Economic Growth, Regulatory Relief, and Consumer Protection Act: Initial Guidance on Property Inspections and Environmental Reviews

Published date27 February 2020
Citation85 FR 11381
Record Number2020-04004
SectionNotices
CourtHousing And Urban Development Department
Federal Register, Volume 85 Issue 39 (Thursday, February 27, 2020)
[Federal Register Volume 85, Number 39 (Thursday, February 27, 2020)]
                [Notices]
                [Pages 11381-11384]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-04004]
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                DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                [Docket No. FR-6115-N-02]
                Economic Growth, Regulatory Relief, and Consumer Protection Act:
                Initial Guidance on Property Inspections and Environmental Reviews
                AGENCY: Office of the Assistant Secretary for Public and Indian Housing
                (PIH), Department of Housing and Urban Development (HUD).
                ACTION: Notice.
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                SUMMARY: Section 209 of the Economic Growth, Regulatory Relief, and
                Consumer Protection Act (the ``Economic Growth Act'') added section 38
                to the United States Housing Act of 1937 and makes several amendments
                pertaining to small public housing agencies (PHAs). This notice
                explains how HUD designates small PHAs and implements section 209
                provisions that reduce regulatory burden on small PHAs by reducing the
                number of inspections required for units with section 8(o) voucher
                assistance, and providing an exemption from environmental review
                requirements for development and modernization projects that have a
                total cost of not more than $100,000. This notice also identifies the
                small PHAs that are eligible for this section 209 regulatory relief.
                DATES: February 27, 2020.
                FOR FURTHER INFORMATION CONTACT: If you have any questions, please
                contact the following people in HUD's Office of Public and Indian
                Housing (none of the phone numbers are toll-free): Harold Katsura,
                (202) 402-3042, for general questions; and Justin Gray, (202) 402-3721,
                for questions regarding the environmental review exemption. The address
                for both individuals is: Department of Housing and Urban Development,
                451 7th Street SW, Washington, DC 20410. Persons with hearing or speech
                impairments may access these numbers through TTY by calling the Federal
                Relay at 800-877-8339 (this is a toll-free number).
                SUPPLEMENTARY INFORMATION:
                I. Background
                 On May 24, 2018, President Trump signed into law the Economic
                Growth Act (Pub. L. 115-174, 132 Stat. 1296).\1\ The purpose of the
                Economic Growth Act is to promote economic growth, provide tailored
                regulatory relief, and enhance consumer protections. Section 209 of the
                Economic Growth Act added section 38 to the United States Housing Act
                of 1937 (42 U.S.C. 1437 et seq.) and made several amendments pertaining
                to small PHAs, which for the purposes of section 38, are PHAs that
                administer 550 or fewer combined public housing units and vouchers
                under section 8(o), and predominantly operate in a rural area as
                described in 12 CFR 1026.35(b)(2)(iv)(A). These provisions streamline
                certain requirements related to program inspections and evaluations,
                corrective action requirements, environmental reviews, and energy
                conservation funding and financing requirements. Certain statutory
                amendments made by section 209 became effective 60 days after enactment
                (July 23, 2018). However, while effective, some of the provisions
                require rulemaking or guidance for implementation.
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                 \1\ The text of the Economic Growth Act, along with a summary
                prepared by the Congressional Research Service, can be found at
                https://www.congress.gov/bill/115th-congress/senate-bill/2155.
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                 HUD published a notice in the Federal Register on February 14,
                2019, entitled ``Section 209 of the Economic Growth, Regulatory Relief,
                and Consumer Protection Act: Initial Guidance'' which, read together
                with the statutory language, was intended to aid HUD program
                participants and the public in understanding the reasons for deferred
                action with respect to specific statutory provisions. See 84 FR 4097.
                HUD also used the notice as an opportunity to seek public comment on
                the implementation of the section 209 provisions, including the
                definition of a small PHA.
                II. Public Comments Regarding the Small PHA Definition
                 Clarification of ``predominantly operates in a rural area.''
                Commenters responded to several options. A PHA could be deemed to
                predominantly operate in a rural area if one or more of the following
                conditions apply: (1) The physical address of the PHA's main
                administrative office is in a rural area (a PHA-based definition); (2)
                more than 50 percent of the buildings occupied by voucher beneficiaries
                and public housing residents are in rural areas (a building-based
                definition); or (3) more than 50 percent of the tenants served live in
                rural areas (a household-based definition). One commenter recommended
                that the term be interpreted to mean an agency where at least 50
                percent of households assisted through public housing and voucher
                programs live in rural areas. The commenter preferred this household-
                based definition because a PHA-based definition would conflict with the
                meaning of ``predominantly operates'' and a building-based definition
                would give the same weight to a building regardless of whether it
                contained one or many voucher holders.
                 Two commenters stated that HUD should interpret this statement as
                broadly as possible and utilize all three definitions, so that as many
                PHAs as possible can take advantage of administrative streamlining. One
                of these commenters continued by stating that if HUD could not
                implement this definition, it should adopt a definition using the
                location of an agency's address, which would be easy to implement and
                would not change frequently.
                 Response. HUD's interpretation of the statutory language is
                consistent with the commenters' desire for an expansive definition that
                considers both the physical location of the agency's administrative
                office (a PHA-based definition) and the location of the tenants it
                serves (a household-based definition).
                 Unit Counts. One commenter recommended that HUD should exclude
                special purpose vouchers in the unit count, as well as units converted
                to Project-Based Rental Assistance (PBRA) through the Rental Assistance
                Demonstration (RAD) program.
                 Response. HUD agrees that units that have converted to section 8
                PBRA through the RAD program should not be included because this
                assistance is not covered by section 8(o) of the United States Housing
                Act of 1937. However, HUD is including special purpose vouchers in the
                unit count as they are funded under the tenant-based rental
                [[Page 11382]]
                assistance account and are generally governed by section 8(o)
                requirements.
                 Periodic reassessment of a PHA's small PHA status. One commenter
                noted that reassessments need to be balanced, stating that if they are
                too frequent, they would be disruptive, while failing to make
                reassessments frequently enough could lead to widely inaccurate
                designations. The commenter suggested conducting reassessments every
                five years.
                 Another commenter suggested that HUD reassess the rural nature of
                each PHA regularly and reasonably based on how often the national data
                is updated, and that PHAs should be allowed to reassess the status of
                their own agencies based on updated data from the Office of Management
                and Budget, the U.S. Census Bureau, the U.S. Department of
                Agriculture's Economic Research Service, as well as updated unit data
                at the individual agency level.
                 Two commenters further suggested that PHAs which gain ``small
                agency'' status should be able to retain that definition indefinitely,
                so that the number of small agencies would only increase at each
                reassessment, never decrease. One of these commenters stated that
                alternatively the designations should be reassessed every ten years.
                This commenter also proposed sample regulatory language that would base
                the small PHA designation on all three criteria that were offered as
                examples in the notice and make the designations permanent.
                 Response. HUD appreciates the public's input on this topic. The
                method for reassessing a PHA's small PHA status will be determined
                through rulemaking. The small PHA designations announced in this notice
                will remain in effect until a reassessment procedure is implemented.
                 General comment. One commenter stated that HUD should consider
                consistency among similarly sized nearby agencies rather than strict
                adherence to meeting the rural requirement when determining small PHA
                eligibility. Doing so would ensure that similarly sized nearby agencies
                would receive consistent treatment and significantly expand the
                streamlining provisions to many more agencies.
                 Response. HUD understands that the size of a PHA's operations can
                be more significant than the rural nature of the PHA's operations as
                this relates to the need for burden relief. Congress, however, decided
                to not extend relief based on program size alone and, instead, produced
                statutory language requiring a focus on rural areas.
                III. Definition of Small Public Housing Agencies
                 Section 38 defines the term ``small public housing agency'' as a
                public housing agency ``for which the sum of the number of public
                housing dwelling units administered by the agency and the number of
                vouchers under section 8(o) administered by the agency is 550 or
                fewer'' and ``that predominantly operates in a rural area, as described
                in section 1026.35(b)(2)(iv)(A) of title 12, Code of Federal
                Regulations.'' After consideration of the public comments discussed
                above, HUD is interpreting ``predominantly operates in a rural area''
                to mean a small PHA that:
                 (1) Has a primary administrative building with a physical address
                in a rural area as described in 12 CFR 1026.35(b)(2)(iv)(A); or
                 (2) more than 50 percent of its combined public housing units and
                voucher units under section 8(o) are in rural areas as described in 12
                CFR 1026.35(b)(2)(iv)(A). HUD also clarifies that voucher units under
                section 8(o) include those in the tenant-based Housing Choice Voucher
                (HCV) program and the Project-Based Voucher (PBV) program.
                 To avoid confusion with other small PHA definitions that HUD uses,
                small PHAs for purposes of section 38 will be referred to as ``small
                rural PHAs'' in the remainder of this notice. HUD will post a list of
                PHAs meeting the small rural PHA definition at: https://www.hud.gov/program_offices/public_indian_housing/pha/lists. The list is based on
                data that was available to HUD on January 14, 2020.
                 Small rural PHAs may receive the inspection and environmental
                review administrative relief provided by section 38.\2\ As noted in its
                February 14, 2019 Federal Register notice, HUD will be undertaking
                rulemaking for the full implementation of section 38. Included in that
                rulemaking will be the definition of small rural PHA.
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                 \2\ The burden-reducing provisions covering the frequency of
                inspections for units with voucher housing assistance as described
                in section 38(c)(2), and the exemption from environmental review
                requirements as described in section 38(d)(1), are self-implementing
                in nature. The statutory language covering inspection frequency
                (i.e., at least once every 3 years for voucher units) does not
                provide HUD with discretion. Congress explicitly stated the need for
                rulemaking for section 38(d)(2) which establishes streamlined
                procedures for environmental reviews of development and
                modernization projects having a total cost of more than $100,000. In
                contrast, Congress did not state there was a need for rulemaking for
                section 38(d)(1), which provides an exemption from environmental
                review requirements for development or modernization projects having
                a total cost of not more than $100,000. HUD believes this difference
                in statutory language makes section 38(d)(1) self-implementing.
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                IV. Small Rural PHA Designation Methodology
                 The process for identifying small rural PHAs consists of two main
                steps: (1) Identifying the number of PHAs that meet the size criteria
                based on the number of public housing units and the number of vouchers
                they administer; and (2) applying the rural definition to this
                population. Small rural PHAs are PHAs that administer 550 or fewer
                combined public housing units and vouchers under section 8(o), and
                predominantly operate in a rural area. A small rural PHA may be a
                public housing-only PHA or a voucher-only PHA so long as it does not
                administer more than a total of 550 units.
                 HUD determined the size of a small rural PHA using the same
                methodology that it uses to identify unit counts for a ``qualified
                public housing agency'' under the Housing and Economic Recovery Act of
                2008 (HERA).\3\ Like a small rural PHA, a qualified PHA under HERA is a
                PHA that administers 550 or fewer combined public housing units and
                vouchers under section 8(o). The public housing and voucher unit counts
                come from HUD's Inventory Management System/PIH Information Center
                (IMS/PIC).
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                 \3\ For the purposes of section 5A(b)(3) of the United States
                Housing Act of 1937, section 2702 of the Housing and Economic
                Recovery Act of 2008 (Pub. L. 110-289) defined a ``qualified public
                housing agency'' as a public housing agency that meets the following
                requirements: (1) The sum of the number of public housing dwelling
                units administered by the agency and the number of vouchers under
                section 8(o) of the United States Housing Act of 1937 (42 U.S.C.
                1437f(o)) administered by the agency, is 550 or fewer; and (2) the
                agency is not designated under section 6(j)(2) as a troubled PHA,
                and does not have a failing score under the section 8 Management
                Assessment Program (SEMAP) during the prior 12 months. The small PHA
                definition for section 38 does not use the second part of the
                qualified PHA definition pertaining to troubled status or having a
                failing SEMAP score.
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                 The Economic Growth Act directs HUD to use an existing definition
                for a rural area. This definition is contained in the regulations
                governing the Consumer Financial Protection Bureau (CFPB) at 12 CFR
                1026.35(b)(2)(iv)(A). An area is considered rural during a calendar
                year if it is:
                 (1) A county that is neither in a metropolitan statistical area nor
                in a micropolitan statistical area that is adjacent to a metropolitan
                statistical area, as those terms are defined by the U.S. Office of
                Management and Budget and as they are applied under currently
                applicable Urban Influence Codes (UICs), established by the United
                States
                [[Page 11383]]
                Department of Agriculture's Economic Research Service (USDA-ERS); or
                 (2) a census block that is not in an urban area, as defined by the
                U.S. Census Bureau using the latest decennial census of the United
                States.\4\
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                 \4\ The CFPB regulations contain a third rural criteria that is
                no longer in effect: ``(3) A county or a census block that has been
                designated as rural by the Bureau pursuant to the application
                process established under section 89002 of the Helping Expand
                Lending Practices in Rural Communities Act, Public Law 114-94, title
                LXXXIX (2015). The provisions of this paragraph (b)(2)(iv)(A)(3)
                shall cease to have any force or effect on December 4, 2017.''
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                 CFPB provides an updated list of rural counties on its website each
                year. HUD used this list along with census block data to identify which
                areas are rural.
                 To determine which PHAs predominantly operate in rural areas, HUD
                matched geo-coded office locations, geo-coded public housing unit
                locations, and geo-coded addresses of voucher units with the rural
                county and census block data. Based on the definition provided in this
                notice, a PHA predominantly serves rural areas if:
                 (1) The physical address of the PHA's primary administrative
                building is in a rural county or census block; or
                 (2) the PHA's physical address is in a non-rural county or census
                block, but more than 50 percent of its public housing units and voucher
                units are in rural counties or census blocks.
                 The over 50 percent threshold applies to the combined total of
                public housing units and voucher units. The list of PHAs meeting the
                small rural PHA definition is available at: https://www.hud.gov/program_offices/public_indian_housing/pha/lists. HUD is making the
                designations based on the most recent data available on January 14,
                2020.
                V. Appeals
                 A PHA may appeal its designation or non-designation as a small
                rural PHA. Only appeals for technical reasons are allowed. A technical
                reason involves computation mistakes, missing data, or incorrect data.
                HUD may not consider data that was missing or incorrect due to a PHA's
                lack of compliance with data submission policies, nor will HUD consider
                PHA-submitted data that is different from what HUD used to make the
                designations because the data refers to a different time period.
                Appeals should be submitted to: U.S. Department of Housing and Urban
                Development/PIH/REAC, Attn: Technical Assistance Center, 550 12th
                Street SW, Suite 100, Washington, DC 20410.
                VI. Inspection Frequency for Section 8(o) Voucher Units
                 As of the effective date of this notice, small rural PHAs
                administering voucher rental assistance under section 8(o) must make
                periodic physical inspections of dwelling units at least once every
                three years.\5\ This flexibility is applicable only to periodic unit
                inspections conducted during the period a participant lives in a unit.
                A PHA is still required to conduct initial and interim inspections in
                accordance with 24 CFR 982.405.\6\ For project-based vouchers, 24 CFR
                983.103 provisions, as modified by the Housing Opportunity Through
                Modernization Act of 2016, continue to apply except that the random
                sample inspection requirement at 24 CFR 983.103(d) applies every three
                years instead of every two years.
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                 \5\ This supersedes previous guidance provided in PIH Notice
                2016-5 that allowed biennial inspections. The Section 8 Management
                Assessment Program (SEMAP) module will now accept inspection dates
                up to three years since the last inspection.
                 \6\ Interim inspections include those required when a
                participant family or government official reports a condition that
                is life-threatening (where the PHA must inspect the unit within 24
                hours of notification) or not life-threatening (where the PHA must
                inspect the unit within 15 days of notification).
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                 Small rural PHAs cannot begin using a three-year inspection
                interval until after the next currently scheduled inspection is carried
                out. For example, if a unit is currently subject to a two-year
                inspection regime, and one year has passed since its last inspection,
                its next inspection will still take place next year. After that
                inspection is completed, the next periodic inspection of the unit may
                occur up to three years in the future.
                 HUD or PHAs must continue to conduct lead safety inspections when
                applicable in accordance with the Lead-Based Paint Poisoning Prevention
                Act (42 U.S.C. 4822). These provisions emphasize following existing
                requirements and therefore do not require further action for
                implementation.\7\
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                 \7\ Safety inspection requirements under the Lead-Based Paint
                Poisoning Prevention Act can be found at: https://www.gpo.gov/fdsys/pkg/USCODE-2009-title42/html/USCODE-2009-title42-chap63-subchapIII-sec4822.htm.
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                VII. Reduction of Administrative Burdens--Environmental Review
                Exemption
                 The Economic Growth Act creates a new section 38(d)(1) which
                exempts small rural PHAs from any environmental review requirements
                with respect to development or modernization projects costing no more
                than $100,000. As required in section 38(d)(2), HUD will undertake
                rulemaking to establish streamlined procedures for environmental
                reviews for projects costing more than $100,000. This notice implements
                only the section 38(d)(1) statutory exemption from environmental
                review. This statutory exemption from environmental review applies to
                any section 9(d) Capital Fund, section 9(e) Operating Fund or section
                8(o)(13) Project Based Voucher (PBV) eligible work activity by a small
                rural PHA at a project site with a project cost of $100,000 or less.
                 Environmental reviews are processed for compliance with the
                National Environmental Policy Act (NEPA) and related laws and
                authorities. The level of review varies depending on the scope of work
                and the conditions of the property. Environmental review requirements
                for PHAs are explained in PIH Notice 2016-22. Many routine activities
                carried out by small rural PHAs are already determined not subject to
                environmental review and did not require environmental review prior to
                this statutory exemption. The tenant-based HCV program and many routine
                administrative and operational activities are already categorically
                excluded not subject to further environmental review.
                 When PHA activities require environmental review, the reviews are
                under either 24 CFR part 58 (``Part 58 Reviews'') or under 24 CFR part
                50 (``Part 50 Reviews''). Part 58 applies when a Responsible Entity
                (RE) conducts the environmental review, and Part 50 applies when HUD
                conducts the environmental review. A unit of general local government
                or state that performs environmental reviews is referred to as the RE
                and holds jurisdictional authority for the community in which the PHA
                project site is located. The role of REs and agreements between PHAs
                and REs are explained in PIH Notice 2013-07. PHA activities are
                generally reviewed under Part 58 by an RE. For the section 38(d)(1)
                exempt activities, eligible PHAs may carry out activities without a
                request for an environmental review or determination from an RE or HUD.
                 An environmental review is conducted at a project site level. A
                project site consists of buildings or other improvements and parcels of
                land that logically group together as a single and cohesive setting.
                Since environmental conditions vary from one geographic area to the
                next, each separate public housing project site is subject to a
                separate environmental review. An asset management project (AMP)
                development can include a single environmental review project site or
                multiple environmental review project
                [[Page 11384]]
                sites if the AMP properties do not all logically group together based
                on proximity. Project aggregation and grouping of scattered sites are
                explained in PIH Notice 2016-22 as well as 24 CFR 58.32 and 24 CFR
                50.21. The project cost threshold of $100,000 or less for the exemption
                is measured at the environmental project site level and includes the
                total cost of the project.
                 An activity is an action the PHA puts forth as part of an assisted
                or to be assisted project. The most common activities involve section
                9(d) Capital Fund and section 9(e) Operating Fund formula assistance. A
                small portion of the PHAs identified as eligible in this notice operate
                only a Section 8(o) voucher program, and a more limited segment of the
                eligible small and rural PHAs administer a PBV program. For a PHA that
                only operates a tenant-based HCV program, these activities are already
                categorically excluded and not subject to further environmental review,
                and section 38(d) offers no additional regulatory or administrative
                burden relief. PBV activities are the only section 8(o) activities that
                require an environmental review. The environmental review of PBV
                activities is a one-time review required before the PBV housing is
                approved to be placed under a Housing Assistance Payments Contract
                (HAP). After the one-time review for placement of PBV, there is no
                requirement for continued environmental reviews for ongoing activities
                at PBV properties. The section 38(d)(1) exempt PBV activities are
                infrequent and limited to PBV housing placement with a project cost of
                $100,000 or less prior to being placed under a HAP contract.
                 Small rural PHAs eligible for the statutory exemption that also
                have less than 250 public housing units have full flexibility of use of
                Capital Funds and Operating Funds as explained in PIH Notice 2016-18.
                The environmental statutory exemption is not based on the funding
                source and applies to all eligible Capital Fund, Operating Fund and PBV
                activities with a total project cost of $100,000 or less.
                 The statutory exemption from environmental review applies to any
                section 9(d) Capital Fund, section 9(e) Operating Fund or section
                8(o)(13) PBV eligible work activity by a small rural PHA at a project
                site with a project cost of $100,000 or less. The environmental
                statutory exemption provided by section 38(d)(1) exempts this work
                activity from NEPA and related laws and authorities. The flood
                insurance requirements of the Flood Disaster Protection Act of 1973, as
                amended (42 U.S.C. 4001), and the funding prohibitions of the Coastal
                Barrier Resources Act, as amended (16 U.S.C. 3501), remain applicable.
                The exemption is available as of the effective date of this notice.
                 Dated: February 13, 2020.
                R. Hunter Kurtz,
                Assistant Secretary for Public and Indian Housing.
                [FR Doc. 2020-04004 Filed 2-26-20; 8:45 am]
                BILLING CODE 4210-67-P
                

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