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					Public Housing Administrative Reform Initiative Development and Asset Repositioning II Final Report 15-Sep-07
The Development and Asset Repositioning II group (―Group‖), was formed with the following members on July 12, 2007: Alanda Jackson; Blair Schiff; Caroline Clayton; Carrie Dobbins; Dale Gravett; Dominique Blom; Eric Brown, Chairperson; Gary Rosen; Holly Edwards; James McCreight; Jennifer Lavorel; Joe Schiff; John Wilson; Kathleen Foster; Leroy Ferguson; Marcel Slag; Maria Maio; Maria Marquez; Reginal Barner; Satinder Munjal; Shawn Sweet, Facilitator; Tara O'Neill; Vivian Bryant, Secretary Meeting twice and having numerous conference calls, the Group worked diligently to identify both philosophical and distinct areas in which HUD could streamline development and asset management processes. It is important to note that the topics discussed in this report are not the results of consensus; rather, they represent topics identified by individual members. The results of the Group’s efforts to identify larger or philosophical streamlining issues are in this summary and the detailed suggestions are in the following pages. The Group took as its charge the streamlining and improvement of HUD processes so that new public housing is built quickly and efficiently. In pursuit of same, the Group identified the following topics as likely to improve efficiencies: ● HUD should allow PHAs to make their own business decisions, especially in mixed finance development where there are banks, investors and other public and private partners involved who have a stake in the project being successful. ● HUD should continue its efforts to streamline the review of development evidentiary documents. HUD should also further its efforts beyond the current draft notice by allowing Public Housing Authorities (―PHAs‖) with recent and material experience to have fewer documents reviewed. PHAs’ with lesser experience would have more documents reviewed by HUD and poor performing PHAs would have all evidentiary documents reviewed by HUD. In order to ensure the protection of HUD’s and the taxpayers’ interest, HUD should randomly monitor approved evidentiary documents after the fact. This proposal would enable capable and experienced PHAs to move forward quickly, and would enable HUD staff to concentrate on development projects from the balance of the PHAs. ● Many PHA and HUD staff should improve attitudes about change and risk aversion. Due to the changing nature of the public housing industry and diminishing Federal funding, every employee needs to be fully on board with proper development methods and procedures.

Page 1 of 26

● Development, Mixed Finance, and Capital Fund Financing training for Field Office staff is essential so personnel know and understand required roles and responsibilities. Past training has improved Field Office performance, yet many other Field Offices had not attended such training sessions, and others use the skills so seldom that the knowledge must be re-learned. The development training should be a required part of the planned Asset Management training. ● HUD should create a division to handle the Field Office development functions. The division should be similar to the Office of Urban Revitalization in that it would have central, but in this case Field Officelocated, management with highly qualified and motivated people staffing the division. This will enable standardization of development processing, thereby expediting the process. ● As a Federal department, HUD cannot provide a great deal of quick action; however, HUD could improve its communication with both PHAs and HUD Field Offices. When policy determinations change; when there is a new legal interpretation of development policies, procedures, regulatory or statutory issues; publishing of a draft or new notice, HUD HQ should send a blast email to all PHAs and HUD Field Office management, then post the information on a HUD website. This would enable everyone affected by changes to know about them very quickly. Additionally, HUD should be as flexible as possible to keep pace with changes in the industry. ● There is anecdotal evidence that some HUD Field Offices discourage PHAs from participating in development funding actions. Field Offices should be promoting the use of available funding methods. While the Group sincerely appreciates the interest HUD has taken in de-regulation, we have merely been able to scratch the surface in the time provided. The Group urges the Department to examine what has been accomplished to date and re-open the window for a continuation of the process. For a thorough job to be done, the Group suggests that additional time, and a HUD facilitator, be given to continue work through the Spring of 2008. Other groups may also be able to use the same opportunity. The Development and Asset Repositioning Group II sincerely thanks the Department for the opportunity to take part in such an important project.

Page 2 of 26

Development and Asset Repositioning Group II: Ideas for Streamlining Processes
Procedure and Related Reg

No.

Ideas

Reason for Change & Value Added

Other Comments
HUD's role may be unique, and not covered by local certification (for example, fair housing assessment). HUD has sponsored Maximizing Leverage Training, which provides a very good overview of CFFP, mixed-finance development, etc. HUD Field Office, generally, need more intensive training.

1

941 Subparts E It takes HUD a long time to approve mixed finance and conventional PHAs will get quicker responses by HUD, and HUD review &F deals. It would be better to require certifications for items, e.g., title process will be limited to what is necessary. insurance, surveys, site and neighborhood standards, etc. HUD Field Offices are not educated (capable?) to process their end of mixed finance deals; they should have training so they are able to understand mixed finance deals and what they need to process/approve. HUD Field Offices could be a very good resource in processing if HUD Field staff understood their roles and responsibilities. Well trained HUD staff would be able to better process development deals resulting in an expedited approval process.

2

What are the fewest documents that need to be reviewed by HUD? 3

4

102(a)

5

There may be other development methods, and HUD staff should not Statute provides that the list is not exclusive. Adds to flexibility. Train HUD Field Office staff. look at this as the only way of doing development. For example, one PHA had talked about a design/build proposal (like a turnkey, but with the developer doing the work on land that the PHA controlled; HUD Field Office said it could not be done because that specific method was not included in the regs. Maybe grant managers at HUD should become development Avoids multiple reviews and builds on expertise. Limited staff. coordinators? They become very sophisticated about development over time. HUD DC office might want to look at letting the Grants Managers at the Field Office doing the development approval, since they were more likely to know what was possible and be flexible. If some of the responsibility for mixed finance approval was taken

6

Some PHAs have units that are off-line are receiving subsidy. 7 102( c)

Project based asset management is one way this problem will be resolved.

DAR II

Page 3 of 26

941 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining Processes
Procedure and Related Reg

No.

Ideas
Slight disagreement in that safe harbor rules should also be enforced by HUD, as they can be beneficial to PHAs, particularly with regard to developer fees.

Reason for Change & Value Added

Other Comments

8

Should Cost Controls and Safe Harbors be expanded, if applicable?

Inconsistencies with demo/dispo? 9 202 On 941.207,(b) and (e)(2), the citations needed to be updated: 24 CFR Part 913 no longer exists, and the portion of 24 CFR Part 960 referenced was no longer accurate. It was also worth looking at 941.207(c) to see if this is still accurate. It was noted that where CDBG or HOME funding was also used, they might have additional requirements for relocation and replacement, and should be cross-referenced; might be ways to avoid duplicate review processes. As suggested elsewhere, there is a lot of repetition between the regulations on relocation. This is partially a result of statutory requirements. However, there should be one standard set of relocation requirements cross-referenced in all regulations to ensure consistency. Need to perform analysis

10

11

12

203(c )

Questions arose regarding both 941.203(c) and (d). It was noted that the restriction on elevators for family public housing came from 42 USC 1437d(a), but that there might be cases where density was part of a local affordable housing development strategy.

13

301

Development handbook written a long time ago, when FHA did public housing development. Many of the specialists who are supposed to review proposals are no longer there; handbook is no longer accurate.

After new reg. is developed, HUD will develop new handbook. 14

HUD should provide training for both HUD Field Office staff and PHAs/partners on the new handbook so both PHAs and HUD staff understood their roles and responsibilities. Well trained HUD staff and PHAs/partners would result expedited approvals.

DAR II

Page 4 of 26

941 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining Processes
Procedure and Related Reg

No.

Ideas
Problems with Field Offices not acting within time limits. Suggestion: using a process similar to 5-year plans. However, if HUD then simply sends it back saying incomplete, etc. in order to meet the deadline… any way to avoid the back and forth?

Reason for Change & Value Added

Other Comments

15

16

People described problems with FHEO Field Office approval, where they had no vested stake in the deal happening by a particular date (asking for more documents to review, like the regulatory & operating agreement, admissions & occupancy plan, lease, management documents). Simply referring to FHEO in DC might not work, because you might lose out on the expertise and/or institutional memory at the local level about where there had been particular fair housing problems at particular PHAs.

Will ensure that FHEO review is integrated into the overall process, that all HUD staff understand the need for expedited review, and that review staff are up to speed on unique elements of development & asset repositioning that otherwise might not encountered. Balance between expediting review by making the channels of decision-making at regional and central offices clear and insuring that the central office is not deprived of key local information or institutional history that may be necessary for evaluation.

17

18

PHAs again said this was primarily a concern for HOPE VI and mixed finance deals. HUD staff pointed out that Subpart C was for conventional development.

19

306

There is a problem PHAs encounter with getting approval for buildings with elevators in buildings for the elderly where the building had less than 4 stories, and PHAs have ended up having to use non-HUD funding for the elevator in a 3-story building.

It is important to have elevators in building for the elderly when Also noted in regs and statutes there is more than one storey. This is easily rectified by adjusting the 2008 TDCs to reflect the inclusion of elevator costs for "elderly/disabled" buildings with 2 to 3 storeys.

20

People thought this should be revisited, and was a question of the development type allowed under TDC. HUD staff advised that buildings with elevators were treated as a different structure type under TDC and the suggestion was made that a category for ―elderly only‖ should be part of the 2008 TDCs.

DAR II

Page 5 of 26

941 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute Ideas Reason for Change and Value Added Other Comments

1

Identify minimum requirements and then only require the minimum; especially when 941 Subparts E - bank and other entities are reviewing/approving financial documents; F HUD doesn’t need to approve deals where no Public Housing monies are involved

2

3 4

102(a)

Adding language to 24 CFR 941.102(a), ―but not limited to‖, to make clear that other methods of development were possible would be helpful. HOPE VI should be noted in this section. Need language that provides maximum flexibility; what about refinancing? Other methods of financing? Proposed language at Sec. 941.102(a) was suggested. For mixed-finance deals, HUD should enforce TDC and audit periodically and leave it to HFAs to perform subsidy layering and determining appropriateness of development in terms of site selection/approval, etc. In North Carolina, for example, the HFA has more stringent neighborhood standards than does HUD in terms of proximity of good services for residents, etc. In other words, in mixed-finance deals, HUD should rely on others in the deal to underwrite the deal in terms of good real estate practices.

5

6

7

102 ( c)

What if you have the funds to develop additional public housing? Can the cap be removed? Would require a statutory change. If you had the funds, could you go beyond the cap? The answer was no, due to the statute. HUD staff indicated that the draft capital rule will have the 1999 date. The question was asked, could you grandfather for those who did better under the prior formula, and who may have relied on it. HUD staff couldn’t say. Add the exception for mixed finance deals where they are less expensive than Section 8.

8

9

10

―However, development of such units must be approved by HUD in advance in writing for them to be eligible for inclusion under the ACC.‖

DAR II

Page 6 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute Ideas
Demolition costs should not be part of TDC. Not all PHAs have a cleared site with which to work. Would require a statutory change to exclude demolition costs from TDC, although any extraordinary costs may be excluded from TDC

Reason for Change and Value Added

Other Comments

11

12

ACC

If placing public housing units in an FHA property, for example, it seems that the declaration of trust needs to apply to the entire property. This is a problem.

13 14

Need a ―floating trust‖ specific to just the number of units in the project. Should ask HUD to define a declaration of trust specific to mixed-finance deals. ―An agreement between a PHA and the applicable local governing body or bodies which assures exemption from real and personal property taxes, provides for equal local support…‖ Hasn’t HUD eliminated the minimum construction standards?

15

Cooperation Agreement Design and Construction Standards

16

17

TDC

Where does the developers’ fee fit under the definitions, since it isn’t part of ―housing construction cost (HCC). Several indicated that it would be included in the total development cost (TDC), but not in the HCC, as HCC is considered hard costs. TDC? Definition should be included in regs. Perhaps HUD could have a process whereby it would certify that if an HFA’s site and neighborhood approval process was as good as HUD’s, it could defer to this, but if not, usual rules would apply. HUD may not trust certain approval processes based on past experience with a HFA. In North Carolina, the HFA had neighborhood siting criteria that were even more stringent than HUD—won’t let you build where there’s concentrated poverty, or where the may be a question of local services. Don’t know if that’s the case in other states.

18

202

19

DAR II

Page 7 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute Ideas
HUD staff advised that when the TDC was developed, demolition costs were part of it, and that this was in the statute, and will provide the reference. Additionally, PHAs can identify extraordinary costs which would not be included in the TDC. Only suggested this for mixed finance, where there would be an expectation of other layers of review; not familiar with what might happen for the other methods of development. Question was whether someone else was in the deal who had an equally strong interest in making sure it was a good real estate deal.

Reason for Change and Value Added

Other Comments

20

21

22

Limitations on siting are fair-housing related, and asked if there was any inconsistency between what was here and in the demo/disposition regulations. Satinder said no. Several people asked what would happen if the one-for-one replacement requirements came back, as proposed in Congress for HOPE VI amendments, where they didn’t have adequate land elsewhere, and needed to rebuild on site. (Several people didn’t appear to realize the limitations that this regulation would place on such rebuilding.) Mac asked if there was any definition of the term ―racially mixed‖, and HUD staff said this is something FHEO would have to answer.

23
24 25 26

Why not require proper zoning for what is proposed? Add: ―…as demonstrated by a letter from the jurisdiction’s chief elected official certifying to this factor Need to define term ―racially mixed.‖ A task for FHEO. There is concern about what happens if/when one-for-one replacement comes back, as is expected on the legislative front. In jurisdictions that grant building permits, receipt of the permit shall demonstrate that this standard has been met. Add: ―…as demonstrated in the letter from the jurisdiction’s chief elected official certifying to this factor.‖ ―…shall strive to encourage…‖ is not a mandatory requirement; suggestive, maybe additional points for achieving a design that accomplishes this.

202 (b) 202(b)(ii) 202(c) (2)(i) 202(c) (2)(i)

27

28

202(e) 203

29

DAR II

Page 8 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute Ideas
Questions arose regarding both 941.203(c) and (d). It was noted that the restriction on elevators for family public housing came from 42 USC 1437d(a), but that there might be cases where density was part of a local affordable housing development strategy, such as smart growth near a transportation hub, and that 203(c) should be looked at separately. In response to the question of which office would determine if there was a ―practical alternative‖ to a high-rise elevator building, HUD staff indicated this would be by DC, rather than the Field Office. It was suggested that the issues of lower density and deconcentration of poverty were two separate issues, and they should be broken apart. The PBV regulations should be looked at to see if there had been any useful consideration of these issues. On the 2nd sentence of 941.203(d), why it should be necessary to provide all this documentation for elderly buildings to have elevators. HUD staff noted it was appropriate to consider emergency evacuation issues for the elderly. In large cities, if a PHA can’t put a parent with one child in an elevator building, it would have to go way out to the suburbs, away from public transit, to avoid an elevator building. This standard generally conflicts with density standards, Smart Growth, etc. Statutory language on this at 1437(d)(a) — ―no practical alternative‖ is in the statute There is a difference between low-density and deconcentration of poverty. Need to ―unmuddle‖ the concepts. Project-based voucher regs address this issue (recent SEVRA amendments). 205( c) (2) 205(d) 207(b) Why is a Program Manager approval required and not a developer? Isn’t this a left over FHA reg? There are some outmoded references to 913 (no longer exists as a regulation) and 960.204, which has been changed to 960.203. Reimbursement for moving people out and back in? Yes. Sometimes those who come back are less than projected, which creates an ―interesting‖ budget line item. Can we streamline with other requirements (CDBG, for example) related to relocation? HOME funds require one-for-one replacement. HOPE VI deals have exemption from URA? The deals require more tracking, in any case.
Page 9 of 26 941 Regs and Statutes

Reason for Change and Value Added

Other Comments
Per HUD staff, this section is not statutory. Can this be addressed in a notice?

30

203(c )

31

32

33

34

203(d)

35

36
37

38 39 40 41 42
DAR II

Addressed in draft notice?

Regulatory?

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute
43 44 207(f) 207(h)(3)

Ideas
Add: ―…within xxx calendar days of notification of the PHA’s decision‖ Add: ―HUD shall respond to such requests within fourteen (14) calendar days so as to not unnecessarily delay the development process.‖ The question was raised, under 941.302, about allowing upfront draw-downs for predevelopment costs, and how this is different for mixed finance. Satinder indicated that in mixed finance, the draw-down was for 75% of the pre-development costs, and the limitation here was for a cap of 3% of the TDC—a far different figure. He believed the 3% allowance for predevelopment costs was very liberal. This subsection should be as flexible as the mixed-finance section for the sake of consistency. Add: ―plus the cost of any land to be acquired‖

Reason for Change and Value Added

Other Comments

45

46 47 48 49 50 51 52 53 54 55 56

302(b)

302(c)(1)

Lots of discussion about whether cost of elevators can be included in TDC for elderly buildings. Some confusion re: 75 percent of predevelopment costs (allowed under mixed-finance) versus 3 percent of TDC. Bottom line is that greater flexibility is needed to assure that predevelopment costs are realistically covered. * Add: ―plus the cost of any land to be acquired‖

303 304(b) 304(d)(h)

Add: ―HUD shall act upon the acquisition request with 45 days of receipt of all the required documents‖ Delete: ―and a demonstration by the PHA that it will be able to use this method successfully to develop the public housing units.‖ Why is this in here? Delete: ―…and, if applicable, a statement addressing the minority enrollment and capacity of the school system to absorb the number of school-aged children expected to reside in the project‖

304(d)(m)

What statute requires this? There is a problem PHAs encounter with getting approval for buildings with elevators in buildings for the elderly where the building had less than 4 stories, and PHAs have ended up having to use non-HUD funding for the elevator in a 3-story building.

57

306

DAR II

Page 10 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute Ideas
People thought this should be revisited, and was a question of the development type allowed under TDC. HUD staff advised that buildings with elevators were treated as a different structure type under TDC and the suggestion was made that for ―elderly only‖, ―disabled only‖, or ―elderly and disabled only‖ being designated a separate structure type. Comment that ―public housing capital assistance‖ should be listed in definitions. 59 60 61 306(b) 306(d) 401(b) Can a more descriptive term of what this is be substituted for CRC? When are the conditions established An issue was identified on ACC and Declaration of Trust. A PHA might be putting public housing rental units in a market rate development (not yet condo-ized) but there was a problem because the declaration of trust applied to the entire building. Private developers wouldn’t agree to so affect the other units. HUD staff noted that this was a legal question, about whether you could do a declaration of trust for just those units.

Reason for Change and Value Added

Other Comments

58

62

401(c)(1)

63

It was indicated that some developments have a floating number of ACC units, where the Declaration of Trust applies to 10 out or 100 units, but doesn’t specify exactly which ones they are. Deals being discussed here aren’t mixed finance development, but ACC-only units. Many of the private developers don’t want to think about what will happen 30 years later, but are only thinking about their exit strategy 5 years later, where they want to sell or condo-ize. Right now, if a declaration of trust was put on the property, you couldn’t convert to condominiums. It was noted that you could condo-ize up front (or make a statement of intent to do so a number of years down the line) and then put the declaration of trust. Some said that this wasn’t that different than Section 8 project-based assistance issues. People thought that Declaration of Trust should be included in the definitions. It was noted that another Focus Group was looking at the Declaration of Trust and ACC documents 401(c)(2) ―901‖ should be ―902‖. Delete… ―or a PHA that has for other reasons been notified in writing that it may not use the procedure specified in paragraph (c)(1) of this section‖

64

65

66 67 68

DAR II

Page 11 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute
69 70 71 72 73 74 75 76 Delete: ―. For this purpose, the initial operating period with respect to each project is the period commencing with the date of initiation of the project and ending with the earliest of the following three dates: the end of the calendar quarter in which ninety-five percent of the dwelling units in the project are occupied; the end of the calendar quarter that is six, seven, or eight months after the date of full availability of the project; or the end of the calendar quarter next preceding the date of physical completion of the project‖ as EIOP will not be used in the future. Subpart F crosscuts subparts A – E in certain areas and it is worth looking at this and seeing if it could be streamlined further. A number of people commended HUD on the changes to 941.606(k). For mixed finance development, the process should be more like HOME or CDBG. HUD’s concerns should be about leveraging the resources (enforcement of total development costs) and making sure that it’s a sound real estate deal. But if there is tax credit financing at 4% or 9%, others are already looking at that and making sure it’s a sound deal. Not sure we need safe harbors, design standards, provisions on neighborhood placement—HFAs [housing finance agencies?] already have them. Instead, HUD can meet with HFAs and establish with the HFA that it’s a sound deal. Use ―instrumentality(ies)‖ in lieu of ―partners‖. 404(a) 402(d)(2) 402(b)(2) 402(a)(2)

Ideas
Delete: ―…or a PHA that has for other reasons been notified in writing that it may not use the procedure specified in paragraph (a)(1) of this section,‖ ―901‖ should be ―902‖ ―901‖ should be ―902‖ Delete ―chapter or a PHA that has for other reasons been notified in writing that it may not use the procedure specified in paragraph (b)(1) of this section ―901‖ should be ―902‖ Delete ―, or a PHA that has for other reasons been notified in writing that it may not use the procedure specified in paragraph (d)(1) of this section‖ Add: ―after the units are occupied‖ Delete: ―end of the initial operating period unless a longer period is approved by HUD‖

Reason for Change and Value Added

Other Comments

77

78 79

Subpart F

80

81
DAR II

600

Page 12 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute
82 83 84 85 600(b) 602(b) 604 606

Ideas
Add: ―…before the affected action either required or prohibited occurs. Add: ―…before the affected action either required or prohibited occurs. Add definitions of ―instrumentality‖ and ―affiliate‖ Add: ―Prior to submitting a proposal, a PHA can request that HUD determine what documentation it desires from the agency and rely on this response.‖ Delete: ―PHMAP‖.

Reason for Change and Value Added

Other Comments

86 87 88 89 606(a) 606(b) 606(c )

* Add: ―and responsibilities‖ Delete ―operating pro formas relating to the viability of the development‖ (the deletion is covered bi (i)) How does this comport with Asset Management? Won’t the subsidy floe to the property directly? Should this be deleted? * Delete: ―, including the architect or contractor estimate of the time required to complete each major development stage.‖ Add: ―…assuming level operating subsidy appropriations in future years.‖

90 91 92

606(g) 606(i)

Add: ―…or HUD has previously approved the identity of interest construction contract 606(k)(1)(ii)(B) in its approval of the proposal. Not clear whether this incorporates process for tenant review/comment. Doesn’t mention Resident Advisory Board comments, for example. (was written before QHWRA?) Question of whether this section is even needed, assuming the PHA is reporting annually. A: Needed if doing this mid-year. Response: Needs to be clarified. Add: ―…related to the relocation of existing residents,‖ Should there be notice to tenants and Resident Advisory Board (RAB) where HUD is taking a sanction activity? For other types of sanctions, resident/RABs are usually notified. Reg. and Op. may talk about procedures for notifying residents/RABs.

93

608(b)(5)

94

95 96 97

612(a)(1) 616

DAR II

Page 13 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining Regulations and Statutes
Regulation or No. Statute
98

Ideas
No reg. yet on transformation activities, but PHA may be required to undertake them as part of the sanction. Residents should be notified. It might be useful to include notice to residents and the RAB where HUD was taking sanctions against the PHA for noncompliance, as a ―heads up‖ so that residents were aware of what was happening before they had to go into PHA plan process (or consider transformation remedies). A number of PHAs weren’t sure about this, but it was noted that this was just an idea Add: ―Conversely, if HUD delay in processing appropriate requests by the PHA, HUD shall be liable to the PHA for reasonable damages.

Reason for Change and Value Added

Other Comments

99

100

DAR II

Page 14 of 26

941 Regs and Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining: 24 CFR 970 Processes
No. Procedure and Related Reg
970.3

Ideas
PHAs generally should have the right to tear down non–public housing buildings without going through demo/dispo (for example, with a building that is an eyesore and not in use by residents). If process is adequately streamlined, 60 days should be plenty of time for HUD approval. If the application triggers a series of questions, the applicant should have an additional 30 days. Question: Mixed-finance does not have to go through disposition review by SAC, yet HOPE VI grant agreements say they do. Can HUD clarify, provide consistency? HUD staff: Grant agreements were written before current rule came out. When HUD went to apply the current rule, OGC reminded HUD that a disposition approval is required by statute (Sec. 18). So the grant agreement is actually more accurate than the regs. Streamlined application is posted on the SAC website. Why require an environmental review for demolition only? If the building was built during a particular era, there could be asbestos tiles or other dangerous substances requiring abatement (that’s already taken into account for demo specs, etc.). Maybe concerns specific to demolition should be identified and the PHA should simply certify that these have been taken into consideration. Issue is whether environmental review applies to building envelope. HUD staff: Environmental review is required only if intent is to build something after the demo. Needs clarification in terms of how requirement is being implemented. Agreement that environmental review is a reasonable requirement at point where ready to rebuild. If prior review has covered the project, can’t that count as the environmental assessment? SHPO/Department of Interior requirements must be considered; a lot of public housing is over 50 years old. Getting environmental assessment done by Local Responsible Entity is political and is hard to get. Would be easier to have dispo approved by Washington if Washington is already reviewing evidentiary and other materials under HOPE VI.

Reason for Change & Value Added

Other Comments

1

2

970.7

3

4

970.13

5

6

970.17

DAR II

Page 15 of 26

970 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining Processes: 24 CFR 970 Regulatory/Statutes
Regulation and/or No. Statute Reason for Change & Value Added

Ideas
Statute makes reference to other properties ("in the case of an application proposing disposition by sale or other transfer of a public housing project or other real property subject to this subchapter"). Not clear whether demo/dispo statute applies to non–public housing structures located on a public housing site. Applies only if built with public housing funds.

Other Comments

1

1437p(a)(2)

2

Why is a description of the process of consultation with the local government necessary if PHA is getting a letter from the local elected officials? HUD wants to be sure any board meetings where official 970.1(a)(i) and actions are taken take place after getting input. Why not just require (ii) the PHA to certify that all actions took place after input was obtained?

3

970.3

Suggest adding a number 16: ―Disposition of property owned by a PHA or its instrumentality and not subject to a Deed of Trust.‖ Offering of Buildings to residents is not in the statute [it appears to be in the statute at 1437p(c)]; should be clarified. Eligible resident organization and resident council not defined in statute. Definitions need to be clarified. Suggests a PHA can tear down without HUD approval as long as the PHA doesn’t intend to request HUD funds (similar ambiguity under 970.25). If a PHA demos/dispos without approval, it cannot get HUD funds to pay for demo (also 970.5 [unclear reference]). This needs to be clarified. Does this mean HAs can demo at will if they don't need HUD funds? Are (1) through (16) required by statute? (17) is excessively vague. (a)(6) Can’t HUD accept a certification that the PHA is following their relocation rules rather than require a plan? Replace ―consider‖ with ―approve.‖ "HUD will approve…" Delete paragraph unless it is a statutory requirement. (c) Statute uses the term eligible resident organizations but doesn’t define them.
Page 16 of 26 970 Regs and Statutes

4 5

1437p(c)

6

970.7(a) | 970.25(a)

7 8 9 10 11

970.7(a) 970.7(a)(6) 970.7(b)(1) 970.7(b)(2) 970.9

DAR II

Development and Asset Repositioning Group II: Ideas for Streamlining Processes: 24 CFR 970 Regulatory/Statutes
Regulation and/or No. Statute Reason for Change & Value Added

Ideas
(a), (b), and (c) appear to be statutory; (d) has a level of detail that appears to be necessary if a demo/dispo approval is challenged in retrospect, for example. Why do we need the level of micro-management detailed by this section? In favor of eliminating whole section. How can HUD order a PHA to sell the PHA’s property to someone? While HUD may not have a legal obligation to provide operating subsidy, it doesn’t own the site. Does the statute require this? Reference to obsolescence: The form is more specific than the regs. A PHA could make progress toward demo following just the regs and then realize that the form is more detailed; form material should perhaps be incorporated in the regs. Easier to have dispo approved by grant managers if project is a HOPE VI, but could this raise statutory issues? Use of net proceeds is not as clear as HUD’s latest interpretation, according to the form. Define fair market value in terms of a willing seller and willing buyer who are both informed. Add ―operating subsidy, property reserves‖.

Other Comments

12

970.11

13

14

970.11(h)

15

970.13

16

970.15

17 18 19 20

970.17 970.19 970.19 970.21(c)(1)

21

Why require "a schedule for the relocation of those residents [of occupied units at the time of demo/dispo application approval] on a 970.21(d)(2) month-by-month basis"? This is a guesstimate at best. 970.23 Add: ―its operating subsidy, property reserves‖ Add "written" to read: ―A PHA may not take any action to demolish or dispose of a public housing development or a portion of a public housing development without obtaining written HUD approval under this part.‖

22

23

970.25(a)

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Development and Asset Repositioning Group II: Ideas for Streamlining Processes: 24 CFR 970 Regulatory/Statutes
Regulation and/or No. Statute Reason for Change & Value Added

Ideas
Language talks about not re-renting on turnover while HUD is considering application. HUD form seems to ask questions about rerental timing. Form and regs. don’t seem to match and maybe they should. HUD should clarify. A PHA demolished part of a site and had approval outside of HOPE VI; 84 units were demolished 84 and the PHA was allowed to put back 82. The ―significantly fewer‖ requirement is statutory (1437(p)(d)). How do design criteria relate to ―significantly fewer‖ requirement? Unclear. What if a PHA is tearing down 50 largebedroom units and replacing them with 50 smaller-bedroom units? Density is reduced, but with same number of units. So this language is too vague, not helpful. Also, the mix of units in the new development may be different from the mix of units in the old development. This could conflict with any congressional action to require one-for-one replacement. An additional suggestion for comments on 24 C.F.R. Part 970 arising out a court case, Owens v. Charleston House. Auth., 336 F.Supp.2d 934 (E.D.Mo. 2004): This case did not involve the demolition & disposition regulations generally, but was sort of sui generis -- the housing authority owned a FmHA mortgaged Section 8 project-based development, and had chosen to vacate & demolish the development The court found that under 42 U.S.C.. 1437c-1(d)(15), the PHA had a duty to affirmatively further fair housing, and that there was credible evidence that the loss of the development would have a disproportionate impact on African-Americans.

Other Comments

24

25

970.31

26

General comment

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Development and Asset Repositioning Group II: Ideas for Streamlining Processes: 24 CFR 970 Regulatory/Statutes
Regulation and/or No. Statute Reason for Change & Value Added

Ideas
The court noted that the decision to vacate and demolish the development should not be done without an analysis of the racial effect of the decision or an investigate of alternative options to demolishing the development. Applying this reasoning to demolition and disposition, a PHA should, when it is proposing demolition and/or disposition, determine what racial impact its action is likely to have, and consider alternative options that might lessen this impact. I understand this is just one comment, and may not be something that others in the focus group would agree on as a proposed change.

Other Comments

DAR II

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Development and Asset Repositioning Group II: Ideas for Streamlining 971 Processes Regulation and/or Statute Reason for Change & Value Added

No.

Ideas

Other Comments

1

971.3 Standards Follows the statute quit closely. Will this be changed due to asset for identifying management? developments.

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971 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 971 Regulations/Statute Procedure and Related Reg
971.1 Remove/update obsolete terms. All seems to ID projects: is this yearly or once it’s done, it’s done. (Note: this reg was ―rescinded‖ by QHWRA; however, those PHAs with approved plans under this reg are still covered.) SAC IDs cluster of units; those units need to be dealt with. HUD form on occupancy not used anymore; update. Regs don’t lend themselves to making changes. 971.5 There is only one TDC

No.
1 2 3 4 5 6 7

Ideas

Reason for Change & Value Added

Other Comments

971.3

Methodology of Comparing Cost of Public Housing With Cost of Tenant-Based Appendix to Part 971 Assistance: Does this appendix comport with the comparable cost theory?

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Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 972 Processes No. Procedure and Related Reg
None

Ideas

Reason for Change & Value Added

Other Comments

DAR II

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972 Processes

Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 972 No. Regulation and/or Statute
972.1
1

Ideas
―Other affordable housing‖ could be subject to a variety of interpretations. Should instead use the term from the statute, i.e., that the housing is comparable in terms of rental rate to the original unit. See 1437z5(d)(2)(ii). The term ―project based assistance‖ is not defined in the regulation or the statute, and should be. Could a PHA have the option of having the tenantbased assistance be Project-Based Vouchers from the inception? If so, do full PBV regulations apply? Nothing in the statute seems to require an annual assessment of mandatory conversions, and this is burdensome for PHAs. Could this be done every 3 years? Every 5 years? This discusses HOPE VI, but doesn’t discuss other types of mixed finance development. Does this definition work? Is it too broad? Too narrow? Any possibility for streamlining, so as to avoid duplicative or burdensome submissions? (It’s understood that the HOPE VI proposal and the conversion proposal will need to be consistent). Probably the term ―these‖ is not meant here, and should instead say ―those‖ (since this is referring to different regulatory requirements in 24 CFR Part 971). (b)(1) Where did the specific vacancy rate figures come from? It may make sense to push back the date to switch from the higher vacancy threshold to the lower threshold to match with the date of Asset Management implementation (2011 instead of 2009). (b)(2), Additional exceptions should be included, consistent with the Operating Fund rule: (a) vacancies due to litigation; (b) vacancies being addressed through scheduled modernization work [although this may be caught already in the lead-in description]; (c) units being held vacant for relocation purposes; and (d) units which are vacant due to 504 work (which may or may not be part of litigation). (c)(1): The phrasing here is slightly different than the statute, and probably the statutory phrase should be used. Statute uses ―reasonable modernization expenses‖ , rather than ―reasonable revitalization‖ (and revitalization can be subject to a range of interpretations). Moreover, the statute also says ―or other measures‖, raising the possibility that a PHA could demonstrate other ways in which long-term viability can be achieved, and that the list here is not exclusive. See 1437z-5(a)(3)(A).

Reason for Change & Value Added

Other Comments

972.103
2

3

972.106

4

972.115

5

972.121

6

972.124

7

8

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Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 972 No. Regulation and/or Statute Ideas
As written, it makes it appear that a PHA must show all of this. However, that doesn’t appear to be what the statute says. The factors in (b) and (c) should only be relevant if the housing is distressed (measured by costs or vacancies), and then only to show that the PHA has a strategy to insure viability through density reduction or greater income mix. The burden on PHAs should be limited to what's in the statute. Should cross-reference to 972.112, so that PHAs are reminded when compliance with URA is mandated (for demolition) and when not (if simple disposition), or to some overall relocation reference that applies to all of the development & asset repositioning regulations. Moreover, if a PHA is utilizing other funding which would trigger additional URA or relocation requirements (such as CDBG, HOME, etc.), PHAs should be advised of this in the regulation to avoid making costly mistakes. Question was asked, how does this differ, if at all, from the normal relocation plan? Under (b)(4)(ii), the same issues as above for ―projectbased assistance‖, and make sure ―comparable‖ is defined, as in statute, with reference to the rental rate for the original unit; term ―affordable housing‖ may create some ambiguity. Suggestion was made that the term ―suitably sized‖ be added, so that it is clear that the PHA need not replicate exact unit sizes if they are not what families require (i.e., existing residents may be over-housed or underhoused). Same issues as above about ―project based assistance‖, ―affordable housing‖, and making such that the term ―comparable‖ is defined in a manner similar to statute (i.e., with reference to the rental rate of the original unit). Add the term ―suitably sized‖. HUD: need to answer the question of whether a tenant who moves with tenant-based assistance and pays more than 30% of income has ―comparable‖ unit. Likely answer is yes, since this is tenant choice, as long as tenant had the option of relocating to a unit where the rent would not exceed 30% of income.

Reason for Change & Value Added

Other Comments

9

972.127

10

970.130(b):

HUD: need to answer the question of whether a tenant who moves with tenant-based assistance and pays more than 30% of income has ―comparable‖ unit. Likely answer is yes, since this is tenant choice, as long as tenant had the option of relocating to a unit where the rent would not exceed 30% of income.

11

12

13

972.130(b)(4)(ii)

14

Question was also raised if the unit is ―comparable‖ where it’s tenant-based Section 8, since the tenant may end up paying more than 30% of adjusted income; likely answer is ―yes‖, because this is a matter of tenant choice as to whether to lease up a unit with a higher rent burden. On the other hand, the PHA may need to insure that the range of units offered give tenants an opportunity to find units where they don’t have to exceed 30% of income if they don’t want to. Question best directed to HUD. 972.133 What does the term ―appropriate public officials‖ mean?

15

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972 Regs Statutes

Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 972 No. Regulation and/or Statute Ideas
The statute also includes a provision for cessation of payments to the PHA, but with an exception if this could create a health/safety risk for residents—useful to incorporate that here. In addition, the statute includes a provision that a PHA may be required to provide additional information to HUD or its residents necessary for the administration of the program, and it would be helpful to include this in the regulation. See 1437z-5(e) and (h)(1). Same issue as above regarding ―project-based assistance‖. Moreover, this statute, too, includes comparability measured by the rental rate of the original unit. See 1437t(d)(4). Haven’t all the required initial assessments been done? If so, is this just here for historic references, or to capture conversions underway as a result of such initial assessments. See 1437t(b)(2). In (a), language can be changed since the cost methodology has now been developed (in the Appendix). In (c)(2), reference to ―certificates‖ can be removed. In (d), the phrase ―to tenant-based assistance‖ should be added between ―conversion‖ and ―of the public housing development‖, so as to track the statute. See 1437t(b)(1)(B). In (d), significant comments to which the PHA should respond may come from residents, but it may come from other sources (government officials, others who’ve commented during the public process); phrase should be revised to say ―resident or other‖. In (g)(4)(ii), here again, should be made clear that the ―comparable‖ is in comparison to the rental rate for the original unit, and may also want to add the phrase ―suitably sized‖. Concern raised that the provision on approval due to lapse of time could be a problem where a conversion plan is flawed but HUD staff may not have caught it in time (due to reduced staffing, etc.)—nothing in the statute to provide for this, and it could raise major resident concerns. There should be a time period for HUD to either act or to send back specific concerns/questions, and the 90-day period should work.

Reason for Change & Value Added

Other Comments

16

972.137

17

972.203

18

972.206

19

972.218

20

972.230

21

972.236

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Development and Asset Repositioning Group II: Ideas for Streamlining 24 CFR 972 No. Regulation and/or Statute Ideas
Question whether the Operating Costs provision here is consistent with Asset Management, since there should now be accurate site-based figures. Also question of what ―reliable‖ cost data is and who makes that determination, as well as how units under scheduled modernization, etc. are treated. The whole section should be analyzed in light of new Operating Subsidy rule. It was also noted, in Section II., that the statute refers to the cost of Section 8 assistance being calculated ―based on a net present value basis and in terms of new budget authority requirements‖. See 1437t(b)(1)(A). It’s not clear exactly what this means, but if this would have some positive effect on how PHAs are treated, it should be factored into the calculation.

Reason for Change & Value Added

Other Comments

22

Appendix

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972 Regs Statutes


				
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