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Deregulation for Small Public Housing Agencies
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: June 24, 2003 (Volume 68, Number 121)]
[Rules and Regulations]
[Page 37663-37672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn03-17]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 902, 903 and 985
[Docket No. FR-4753-F-02]
RIN 2577-AC34
Deregulation for Small Public Housing Agencies
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule simplifies and streamlines HUD's regulatory
requirements for small public housing agencies (PHAs) that administer
the public housing and voucher assistance programs under the United
States Housing Act of 1937 (1937 Act). Consistent with HUD's basic
regulatory responsibilities, the final rule further streamlines the PHA
Annual Plan requirements for certain small PHAs and deregulates the
assessment and scoring of small PHAs under the Public Housing
Assessment System (PHAS) and the Section 8 Management Assessment
Program (SEMAP). These changes will alleviate administrative burden and
better enable small PHAs to focus on their core mission of providing
decent, safe, and affordable housing for the neediest American
families. The final rule follows publication of an August 14, 2002,
proposed rule and takes into consideration the public comments received
on the proposed rule.
DATES: Effective Date: July 24, 2003.
FOR FURTHER INFORMATION CONTACT: Bessy Kong, Deputy Assistant Secretary
for Policy, Program, and Legislative Initiatives, Department of Housing
and Urban Development, 451 Seventh Street, SW., Room 4116, Washington,
DC 20410-0001; telephone (202) 708-0713 (this is not a toll-free
number). Persons with hearing or speech impairments may access this
number via TTY by calling the toll-free Federal Information Relay
Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
On August 14, 2002 (67 FR 53276), HUD published a proposed rule for
public comment to simplify and streamline its regulatory requirements
for small public housing agencies (PHAs) that administer the public
housing and voucher assistance programs under the United States Housing
Act of 1937 (42 U.S.C. 1437 et seq.) (1937 Act). The proposed rule
would further streamline the PHA Annual Plan requirements for certain
small PHAs. The proposed rule also would deregulate the assessment and
scoring of small PHAs under the Public Housing Assessment System (PHAS)
and the Section 8 Management Assessment Program (SEMAP), consistent
with HUD's basic regulatory responsibilities. The proposed changes were
designed to alleviate administrative burden and better enable small
PHAs to focus on their core mission of providing decent, safe, and
affordable housing for the neediest American families. In addition to
the changes that solely concern small PHAs, the proposed rule would
also streamline HUD's review of the Annual Plans submitted by all PHAs
(large and small). The preamble to the August 14, 2002, proposed rule
provides additional details regarding the proposed deregulatory changes
to HUD's regulations.
II. This Final Rule; Significant Changes to the August 14, 2002,
Proposed Rule
This final rule follows publication of the August 14, 2002,
proposed rule and takes into consideration the public comments received
on the proposed rule. The most significant differences between this
final rule and the August 14, 2002, proposed rule are as follows:
Additional streamlined Annual Plan components. The final rule
provides that, in addition to information regarding capital
improvements and the civil rights certification, the streamlined Annual
Plans submitted by small PHAs must also address any PHA initiatives
concerning site-based waiting lists (see Sec. 903.7(b)(2)), any
homeownership programs administered under section 8(y) of the 1937 Act
(see Sec. 903.7(k)(1), and any project-based voucher assistance (as
provided in section II.D. of HUD's January 16, 2001, Federal Register
notice regarding revisions to the PHA Project-Based Assistance Program
(66 FR 3605 at 3608, middle column) and section III.C. of PIH Notice
2001-4 issued on January 19, 2001), if applicable. This information
concerns discretionary PHA programs and policies that are required,
either by regulation or statute, to be addressed in the PHA Plan, and
for which no alternative method exists for obtaining prior HUD
approval.
SEMAP exemption for non-audit PHAs. The proposed rule would have
exempted small PHAs not subject to the requirements of the Single Audit
Act from review under SEMAP. The final rule no longer exempts these
small PHAs from SEMAP review. Small, non-audit PHAs will continue to be
subject to SEMAP assessment and scoring, in accordance with the current
SEMAP regulations.
Timing of biennial PHAS and SEMAP assessments. The final rule
continues to provide for biennial PHAS and SEMAP assessments for small
PHAs. To facilitate compliance with biennial assessments, PHAs with
fiscal years ending in the first four quarters following the effective
date of this final rule will not be evaluated under PHAS or SEMAP for
that fiscal year.
III. Discussion of the Public Comments Received on the August 14, 2002,
Proposed Rule
The public comment period on the August 14, 2002, proposed rule
closed on September 13, 2002. HUD received twenty-one public comments
on the proposed rule. Comments were received from PHAs, two of the
major national organizations representing PHAs, and low-income housing
advocates, and service providers. The majority of the commenters
supported the rule and applauded HUD's efforts to provide regulatory
relief for small PHAs. Several commenters, however, had reservations
about certain elements of the rule and suggested changes for addressing
these concerns. In many cases, the commenters recommended additional
deregulatory changes not contained in the proposed rule.
The summary of comments that follows presents the major issues and
questions raised by the public commenters on the August 14, 2002,
proposed rule. The underlined headings present the issue or question
and are followed by a brief description of the commenter's reasoning.
The discussion of the public comments is organized as follows:
Section IV of this preamble discusses the general public comments
on the proposed rule.
Section V of the preamble discusses the public comments regarding
the proposed changes to the PHA Annual Plan requirements.
Section VI of the preamble discusses the public comments regarding
the proposed changes to the PHAS.
Section VII of the preamble discusses the public comments regarding
the proposed changes to SEMAP.
IV. Discussion of General Public Comments on the Proposed Rule
Comment: Support for proposed rule. The majority of the public
commenters supported the proposed rule, applauding HUD's efforts to
reduce the regulatory burden imposed on small PHAs. The commenters
wrote that the proposed rule is a ``firm step in the right direction''
and ``offers a foundation to
[[Page 37665]]
provide necessary relief for small agencies,'' but ``still not pose a
risk to the Department, residents or the taxpaying public.''
HUD response. HUD appreciates the support expressed by the
commenters. The final rule will alleviate the administrative burden
imposed on small PHAs, while still requiring basic accountability.
These deregulatory changes will better enable small PHAs to focus on
their primary mission of providing housing assistance to low-income
families.
Comment: Deregulation of procurement and contracting procedures is
also required. One commenter wrote that many small PHAs have difficulty
complying with the multiple regulatory and paperwork requirements
related to the procurement process and requested that HUD also
undertake efforts to streamline and simplify these requirements. The
commenter noted that many contractors in the locality of a small PHA
are frequently small businesses themselves. The commenter wrote that
these small businesses are also ill-equipped to deal with the
procurement requirements and, therefore, not inclined to contract with
small PHAs. In particular, the commenter wrote that two changes would
make it more attractive for these small businesses to contract with
small PHAs: (1) raising the dollar value threshold that triggers Davis-
Bacon wage rates from $2,000 to $10,000; and (2) relaxing the Section 3
low-income hiring requirements. The commenter noted that these are both
sensitive issues and would probably require statutory changes, but
urged that HUD at least consider these points to alleviate procurement
problems for small PHAs and lower the costs for businesses that wish to
deal with them.
HUD response. As the commenter notes, the requested changes involve
issues that will require further consideration and may require
statutory changes in order to be implemented. Further, the procurement
and contracting issues highlighted by the commenter are not regulatory
in nature and, therefore, outside the scope of this rulemaking.
Accordingly, the final rule does not adopt the recommendations made by
the commenter.
Comment: HUD should exercise its statutory authority to provide
small PHAs with greater flexibility in the management of the public
housing Capital and Operating Funds. One commenter noted that section
9(g)(2) of the 1937 Act authorizes small PHAs to use amounts allocated
from these funds for eligible capital and operating costs, ``regardless
of the fund from which the amounts were allocated.'' The commenter
wrote that, contrary to this statutory flexibility, the current HUD
regulations require that small PHAs submit a Capital Fund plan for
using allocations from the Capital Fund solely for capital activities.
The commenter wrote that implementing section 9(g) would greatly
benefit small PHAs by providing relief from the administrative burden
of separately tracking allocations from the two public housing funds.
HUD response. HUD has not adopted the recommendations made by the
commenter. The suggested regulatory changes were not included as part
of the August 14, 2002, proposed rule. Since the changes suggested by
the commenter are outside the scope of the proposed rule, HUD has not
revised the rule in response to this comment.
Comment: High performing PHAs that do not participate in the
Operating Fund should be granted the ability to use operating funds,
operating reserves, and funds in excess of operating reserves for
development and modernization. One commenter submitted this
recommendation. The commenter wrote that these PHAs create their own
excess revenues that, due to current HUD regulatory requirements, are
locked into reserves. The commenter wrote that the suggested
deregulatory changes would allow these PHAs to perform their housing
operations, and provide additional improvements and additional
affordable housing, without imposing any added burden on HUD. The
commenter agrees with current regulations providing that any additional
units or developments built with these funds are not eligible for
future subsidy under the Operating Fund.
HUD response. HUD has not revised the rule in response to this
comment. The amendment recommended by the commenter is outside the
scope of this final rule, which is concerned with deregulatory changes
designed to assist small PHAs.
Comment: HUD needs to provide small PHAs with additional assistance
regarding the use and implementation of automated systems. One
commenter recommended that HUD develop outreach and technical
assistance specifically for small PHAs with regard to automated
systems, and that HUD improve its communication overall with small PHAs
regarding its plans for information technology. The commenter wrote
that small PHAs do not possess the best hardware or software for
connecting with HUD's systems. The commenter wrote that an early-
warning system of several months for changes and new products, coupled
with appropriate technical assistance, would help small PHAs prepare
and assimilate to HUD's requirements.
HUD response. The proposed rule has not been revised to reflect the
commenter's suggestion. The issue of technical assistance is not
regulatory in nature and, therefore, outside the scope of this final
rule. However, HUD currently provides, and will continue to provide,
technical assistance to PHAs.
Comment: Further review and streamlining of data collection
requirements is required. Two commenters wrote that HUD should
reevaluate the type and amount of information that small PHAs are
required to collect and report to HUD. The commenters wrote that HUD
should then assess whether there are duplicative or excessively
burdensome requirements that should be eliminated. For example, one of
the commenters wrote that the reporting requirements under the PHAS
Management Assessment Sub-System (MASS) and the Financial Assessment
Sub-System (FASS) are administratively burdensome and need to be
simplified. The commenter also wrote that several of the MASS reporting
requirements, such as the dates units became vacant, are already
available through the electronic PIH Information Center (PIC), and are,
therefore, duplicative.
HUD response. HUD has not revised the proposed rule in response to
this public comment. In response to the commenter's statement
concerning duplicative data, HUD notes that MASS and PIC are concerned
with different types of information. To use the example of vacancy rate
data raised by the commenter, MASS collects and measures information
regarding a PHA's performance in leasing vacant units, while PIC
collects information on the number of vacant units a PHA has on an
annual basis. However, HUD will review the PHAS data collection
requirements and determine whether any can be streamlined or
consolidated as part of future changes to the PHAS.
Comment: HUD should monitor PHAs to determine whether the
deregulatory changes will have an impact on the number of units that a
PHA operates. One commenter cautioned that the rule might have the
unintended negative consequence of causing PHAs to reduce the
availability of public housing or vouchers in their jurisdictions, in
order to have the benefit of the regulatory relief.
HUD response. HUD does not anticipate that PHAs will violate their
mission by intentionally reducing the number of families they serve in
order to benefit from regulatory relief. As
[[Page 37666]]
stated above in this preamble, the goal of the final rule is to better
enable small PHAs to focus on their core mission of providing housing
assistance to poor families. HUD will monitor the impact of the final
rule on PHAs and will revise the rule as necessary to ensure that the
deregulatory changes do not conflict with the provision of decent,
safe, and sanitary housing to families in need.
Comment: Streamlining changes should be extended to large PHAs and
high-performing PHAs. One commenter suggested that the deregulatory
benefits of the proposed rule should be provided to all PHAs, large and
small alike. The commenter wrote that ``all PHAs, regardless of being
small or large, would be better able to serve their clients without the
administrative burdens defined in the proposed rule.'' Another
commenter suggested that the streamlining changes should be extended to
high-performing PHAs and to PHAs that do not participate in the
Operating Fund program. The commenter wrote that these PHAs have
displayed the ability to operate in an effective manner without
extensive HUD regulation and monitoring. The commenter wrote that PHAs
that function with positive revenues and do not take operating subsidy
from HUD should be regulated differently than those receiving
allocations from the Operating Fund.
HUD response. HUD has not revised the proposed rule to incorporate
these suggestions. HUD is aware that large PHAs may also benefit from
deregulation and will examine whether there are actions that can be
taken to alleviate the regulatory burdens currently imposed on these
PHAs.
Comment: Small PHAs with less than 250 units should be completely
exempt from Annual Plan and assessment requirements. Two commenters
made this suggestion. The commenters wrote that the time and energy
spent to comply with these requirements impedes PHAs in providing
services to their clients.
HUD response. HUD has not adopted the suggestion made by the
commenter. While the provisions of the 1937 Act establishing the PHAS
and the PHA Plan process provide HUD with the flexibility to establish
streamlined requirements for small PHAs, they do not authorize the
exemption of small PHAs from these requirements altogether.
V. Discussion of the Public Comments on the Proposed Changes to the PHA
Annual Plan
A. Comments Regarding Definition of Small PHA
Comment: Applicability of streamlining changes should be clarified.
Three commenters requested greater clarity on how the streamlining
changes to the PHA Plan will apply to PHAs that manage both public
housing and voucher programs. The commenters wrote that the proposed
rule appears to streamline the Annual Plan process only for small PHAs
with less than 250 public housing units (regardless of the number of
voucher units they operate). However, the preamble discussion of the
Annual Plan refers to Public and Indian Housing (PIH) Notice 2000-43
(issued on September 18, 2000), which defines small PHA to mean PHAs
that operate 250 or fewer units of public housing and 250 or fewer
voucher units. One of the commenters asked whether a PHA with less than
250 public housing units, but more than 250 voucher units, would
qualify for the new streamlined Annual Plan procedures.
HUD response. The streamlined Annual Plan requirements apply to
PHAs with less than 250 public housing units, irrespective of the
number of voucher units administered by the PHA.
Comment: Suggested changes to definition of a small PHA. Three
commenters suggested a revised definition of a small PHA. One commenter
wrote that the final rule should define a small PHA as one with less
than 100 public housing and voucher units combined. The commenter wrote
that this definition is consistent with the definition contained in
legislation pending in Congress. Another commenter wrote that the final
rule should define a small PHA as one with fewer than 100 public
housing units.
Yet another commenter wrote that the final rule should revise the
definition of a small PHA to include only PHAs with less than 250
assisted units, including both public housing and voucher units. This
commenter wrote that the proposed rule would create the anomalous
result that a PHA with 250 public housing units, but potentially
thousands of voucher units, would be considered ``small'' and have
fewer planning and reporting requirements than a PHA with 260 public
housing units and no voucher units at all. In addition, the commenter
noted that the proposed rule would treat all PHAs that only administer
vouchers the same, regardless of the size of their voucher programs.
The commenter wrote that its suggested change would be the fairest and
easiest to understand, and would treat similar PHAs in a similar
manner.
Two other commenters, however, urged HUD to ensure that the final
rule includes the same definition of small PHA as the proposed rule.
One of the commenters endorsed the proposed definition, writing that it
will enable PHAs to ``focus on the delivery of quality services and
being responsive to their community, rather than worrying about filing
reports with HUD.''
HUD response. After careful consideration of all of the suggestions
offered by the commenters, HUD has decided not to revise the definition
of a small PHA for purposes of the streamlined Annual Plan
requirements. The final rule continues to define a small PHA as one
with less than 250 public housing units. The number of voucher units
administered by the PHA is not taken into consideration for purposes of
the definition. This definition of a small PHA is consistent with
section 5A(k) of the 1937 Act, which authorizes the establishment of
streamlined Annual Plan requirements.
B. Comments Regarding Resident and Public Participation in the PHA Plan
Process
Comment: Existing Resident Council should be allowed to substitute
for the Resident Advisory Board. One commenter wrote that, given the
difficulties faced by small PHAs in finding residents interested in
serving on a Resident Advisory Board (RAB), another way to lessen the
administrative burden on these small PHAs would be to allow an existing
PHA Resident Council to substitute for the RAB.
HUD response. HUD has not revised the proposed rule in response to
this comment. The PHA Plan regulations at Sec. 903.13(b) already
provide that if a jurisdiction-wide Resident Council that complies with
HUD's tenant participation regulations in 24 CFR part 964 exists, the
PHA shall appoint the Resident Council or the Council's representatives
to the RAB. Further, as provided in PIH Notice 2000-36 (issued on
August 21, 2000), if a PHA has made every effort, but has still been
unsuccessful in finding residents to serve on a RAB, the PHA may
appoint all its residents as the RAB. Should this occur, the PHA must
provide adequate notice to the residents that all residents are
appointed to the RAB. The PHA must ensure that a RAB consisting of all
the residents is provided the same opportunity to comment on the PHA
Plans, and the PHA must consider these resident comments when drafting
the
[[Page 37667]]
final Plan in the same manner as for any other RAB. A copy of PIH
Notice 2000-36 may be downloaded from HUD's Client Information and
Policy Systems (HUDCLIPS) Web site at http://www.hudclips.org. 
Comment: Small PHAs should not be required to use a resident
survey. One commenter wrote that the resident survey is an unnecessary
administrative requirement for small PHAs. The commenter wrote that the
low response rate does not justify its use. Further, the high degree of
interaction between the staff of a small PHA and the residents allows
for a greater sense of resident satisfaction than any survey can
provide.
HUD response. HUD has not adopted this comment. The information
available to HUD indicates that small PHAs have a high response rate
for their resident surveys. HUD agrees that residents of small PHAs are
more easily able to interact with PHA staff than residents of larger
PHAs. However, HUD also continues to believe that resident surveys
provide a valuable additional resource for small PHAs in evaluating and
responding to the needs of their residents.
Comment: Small PHAs should be required to make reasonable and
appropriate efforts to ensure participation by the RAB and the public
in the streamlined PHA Plan process. Three commenters made this
suggestion. The commenters also suggested that the final rule require
that a small PHA consider the comments provided by the RAB in the
development of its Plan submission, and that the PHA provide
documentation of having done so, as required under the current PHA Plan
regulations.
HUD response. HUD has not revised the proposed rule in response to
this comment. This final rule (as did the August 14, 2002, proposed
rule) continues to ensure the participation of residents in the
streamlined Annual Plan process. Specifically, the final rule requires
that small PHAs submitting a streamlined Plan must provide the RAB with
an opportunity to review and comment on proposed changes to the PHA's
policies and programs. Further, the PHA is required to make the revised
policies and programs available for public review and inspection, which
will allow the public to confirm RAB participation in the streamlined
Plan process.
Comment: PHAs should be required to make certain basic information
available to the public, regardless of Plan streamlining. One commenter
wrote that, irrespective of streamlining, PHAs should be required to
annually provide certain basic information to the RAB, tenants, PHA
board members, and the public. For public housing, this information
would consist of the total number of units, the number of vacant units,
the expected unit turnover rate during the upcoming year, and the
average time it takes to rent a vacated unit. For vouchers, the
information would consist of the total number of voucher units
(adjusted baseline), the number and percentage of ``leased-up'' units,
the expected turnover rate for the coming year, whether the PHA has
received a letter from HUD warning that the PHA may lose voucher units
if it does not increase its voucher utilization rate, and the voucher
utilization rate that the PHA must achieve in order to qualify for
additional vouchers. In addition to this information, the commenter
suggested that PHAs also be required to make their PHAS and SEMAP
scores available to the public (both the overall score and the scores
on each indicator), along with an explanation of any plans on how the
PHA intends to improve its scores.
HUD response. HUD has not adopted this comment. The information
requested by the commenter is either available via the Internet or
through direct request to the PHA or HUD. For example, members of the
public may obtain information regarding PHA operations and resident
characteristics via the Internet by accessing http://www.hud.gov/offices/
pih and clicking on the ``Online Systems'' link. The reports
entitled ``Housing Authority Profiles'' and ``Form 50058--Resident
Characteristics Report'' provide information on, among other things,
the total number of public and low-rent housing units, the number of
occupied public housing units, and the number of housing choice
vouchers operated by the PHA, as well as on the income, tenant payment
amounts, family status, and age of residents. Further, each PHA is able
to access its PHAS score through HUD's Internet homepage at http://www.
hud.gov/reac. In the near future, HUD also intends to post PHA
SEMAP scores, overall PHAS grades, and PHAS/SEMAP indicator grades and
designations on its Web site. For other information regarding program
utilization, interested persons can submit a written inquiry to their
PHA or to HUD. Accordingly, since the requested information is already
readily available to the public, there is no need to revise this rule
to adopt the commenter's suggestion.
C. Comments Regarding Civil Rights Requirements
Comment: The civil rights certification should be submitted under
penalty of perjury. One commenter suggested that the Annual Plan
regulations be revised to provide that the Executive Director of the
PHA sign the required civil rights certification under penalty of
perjury. The commenter also recommended that designees of the PHA
governing board and the Resident Advisory Board be required to also
sign the certification.
HUD response. HUD has not adopted this comment. PHAs that fail to
comply with nondiscrimination and fair housing requirements are already
subject to sanction under the applicable civil rights statute and
implementing HUD regulations.
Comment: A PHA should not be eligible to submit a streamlined
Annual Plan if it does not meet the civil rights ``threshold
requirements'' contained in HUD's Super Notice of Funding Availability
(SuperNOFA). One commenter made this recommendation.
HUD response. HUD has not adopted the suggestion made by the
commenter. The civil rights review conducted for a PHA submitting an
Annual Plan should not be comparable to the civil rights threshold
review conducted for SuperNOFA applicants. The SuperNOFA threshold
criteria are applied to potential grantees applying for limited funding
and are used to distinguish between more competitive and less
competitive applicants. HUD has determined that only those SuperNOFA
applicants who are in full compliance with certain civil rights
requirements and do not have unresolved civil rights charges of various
kinds should be eligible to compete for discretionary HUD funding. The
submission of an Annual Plan, however, is a statutory requirement and
does not affect the amount of HUD subsidy for which the PHA is
eligible. All PHAs (large and small) are required to conduct their
housing programs in accordance with applicable civil rights and
nondiscrimination requirements and are required to certify that they
will comply with these requirements.
Comment: The PHA Plan template should be revised to ask whether the
PHA maintains data indicating the level of participation in the PHA's
programs by members of different racial and ethnic minority groups. One
commenter made this suggestion. The commenter suggested that the PHA be
asked to also state whether the PHA makes this data available to
program participants and other interested parties, maintains and makes
available similar data regarding the level of participation by persons
with disabilities, and whether the PHA has determined if there is a
need for services in languages other than English.
[[Page 37668]]
HUD response. HUD already collects the data requested by the
commenter through its form HUD-50058. Specifically, PHAs are required
to provide information regarding the participation in their public
housing and voucher programs by members of different racial and ethnic
groups, as well as by persons with disabilities. This information is
summarized in the Resident Characteristics Report Module of PIC, which
HUD makes available to the public.
D. Other Comments Regarding Annual Plan
Comment: HUD should exempt small PHAs from the requirement of
submitting their Annual Plans to HUD. One commenter suggested that a
small PHA be permitted to simply certify that the public (including
residents) has reviewed its Annual Plan and that the PHA provided
adequate notice for public review and comment.
HUD response. HUD does not have the statutory authority to adopt
the recommendation made by the commenter. The submission of the PHA
Plans is a statutory requirement mandated by section 5A of the 1937
Act.
Comment: All PHAs that administer voucher programs should be
required to report annually at least on the Annual Plan components
included in the streamlined Plan for ``voucher only'' PHAs. One
commenter wrote that small PHAs with 0-249 public housing units, but
that also operate some vouchers, should be required to report on the
PHA Plan components that HUD has considered to be important to voucher
programs. The commenter wrote that it is particularly important that
PHAs obligated to operate Family Self-Sufficiency programs for voucher
families be held to the current reporting and planning requirements of
Sec. 903.7(l). The commenter wrote that if HUD exempts small PHAs from
some of the reporting requirements that now apply to voucher-only PHAs,
all of the components of the current streamlined voucher-only Plan
should have to be included in the more complete 5-year Plan. Another
commenter wrote that small PHAs that administer a voucher program
should at least be required to submit on an annual basis the civil
rights certification (required under Sec. 903.7(o)) and the statement
of the PHA's rent determination policy (required under Sec. 903.7(d)).
HUD response. HUD has not revised the rule in response to this
comment. Section 5A(k) of the 1937 Act authorizes HUD to establish
streamlined PHA Plan requirements for PHAs with less than 250 public
housing units, irrespective of the number of vouchers administered by
the PHA. Accordingly, HUD does not believe that small PHAs that also
administer tenant-based voucher assistance should be subject to more
extensive reporting requirements than other small PHAs. The imposition
of these additional requirements would be inconsistent with the
statutory language of section 5A and frustrate the purpose of this rule
to alleviate the administrative burden imposed on PHAs. The information
supplied by small PHAs in their streamlined Annual and 5-Year Plans
will supplement other data available to the public and to HUD regarding
the PHA's performance, programs, and management.
Comment: Capital improvement data should not be required until
actual funding amount is provided. One commenter made this suggestion.
The commenter wrote that all PHAs, large and small, spend time and
money to prepare an accurate five-year budget, which forms part of the
PHA Plan submission. However, because these budgets may be due to HUD
before the actual amount of capital funding is determined (depending on
the start of the PHA's fiscal year), the PHA may be required to prepare
a completely revised budget once the funding amount is known.
HUD response. The commenter's suggestion would require changes in
the timing and processing of PHA Plan submissions that HUD is not
prepared to make at this time. Accordingly, HUD has not revised the
rule in response to this comment.
Comment: The PHA Plan requirements are already streamlined for
small PHAs, and further streamlining is not necessary. One commenter
made this recommendation.
HUD response. HUD does not agree with the commenter. The additional
streamlining changes to the PHA Plan requirements made by this final
rule will reduce administrative burden, eliminate duplicative reporting
requirements, and better enable small PHAs to focus on their core
mission of providing affordable housing to poor families. Therefore,
HUD has not revised the rule in response to this comment.
Comment: Rather than merely providing a list of the Annual Plan
policies it has revised, a small PHA submitting a streamlined Plan
should be required to affirmatively state that it has not revised each
relevant Plan component, or explain the changes it has made to any of
the components, since submission of the PHA's last Plan. One commenter
made this suggestion. The commenter wrote that such a change to the
rule would ensure that policy changes that have been made are not
inadvertently overlooked and not reported.
HUD response. HUD has not adopted the suggestion made by the
commenter. The final rule contains sufficient safeguards to ensure that
the PHA's governing board, HUD, residents, and the public are made
aware of policy changes made by the PHA. Specifically, the PHA must
provide the RAB with the opportunity to review and comment on the
policy changes prior to implementation by the PHA. Further, the PHA
must provide assurance that the changes were duly approved by the PHA
board of directors (or similar governing body) and must make the
revised policies available for public review and inspection.
Comment: A PHA should not be permitted to submit only a
certification with respect to its policies on demolition and
disposition that the PHA has revised since submission of its last
Annual Plan. One of the commenters wrote that demolition and
disposition are of such great public importance that they should be
addressed on an annual basis by PHAs. The commenter suggested that, at
a minimum, small PHAs should be required to certify, under penalty of
perjury by the Executive Director and the Chairperson of the PHA Board,
that the PHA will not dispose of or demolish any public housing units
during the year. Another commenter wrote that the 1937 Act requires HUD
to review PHA policies concerning demolition and disposition. The
commenter wrote that for this HUD review to have any meaning, each
small PHA should be required to affirmatively state that it has not
changed its policies with respect to demolition and disposition. The
commenters agreed that it is not enough for the PHA to be silent on
this issue and for HUD, therefore, to extrapolate that there will be no
changes to the policies and practices regarding demolition and
disposition.
HUD response. HUD has not revised the proposed rule in response to
this comment. HUD agrees that the demolition and disposition of public
housing units is of great public interest. However, existing regulatory
and statutory safeguards are sufficient to ensure that PHAs do not
undertake such actions without prior HUD approval and appropriate
consultations with affected residents and the community. In addition to
the PHA Plan approval process, PHAs wishing to demolish or dispose of a
development must submit a full demolition/disposition plan to HUD for
approval, in accordance with
[[Page 37669]]
section 18 of the 1937 Act. Further, as noted above, the PHA must
provide the RAB with the opportunity to review and comment on proposed
changes to its policies concerning demolition and disposition. The PHA
must also provide assurance that these changes were duly approved by
the PHA board of directors (or similar governing body) and must make
the revised policies available to the public upon request.
Comment: The final rule should provide additional guidance
regarding what constitutes a challenge of a Plan element for purposes
of triggering HUD review. One commenter made this suggestion. The
commenter noted the language of the proposed rule providing that HUD
would limit its review of Annual Plans to certain specified elements,
and ``[a]s required by section 5A(i)(2) [of the 1937 Act,]
. . . any
other plan element that has been challenged'' (67 FR 53276, 523277,
first column).
HUD response. HUD has not revised the rule in response to this
comment. HUD may issue future additional guidance regarding challenges
to the Annual Plans should it determine that such guidance is
necessary.
Comment: HUD should not eliminate from its review PHA policies on
rent computation and rent redeterminations. One commenter wrote that
these policies should be reviewed annually to ensure compliance with
the law. According to the commenter, evictions often result from
improper PHA rent computations. The commenter wrote that HUD's
continued review of these policies would help to ensure that PHAs
comply with all applicable legal requirements.
HUD response. HUD has not revised the rule in response to this
public comment. As with other PHA policies and programs, any changes to
the rent computation and redetermination policies must be reviewed by
the RAB, approved by the PHA governing board, and made available to the
public for inspection. The existence of such changes must be listed in
the PHA's streamlined Annual Plan and may be flagged by HUD for further
monitoring and oversight, depending on the scope and nature of the
changes. Inclusion of this information in the Annual Plan is,
therefore, unlikely to provide much further assurance that proper rent
calculations will be made.
E. Questions Regarding Implementation
Comment: How soon will HUD make available a streamlined electronic
PHA Annual Plan? One commenter posed this question. The commenter also
asked whether small PHAs would be expected to continue to use the
current electronic Plan template, but simply enter ``not applicable''
for the reporting requirements eliminated by the regulatory changes.
HUD response. HUD is working on the necessary modifications to the
electronic PHA Plan template. HUD is also considering further
regulatory changes that may affect revisions to the template. When
completed, the availability of the revised template will be announced
through PIH Notice or other non-regulatory means.
Comment: How will staggered review of the 5-Year Plans be
implemented? One commenter asked this question. Specifically, the
commenter, a small PHA, asked when its 5-Year Plan would be due. The
commenter wrote that it is currently preparing its fourth year Annual
Plan for submission in 2003.
HUD response. This is an implementation issue that will be
addressed by HUD in separate non-regulatory guidance. HUD will issue a
PIH Notice describing how the staggered review provisions of the final
rule will be implemented. The PIH Notice will provide PHAs with
sufficient time to bring their policies and procedures governing Annual
Plan submissions into compliance with the timelines for staggered HUD
review.
VI. Discussion of Public Comments Regarding the Proposed Changes to the
PHAS
Comment: Questions regarding effective date of deregulatory
changes. Two commenters posed questions regarding the effective date of
the deregulatory changes being made by HUD. One of the commenters asked
if small PHAs would still be required to electronically submit the
currently required PHAS reporting data for Fiscal Year 2002 should the
final rule become effective by January 1, 2003.
HUD response. The deregulatory changes made by this final rule will
become effective on July 24, 2003. The final rule continues to provide
for biennial PHAS assessments for small PHAs. To facilitate compliance
with biennial PHAS assessments, PHAs with fiscal years ending in the
first four quarters following the effective date of this final rule
will not be evaluated under PHAS for that fiscal year.
VII. Discussion of Public Comments Regarding the Proposed Changes to
SEMAP
Comment: HUD should not exempt non-audit PHAs from SEMAP. One
commenter objected to the proposed exemption from SEMAP assessment and
scoring of small PHAs not subject to the requirements of the Single
Audit Act. The commenter objected that the proposed rule would not
provide any alternative oversight mechanism for assessing whether
exempt PHAs are complying with federal law in administering their
voucher programs. The commenter also objected to the number of PHAs
that would be exempt from SEMAP, writing that approximately one-third
of all PHAs may be exempt from management oversight as a result of the
proposed rule. Further, the commenter wrote that if the dollar
threshold for federal expenditures subject to the Single Audit Act is
ever raised, even more PHAs might be exempt from SEMAP.
The commenter wrote that if HUD is concerned about the unfair
impacts of using a fewer number of indicators to conduct SEMAP
assessments for non-audit PHAs, there are two alternative solutions
that are far less drastic than exempting these PHAs altogether from
federal oversight. The first alternative is to allow these small PHAs
to self-certify their compliance with the seven SEMAP indicators that
are independently verified for other PHAs. The second alternative is to
alter the percentage threshold for designation as troubled for these
small PHAs. The commenter wrote that either of these alternatives,
combined with HUD's other proposed changes to SEMAP, would reduce the
burden on small PHAs and HUD staff, while retaining some federal
oversight of program integrity and accountability, which is the purpose
of SEMAP.
HUD response. Upon reconsideration, HUD agrees with the concerns
raised by the commenter and has revised the proposed rule accordingly.
Small, non-audit PHAs will continue to be subject to SEMAP assessment
and scoring, in accordance with the current SEMAP regulations. Those
regulations at Sec. 985.3 provide that non-audit PHAs are exempt from
assessment under seven of the SEMAP indicators (indicators (a) through
(g)) for which the annual independent audit report is a HUD
verification method. However, non-audit PHAs must still complete the
SEMAP certification for these indicators, and performance under the
indicators is subject to HUD confirmatory review.
Comment: HUD should consider making SEMAP scores advisory
altogether. One commenter made this recommendation based on the
perceived deficiencies with the PIC electronic reporting system. The
commenter wrote that PIC does not accept records properly due to a
system failure, that it is difficult to clearly identify on PIC which
PHA records are being counted towards the PHA's final SEMAP score,
[[Page 37670]]
and that the final SEMAP indicators report is inaccurate.
HUD response. HUD has not revised the rule in response to this
comment. Adoption of the commenter's suggestion would restrict HUD's
ability to require that troubled PHAs undertake remedial action to
correct identified management deficiencies, thereby negating one of the
purposes of SEMAP assessment. The final rule continues to provide for
biennial SEMAP assessments for small PHAs. To facilitate compliance
with biennial SEMAP assessments, PHAs with fiscal years ending in the
first four quarters following the effective date of this final rule
will not be evaluated under SEMAP for that fiscal year.
Comment: HUD should increase the Housing Choice Voucher Program
administrative fee or provide a base level of funding for small PHAs.
One commenter made this recommendation. The commenter wrote that this
change is necessary to allow small PHAs to hire and retain adequate
qualified staff, and that this would allow small PHAs to submit the
required SEMAP certification in a timely manner.
HUD response. The suggestion made by the commenter is outside the
scope of this rulemaking, which does not concern funding issues.
Accordingly, HUD has not revised the proposed rule in response to this
comment.
Comment: Late submission of SEMAP certification should not result
in an automatic designation of ``troubled.'' One commenter wrote that
SEMAP does not presently establish penalties for late submittal of the
required SEMAP certification, except to provide that the PHA will be
designated as ``troubled.'' The commenter wrote that many small PHAs
have difficulty complying with this deadline due to limited staffing,
and that the automatic designation of troubled is unduly harsh. As an
alternative, the commenter suggested that failure of a PHA to submit
its SEMAP certification should result in a reduction of one point for
each day the submittal is late.
HUD response. The change suggested by the commenter is outside the
scope of the August 14, 2002, proposed rule and, therefore, HUD has not
revised the rule in response to this comment.
VIII. Findings and Certifications
Public Reporting Burden
The information collection requirements contained in the PHA Plan
process (24 CFR part 903) and the PHAS (24 CFR part 902) have been
approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB
Control Numbers 2535-0106, 2535-0107, 2507-0001, and 2577-0226,
respectively. The regulatory amendments contained in Sec. Sec. 902.9,
903.5, 903.11, and 903.12 of this final rule merely modify the scope
and frequency of these currently approved information collection
requirements to streamline and reduce the paperwork burden imposed on
small PHAs. In accordance with the Paperwork Reduction Act, HUD may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a currently
valid OMB control number.
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866 (entitled Regulatory Planning and Review). OMB
determined that this rule is a ``significant regulatory action'' as
defined in section 3(f) of the Order (although not economically
significant, as provided in section 3(f)(1) of the Order). Any changes
made to the rule subsequent to its submission to OMB are identified in
the docket file, which is available for public inspection in the
Regulations Division, Room 10276, Office of General Counsel, Department
of Housing and Urban Development, 451 Seventh Street, SW., Washington,
DC 20410-0500.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) establishes requirements for federal agencies to assess the
effects of their regulatory actions on state, local, and tribal
governments and the private sector. This final rule does not impose any
federal mandates on any state, local, or tribal governments or the
private sector within the meaning of the Unfunded Mandates Reform Act
of 1995.
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
A Finding of No Significant Impact with respect to the environment
was made at the proposed rule stage in accordance with HUD regulations
at 24 CFR part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332). The Finding remains
applicable to this final rule and is available for public inspection
between the hours of 7:30 a.m. and 5:30 p.m. weekdays in the Office of
the Rules Docket Clerk, Office of General Counsel, Room 10276,
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Washington, DC 20410-0500.
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 will not have a significant economic
impact on a substantial number of small entities. Although the final
rule is concerned with small PHAs with less than 250 public housing or
leased housing units, the amendments made by the rule are deregulatory
in nature. Specifically, the final rule eliminates, simplifies, and
streamlines regulatory requirements for these small PHAs regarding the
PHA Annual Plan process and assessments conducted under the PHAS and
SEMAP. Further, the deregulatory amendments do not change the amount of
funding available to these PHAs. Accordingly, the economic impact of
this rule will not be significant, and it will not affect a substantial
number of small entities.
Catalog of Federal Domestic Assistance Numbers
The Catalog of Federal Domestic Assistance Numbers for the programs
affected by this final rule are 14.850 (for the Public Housing Program)
and 14.871 (for the Housing Choice Voucher Program).
List of Subjects
24 CFR Part 902
Administrative practice and procedure, Public housing, Reporting
and recordkeeping requirements.
24 CFR Part 903
Administrative practice and procedure, Public housing, Reporting
and recordkeeping requirements.
24 CFR Part 985
Grant programs--housing and community development, Housing, Rent
[[Page 37671]]
subsidies, Reporting and recordkeeping requirements.
? Accordingly, HUD amends 24 CFR parts 902, 903 and 985 as follows:
PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM
? 1. The authority citation for 24 CFR part 902 continues to read as
follows:
Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3525(d).
? 2. Add Sec. 902.9 to read as follows:
Sec. 902.9 Frequency of PHAS scoring for small PHAs.
REAC will assess and score the performance of a PHA with less than
250 public housing units every other PHA fiscal year, unless the small
PHA:
(a) Elects to have its performance assessed on an annual basis; or
(b) Is designated as troubled, in accordance with Sec. 902.67.
? 3. Revise the introductory paragraph of paragraph Sec. 902.33(a) to
read as follows:
Sec. 902.33 Financial reporting requirements.
(a) Annual financial report. All PHAs must submit their unaudited
and audited financial data to HUD on an annual basis. The financial
information must be:
* * * * *
? 4. Revise the first sentence of Sec. 902.60(d) to read as follows:
Sec. 902.60 Data collection.
* * * * *
(d) Management operations and resident service and satisfaction
information. A PHA shall provide certification to HUD as to data
required under subpart D, Management Operations, of this part and
subpart E, Resident Service and Satisfaction, of this part not later
than two months after the end of the PHA's fiscal year that is being
assessed and scored, with no penalty applying, however, until the 16th
day of the third month after the PHA fiscal year end. * * *
* * * * *
PART 903--PUBLIC HOUSING AGENCY PLANS
? 5. The authority citation for 24 CFR part 903 continues to read as
follows:
Authority: 42 U.S.C. 1437c; 42 U.S.C. 3535(d).
? 6. Revise Sec. 903.5(a)(3) by adding a sentence at the end to read as
follows:
Sec. 903.5 When must a PHA submit the plans to HUD?
(a) * * *
(3) * * * However, HUD may require that half of all PHAs with less
than 250 public housing units submit their 5-Year Plan one fiscal year
in advance (in the fourth PHA fiscal year rather than the fifth PHA
fiscal year).
* * * * *
7. Revise Sec. 903.11(c)(2) to read as follows:
Sec. 903.11 Are certain PHAs eligible to submit a streamlined Annual
Plan?
* * * * *
(c) * * *
(2) For small PHAs that are not designated as troubled (see Sec.
902.67(c)) or that are not at risk of being designated as troubled (see
Sec. 902.67(b)(4) of this chapter) under section 6(j)(2) of the 1937
Act, the requirements for streamlined Annual Plans are described in
Sec. 903.12.
* * * * *
? 8. Add Sec. 903.12 to read as follows:
Sec. 903.12 What are the streamlined Annual Plan requirements for
small PHAs?
(a) General. PHAs with less than 250 public housing units (small
PHAs) and that have not been designated as troubled (see Sec.
902.67(c) of this chapter) or that are not at risk of being designated
as troubled (see Sec. 902.67(b)(4)) under section 6(j) of the 1937 Act
may submit streamlined Annual Plans in accordance with this section.
(b) Streamlined Annual Plan requirements for fiscal years in which
its 5-Year Plan is also due. For the fiscal year in which its 5-Year
Plan is also due, the streamlined Annual Plan of the small PHA shall
consist of the information required by Sec. 903.7(a), (b), (c), (d),
(g), (h), (k), (o) and (r). If the PHA wishes to use the project-based
voucher program, the streamlined Annual Plan of the small PHA must also
include a statement of the projected number of project-based units and
general locations and how project basing would be consistent with its
PHA Plan. The information required by Sec. 903.7(a) must be included
only to the extent it pertains to the housing needs of families that
are on the PHA's public housing and Section 8 tenant-based assistance
waiting lists. 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) of the 1937 Act.
(c) Streamlined Annual Plan requirements for all other fiscal
years. For all other fiscal years, the streamlined Annual Plan must
include:
(1) The information required by Sec. 903.7(g) and (o) and, if
applicable, Sec. 903.7(b)(2) with respect to site-based waiting lists
and Sec. 903.7(k)(1)(i) with respect to homeownership programs under
section 8(y) of the 1937 Act;
(2) If the PHA wishes to use the project-based voucher program, a
statement of the projected number of project-based units and general
locations and how project basing would be consistent with its PHA Plan;
and
(3) A certification from the PHA that lists the policies and
programs covered by Sec. 903.7(a), (b), (c), (d), (h), (k), and (r)
that the PHA has revised since submission of its last Annual Plan and
provides assurance by the PHA that:
(i) The Resident Advisory Board had an opportunity to review and
comment on the changes to the policies and programs before
implementation by the PHA;
(ii) The changes were duly approved by the PHA board of directors
(or similar governing body); and
(iii) The revised policies and programs are available for review
and inspection at the principal office of the PHA during normal
business hours.
? 9. Amend Sec. 903.23 by redesignating paragraphs (b) through (d) as
paragraphs (c) through (e), respectively and adding new paragraph (b)
to read as follows:
Sec. 903.23 What is the process by which HUD reviews, approves, or
disapproves an Annual Plan?
* * * * *
(b) Scope of HUD review. HUD's review of the Annual Plan (and any
significant amendments or modifications to the plan) will be limited to
the information required by Sec. 903.7(b), (g), (h), and (o), and any
other element of the PHA's Annual Plan that is challenged.
* * * * *
PART 985--SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP)
? 10. The authority citation for 24 CFR part 985 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).
? 11. Revise Sec. 985.105(a) to read as follows:
Sec. 985.105 HUD SEMAP responsibilities.
(a) Frequency of SEMAP assessments. (1) Annual review. Except as
provided in paragraph (a)(2) of this section, HUD shall assess each
PHA's performance under SEMAP annually and shall assign each PHA a
SEMAP score and overall performance rating.
(2) Biennial review for small PHAs. HUD shall assess and score the
performance of a PHA with less than
[[Page 37672]]
250 assisted units once every other PHA fiscal year, unless the PHA:
(i) Elects to have its performance assessed on an annual basis; or
(ii) Is designated as troubled, in accordance with Sec. 985.103.
* * * * *
? 12. Revise Sec. 985.107(a) to read as follows:
Sec. 985.107 Required actions for PHA with troubled performance
rating.
(a) On-site reviews. (1) Required reviews for troubled PHAs. Except
as provided in paragraph (a)(2) of this section, HUD will conduct an
on-site review of PHA program management for any PHA assigned an
overall performance rating of troubled to assess the magnitude and
seriousness of the PHA's noncompliance with performance requirements.
(2) On-site reviews for small PHAs. Notwithstanding paragraph
(a)(1) of this section, HUD may elect not to conduct an on-site review
of a troubled PHA, if:
(i) The PHA has less than 250 assisted units; and
(ii) HUD determines that an on-site review is unnecessary to
determine the needs of the PHA and the actions required to address the
program deficiencies.
* * * * *
Dated: June 16, 2003.
Michael M. Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 03-15815 Filed 6-23-03; 8:45 am]
BILLING CODE 4210-33-P