deconcentration policy remains seriously
flawed, and that the rule is unnecessary. The commenter noted further
that their own statistical analysis indicates that there are very few
developments that would fall outside the EIR and have residents with
incomes above 30 percent of area median income. Additionally, the
commenter wrote that HUD's deconcentration policy is administratively
burdensome, and will require PHAs to do unnecessary income analysis of
their developments.
HUD Response: As already discussed, HUD data indicate about 82
percent of public housing family developments have average incomes
below 30 percent of the area median income and 18 percent of public
housing family developments have average incomes above 30 percent of
the area median income. This rule will simplify administrative
requirements and not require a PHA to seek an exemption when the EIR
for certain developments is sufficiently low that some developments for
which the average income is at or below 30 percent of the area median
income, actually fall above the EIR.
Comment: The policy requires an admissions-based solution if even
one development in a portfolio is outside the parameters set by HUD.
One commenter wrote that key management and policy decisions should be
made through a local planning process that is responsive to local
conditions, and not be mandated by the Federal government. The
commenter noted further that he opposes the Federal requirement that
the PHAs must ``deconcentrate'' through their admissions policies.
Additionally, the commenter noted that the more important goal should
be improving the economic conditions of all residents, rather than
focusing on choosing families for a development based solely on their
income.
HUD Response: Achieving deconcentration through admission policies
is a statutory requirement. However, the final deconcentration rule
published on December 22, 2000, does permit agencies to explain or
justify cases where developments fall outside the EIR. HUD agrees that
improving the economic conditions of all residents is an important
goal.
Comment: HUD should amend the deconcentration rule to allow PHAs to
adjust for unit/family size in a more refined method than required by
the final rule. The commenter wrote that HUD's established method of
adjustment is imprecise. The commenter noted further that PHAs should
have the option of utilizing a range of methodologically valid
techniques to make these adjustments instead of the prescribed method
currently allowed by HUD.
HUD Response: This rule amends the definition of EIR but does not
make changes to the broader deconcentration policy as described by the
comment. However, the final deconcentration rule published on December
22, 2000, permits an agency to use median income instead of average
income and to adjust its income analysis for unit size. This approach
strikes a balance and provides agencies flexibility to perform their
analysis, but at the same time makes administration and monitoring for
HUD manageable.
Comment: True income mixing in public housing requires marketable
units and adequate service levels. The commenter wrote that marketing
to higher income families would be extremely difficult given the
current poor condition of some public housing stock due to under
funding of both the capital and operating costs. The commenter noted
further that according
[[Page 51032]]
to HUD's own data, PHA operating subsidies have been under funded in
the amount of almost $1.2 billion from fiscal year 1993 to fiscal year
2001.
HUD Response: This rule amends the definition of the EIR but does
not make changes to the broader deconcentration policy as described by
the comment. However, the final deconcentration rule published on
December 22, 2000, does permit agencies to explain or justify cases
where developments fall outside the EIR.
Comment: Increasing incomes in public housing will require more
than administrative remedies. The commenter wrote that an admissions-
based policy alone would never have the salutary effect of creating
more viable, functional communities. The commenter suggested that this
goal would be better served by strategies that aim not only to bring
new, higher income residents into public housing, but that have the
primary purpose to increase the incomes of existing public housing
families.
HUD Response: HUD agrees that it is important to increase the
incomes of existing residents. HUD has a strong commitment to providing
employment opportunities, training, and supportive services to help
low-income persons become self-sufficient. HUD has aggressively
implemented laws to further many self-sufficiency efforts, for example
by providing a model cooperation agreement for economic self-
sufficiency between PHAs and Temporary Assistance to Needy Families
(TANF) agencies. HUD plans additional initiatives to strengthen self-
sufficiency efforts in the near future.
Comment: The rule should be modified to allow for certain family
developments to always be treated as higher income. The commenter wrote
that small developments in non-poverty areas, HOPE VI, mixed income,
mixed finance and any development built after October 1998, the date
Congress enacted the deconcentration policy, should always be treated
as higher income. The commenter wrote that alternatively, if HUD
decides to adopt the proposed 30 percent of the Area Median Income
(AMI) rule, it should create an exception to that rule and not permit
PHAs to exclude small developments in non-poverty areas, HOPE VI, mixed
income, mixed finance, and any development built after October 1998,
the date Congress enacted the deconcentration policy. The commenter
noted further that these developments might be excluded if the 30
percent rule was applied uniformly.
HUD Response: HUD is not changing the rule to always treat certain
developments as higher income. This would unnecessarily complicate the
rule. Further, an income level that is at or below 30 percent of the
area median income is defined as ``extremely low-income'' in HUD's
regulations and is a low enough standard as a national policy. Nothing
in this rule excludes extremely low-income families from residing in
HOPE VI, mixed income, small, or scattered site developments of a PHA.
The income mix of such developments may be addressed locally, including
through local admissions preferences.
Comment: With respect to high-income Metropolitan Statistical Areas
(MSAs), the rule should not apply. One commenter wrote that it is
misleading to use 30 percent of the MSA median income of high-income
MSAs, when there are great income disparities within the MSA as a
result of affluent suburban areas or wealthy urban pockets. The
commenter further noted that even in MSAs that are not high-income, it
would be far more appropriate to use the median income figure for the
area over which the PHA units are located (usually the central city) if
there is to be any exclusion from the current rule at all. Additionally
the commenter noted that it is inconceivable to use income figures
based on areas in which the PHA has no units, when there is no way the
deconcentration rule would result in any housing being offered in those
areas.
HUD Response: As discussed in an earlier response, all HUD assisted
housing programs use the same method to calculate income limits. HUD
will not deviate from this approach and thus complicate the rule. PHAs
may address the types of concerns raised by the comments through means
such as local admissions preferences.
Comment: Scattered site developments should be excluded from the
exemption. The commenter wrote that such developments should be
excluded or at least subjected to closer scrutiny, perhaps by basing
the analysis on the median income of the census tract in which the
units are located.
HUD Response: As discussed in an earlier response, all HUD assisted
housing programs use the same method to calculate income limits and HUD
will not deviate from this approach. Also, local admissions preferences
can address such situations.
Comment: The wording of the proposed rule is not entirely clear.
The commenter wrote that the rule would be easier to understand if it
read as follows: ``The EIR is from 85 percent to 115 percent
(inclusive) of the average family income (the PHA-wide average income
for covered developments as defined in Step 1), except that the upper
limit shall never be less than the extremely low-income threshold (30
percent of median income) for the jurisdiction.''
HUD Response: HUD has accepted the suggestion and agreed to change
part of the regulatory language. However, the rule will continue to
reference the definition of extremely low-income family under 24 CFR
5.603(b) since the complete definition is too lengthy to repeat and the
definition cite is referenced so that any future changes to the
definition are made in one place only. The revised language at
Sec. 903.2(c)(1)(iii) Step 3 reads as follows: ``A PHA shall determine
whether each of its covered developments falls above, within or below
the EIR. The EIR is from 85 percent to 115 percent (inclusive) of the
average family income (the PHA-wide average income for covered
developments as defined in Step 1), except that the upper limit shall
never be less than the income at which a family would be defined as an
extremely low-income family under 24 CFR 5.603(b).''
Comment: HUD's resident database does not facilitate accurate
analysis of poverty concentrations, so PHAs have to spend more time
doing their own data analysis. The commenter wrote that HUD should
suspend the ``decon- centration of poverty'' rule until the Multifamily
Tenant Characteristics System (MTCS) or the Public Housing Information
Center can provide accurate information on average tenant incomes for
each family development. For example, the PHA has a 153-unit hi-rise
for elderly and disabled residents in the same development (same HUD
project number) as a 298-unit family townhouse development. The MTCS
standard reports blend all of the resident data together, so a PHA
cannot isolate the family development data needed to analyze
``concentration of poverty.''
HUD Response: The MTCS has a field that identifies the HUD project
number of the development in which the resident lives. A public housing
development includes units or buildings with the same project number.
Typically developments with more than one building house similar types
of residents, such as elderly or disabled persons or families, in each
building. In the case described, where one project number includes an
elderly and disabled resident hi-rise and a family townhouse
development, this is considered a single development for purposes of
deconcentration. If such a development falls outside the EIR, the final
deconcentration rule published on December 22, 2000, permits an agency
[[Page 51033]]
to explain or justify the circumstances of how this development meets
the goals of deconcentration and income mixing.
Comment: As amended, the deconcentration rule imposes new
administrative burdens on PHAs and further complicates the already
difficult task of running public housing, thereby driving up
administrative costs. The commenter wrote that applicants and advocates
are likely to be confused by a system of ``higher income'' and ``lower
income'' buildings and developments, resulting in more complaints, more
staff time devoted to explaining the system, more customer
dissatisfaction, and more fair housing complaints.
HUD Response: This rule, which revises the definition of EIR to
include within the EIR those developments in which the average income
level is at or below 30 percent of the area median income, and
therefore ensure that such developments cannot be categorized as having
average income ``above'' the EIR, will simplify deconcentration
requirements for many PHAs that will no longer have to explain or
justify why they need not undertake documentation measures for some of
their developments.
V. Findings and Certifications
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this final 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 the
deconcentration component of HUD's PHA Plans regulations and revises
the definition of EIR to ensure that included within that range are
developments in which the average income level is at or below 30
percent of the area median income and therefore such developments
cannot be categorized as having average income ``above'' the EIR. This
rule does not impose a burden on small entities. This rule alleviates
an administrative burden on PHAs that have developments in which the
average income is extremely low-income.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on State and local
governments and is not required by statute, or the rule preempts State
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This final rule does not have
federalism implications and does not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the Executive Order.
Environmental Impact
This issuance involves a discretionary establishment of external
administrative or fiscal requirements or procedures related to rate or
cost determinations that do not constitute a development decision
affecting the physical condition of specific project areas or building
sites. Accordingly, under 24 CFR 50.19(c)(6), this final rule is
categorically excluded from environmental review under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321).
Regulatory Planning and 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 this
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 amends part 903 of
title 24 of the Code of Federal Regulations as follows:
PART 903--PUBLIC HOUSING AGENCY PLANS
1. The authority for 24 CFR part 903 continues to read as follows:
Authority: 42 U.S.C. 1437c; 42 U.S.C. 3535(d).
2. In Sec. 903.2, paragraph (c)(1)(iii) is revised to read as
follows:
Sec. 903.2 With respect to admissions, what must a PHA do to
deconcentrate poverty in its developments and comply with fair housing
requirements?
* * * * * *
(c) * * *
(1) * * *
(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 from 85 to 115 percent (inclusive) of
the average family income (the PHA-wide average income for covered
developments as defined in Step 1), except that the upper limit shall
never be less than the income at which a family would be defined as an
extremely low income family under 24 CFR 5.603(b).
* * * * *
Dated: July 9, 2002.
Michael Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 02-19751 Filed 8-5-02; 8:45 am]
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