Housing Opportunity Through Modernization Act of 2016: Implementation of Sections 102, 103, and 104

Published date17 September 2019
Citation84 FR 48820
Record Number2019-19774
SectionProposed rules
CourtHousing And Urban Development Department
Federal Register, Volume 84 Issue 180 (Tuesday, September 17, 2019)
[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
                [Proposed Rules]
                [Pages 48820-48842]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-19774]
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                DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                24 CFR Parts 5, 92, 93, 574, 960, 966, 982
                [Docket No FR-6057-P-01]
                RIN 2577-AD03
                Housing Opportunity Through Modernization Act of 2016:
                Implementation of Sections 102, 103, and 104
                AGENCY: Office of the Assistant Secretary for Public and Indian
                Housing, Office of the Assistant Secretary for Housing-Federal Housing
                Commissioner, and Office of the Assistant Secretary for Community
                Planning and Development, HUD.
                ACTION: Proposed rule.
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                SUMMARY: The Housing Opportunity Through Modernization Act of 2016
                (HOTMA) was enacted on July 29, 2016. This proposed rule would revise
                HUD regulations to put sections 102, 103, and 104 of HOTMA into effect.
                These sections make sweeping changes to the United States Housing Act
                of 1937, particularly those affecting income calculation and reviews.
                Section 102 changes requirements pertaining to income reviews for
                public housing and HUD's Section 8 programs. Section 103 modifies the
                continued occupancy standards of public housing residents whose income
                has grown above the threshold for initial eligibility. Section 104 sets
                maximum limits on the assets that families residing in public housing
                and Section 8 assisted housing may have. Additionally, section 104
                provides that HUD must direct public housing agencies to require that
                all applicants for and recipients of assistance through HUD's public
                housing or Section 8
                [[Page 48821]]
                programs provide authorization for public housing agencies to obtain
                financial records needed for eligibility determinations. In addition to
                amending regulations for HUD's public housing and Section 8 programs,
                this proposed rule would change regulations of other HUD programs that,
                for consistency, adopted regulations of programs that are based on
                statutory provisions amended by sections 102 and 104. Therefore, this
                rule makes changes that affect HUD's HOME Investment Partnerships,
                Housing Trust Fund, and Housing Opportunities for Persons With AIDS
                programs, as well as HUD's public housing and Section 8 programs.
                DATES: Comment Due Date: November 18, 2019.
                ADDRESSES: Interested persons are invited to submit comments regarding
                this proposed rule. Copies of all comments submitted are available for
                inspection and downloading at www.regulations.gov. To receive
                consideration as public comments, comments must be submitted through
                one of the two methods specified below. All submissions must refer to
                the above docket number and title.
                 1. Electronic Submission of Comments. Interested persons may submit
                comments electronically through the Federal eRulemaking Portal at
                www.regulations.gov. HUD strongly encourages commenters to submit
                comments electronically. Electronic submission of comments allows the
                commenter maximum time to prepare and submit a comment, ensures their
                timely receipt by HUD, and enables HUD to make them immediately
                available to the public. Comments submitted electronically through the
                www.regulations.gov website can be viewed by other commenters and
                interested members of the public. Commenters should follow the
                instructions provided on that site to submit comments electronically.
                 2. Submission of Comments by Mail. Comments may be submitted by
                mail to the Regulations Division, Office of General Counsel, Department
                of Housing and Urban Development, 451 7th Street SW, Room 10276,
                Washington, DC 20410-0500.
                FOR FURTHER INFORMATION CONTACT:
                 Public Housing, Housing Choice Voucher (including project-based
                vouchers), and moderate rehabilitation programs, at
                [email protected].
                 Multifamily Housing programs: Kate Nzive, Director, Assisted
                Housing Oversight Division, Office of Multifamily Housing, at
                [email protected].
                 HOME Investment Partnerships and Housing Trust Fund programs:
                Virginia Sardone, Director, Office of Affordable Housing Programs,
                Office of Community Planning and Development, at 202-708-2684.
                 Housing Opportunities for Persons With AIDS program: Rita Flegel,
                Director, Office of HIV/AIDS Housing, Office of Community Planning and
                Development, at 202-402-5374.
                 Persons with hearing or speech impairments may access the above
                telephone numbers through TTY by calling the Federal Relay Service,
                toll-free, at 800-877-8339.
                 The mailing address for each office contact is Department of
                Housing and Urban Development, 451 7th Street SW, Washington, DC 20410.
                SUPPLEMENTARY INFORMATION:
                I. Background
                 On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130
                Stat. 782). HOTMA makes numerous changes to statutes governing HUD
                programs, including sections 3, 8, and 16 of the United States Housing
                Act of 1937 (1937 Act). HUD issued a notice in the Federal Register on
                October 24, 2016, at 81 FR 73030, announcing which statutory changes
                made by HOTMA could be implemented immediately and which statutory
                changes require further action by HUD.
                 On November 29, 2016, HUD published another Federal Register notice
                (81 FR 85996), seeking public input on how HUD should determine the
                income limit for public housing residents, pursuant to section 103 of
                HOTMA, and this was followed by a July 26, 2018, notice (83 FR 35490)
                that made some provisions of section 103 of HOTMA effective. On January
                18, 2017, HUD published a Federal Register notice (82 FR 5458), that
                made multiple HOTMA provisions for the Housing Choice Voucher (HCV)
                program, unrelated to sections 102, 103, and 104, effective and
                solicited public comment on HUD's implementation methods. The
                conforming regulatory changes for the HCV program provisions
                implemented by the January 18, 2017, Federal Register notice are not
                part of this proposed rule and will be addressed through a separate
                rulemaking.
                 Many of the statutory provisions in HOTMA are intended to
                streamline administrative processes and reduce burdens on public
                housing agencies (PHAs) and private owners. Sections 102, 103, and 104
                of HOTMA require that HUD make changes to its regulations and take
                other actions--some of which will also reduce burdens on PHAs and
                private owners once implemented.
                A. HOTMA Section 102
                 Section 102 of HOTMA deals with income reviews in HUD's public
                housing and Section 8 programs. Section 102(a) amends section 3(a) of
                the 1937 Act to revise the frequency of family income reviews and the
                calculation of income and requires HUD, in consultation with other
                appropriate Federal agencies, to develop electronic procedures enabling
                PHAs to access income determinations for other Federal means-tested
                programs. Section 102(c) amends section 3(b) of the 1937 Act to change
                the definitions, for the public housing and Section 8 programs, of
                income and adjusted-income for each member of the household who is 18
                years or older and unearned income for each dependent who is less than
                18 years old. Section 102(d) amends section 8(o) of the 1937 Act, which
                authorizes the HCV Program, but existing HUD regulations already
                reflect the changes. Section 102(e) changes the definition of
                ``income'' to ``annual adjusted income'' for the Enhanced Voucher
                Program. Section 102(f) strikes the last sentence of paragraph (3) of
                section 8(c) of the 1937 Act, eliminating the requirement that reviews
                of family income shall be made no less frequently than annually for
                project-based housing. Under section 102(h), statutory amendments based
                on changes in section 102 are not effective until the beginning of the
                calendar year after HUD has issued a notice or regulation implementing
                the changes.
                 Some provisions in section 102 of HOTMA do not require regulatory
                changes and are not addressed in this proposed rule. Section 102(b)
                requires HUD to submit a certification letter to Congress regarding
                hardship exemptions to minimum monthly rent and does not amend the 1937
                Act or prompt changes to HUD regulations. Section 102(g)(1) states that
                HUD may make appropriate adjustments in the formula income of PHAs that
                experience a material and disproportionate reduction in rental income
                during the first year in which the provisions of this section are
                implemented. 24 CFR 990.110(c) currently provides that HUD will address
                secondary elements that will be used in the revised Operating Fund
                Formula through nonregulatory means, so this provision does not require
                a regulatory change. Section 102(g)(2) requires that HUD submit a
                report to Congress identifying and calculating the impact of changes
                made by sections 102 and 104 of HOTMA during each of the first 2 years
                after the
                [[Page 48822]]
                implementation of section 102. Section 102(i) requires HUD to conduct a
                study on the impact any decreased amount of deductions in income that
                result from the implementation of this section has on elderly and
                disabled families.
                B. HOTMA Section 103
                 Section 103 of HOTMA amends section 16(a) of the 1937 Act to place
                an income limitation on a public housing tenancy for families. The law
                requires that after a family's income has exceeded 120 percent of the
                area median income (AMI) (or a different limitation established by HUD)
                for 2 consecutive years, a PHA must terminate the family's tenancy
                within 6 months after the expiration of the 2-year period or charge the
                family a monthly rent equal to the greater of (1) the applicable Fair
                Market Rent or (2) the amount of monthly subsidy for the unit,
                including amounts from the operating and capital fund, as determined by
                regulations. For purposes of this proposed rule, the income limit
                established by HOTMA will be referred to as the ``over-income limit.''
                A PHA must notify a family of the potential changes to monthly rent 1
                year after the PHA determines that the family's income exceeds the
                over-income limit. Pursuant to section 3(a)(5) of the 1937 Act, the
                over-income limit does not apply in instances where a PHA operating
                fewer than 250 public housing units has admitted families with income
                exceeding the over-income limit, if the PHA is renting to those
                families because there are no income-eligible families on the PHA's
                waiting list or applying for public housing assistance. Each PHA must
                submit a report annually to HUD that specifies, as of the end of the
                year, the number of families residing in public housing with incomes
                exceeding the over-income limit and the number of families on the
                waiting lists for admission to public housing projects. Such reports
                must be publicly available.
                 The new language in section 16(a)(5) of the 1937 Act sets the over-
                income limit at 120 percent of the AMI. However, HUD can adjust the
                over-income limit if the Secretary determines that it is necessary due
                to prevailing levels of construction costs or unusually high or low
                family incomes, vacancy rates, or rental costs. On July 26, 2018, at 83
                FR 35490, HUD published a final notice in the Federal Register
                implementing HUD's methodology for determining the over-income limit by
                using the very low-income (VLI) \1\ level for the applicable area as
                the baseline and multiplying it by 2.4. Because VLI is preliminarily
                calculated as 50 percent of the estimated area median income for the
                family, in most cases this would result in a figure matching 120
                percent of the area median income. However, in areas where the VLI has
                been adjusted to account for high or low housing costs or to prevent it
                from being lower than 50 percent of the state, non-metro median family
                income, the final amount would result in an adjusted over-income limit
                as well.
                ---------------------------------------------------------------------------
                 \1\ HUD's income limits were developed by HUD's Office of Policy
                Development and Research and are updated annually. Information about
                HUD's income limits and HUD's methodology for adjusting income
                limits as part of the income limit calculation can be found at
                https://www.huduser.gov/portal/datasets/il.html.
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                C. HOTMA Section 104
                 Section 104 of HOTMA amends section 16 of the 1937 Act to set
                limits on the assets that families residing in public housing and
                families receiving assistance under section 8 of the 1937 Act may own.
                In addition to providing limitations on assets, this section defines
                the term ``net family assets'' and lists exclusions to the definition.
                The section allows for families to self-certify that they are not
                subject to the limitation on assets, under certain circumstances.
                Section 104 also grants PHAs and owners authority to not enforce the
                asset limitation, provided that the PHA or owner sets forth a policy to
                that effect in its PHA plan or in a plan adopted by the owner. Section
                104 also directs HUD to direct PHAs to require all applicants and
                recipients under the 1937 Act to authorize the PHA to obtain financial
                information needed in connection with a determination with respect to
                eligibility.
                II. This Proposed Rule
                A. Affected Programs and Housing Providers
                 HUD proposes to revise 24 CFR parts 5, 92, 93, 574, 960, and 982 in
                order to implement sections 102, 103, and 104 of HOTMA. Although
                sections 102, 103, and 104 amend the 1937 Act, which governs HUD's
                public housing and Section 8 programs, this proposed rule also aligns
                policies and procedures across program offices, where appropriate, to
                include programs that are administered by HUD's Office of Community
                Planning and Development, including the HOME Investment Partnerships
                (HOME), Housing Trust Fund (HTF), and Housing Opportunities for Persons
                With AIDS (HOPWA) programs. Alignment will reduce disparities between
                the programs and better simplify program administration for HUD
                grantees that manage multiple programs.
                B. HOTMA Section 102
                 Section 102 of HOTMA revises the definition in the 1937 Act of
                family income. Because a variety of programs use this definition, HUD
                offers the following chart showing which programs (other than public
                housing and the voucher programs) are affected by various changes to
                the income regulatory provisions in 24 CFR part 5:
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                 Housing trust fund
                 PBRA HOPWA (part 574) HOME (part 92) (part 93) 202/811
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                Net Family Assets Definition Yes (Sec. 983.4).... Yes, except the value Yes, or may use IRS Yes, or may use IRS Yes, or may use IRS
                 (5.603). of a home of a income definition income definition income definition
                 participant receiving (Sec. (Sec. (Sec. 891.105).
                 short-term mortgage 92.203(b)(1)). 93.151(b)(1)(i)).
                 or utility assistance
                 under Sec.
                 574.300(b)(6) or
                 other homeownership
                 assistance eligible
                 under HOPWA is
                 excluded (Sec.
                 574.310(f)(1)).
                Annual Income Definition (5.609(a)) Yes (Sec. 983.4).... Yes (Sec. Yes (Sec. Yes (Sec. Yes (Sec. 891.105).
                 574.310(d)(1)). 92.203(b)(1)). 93.151(b)(1)(i)).
                Annual Income Exclusions (5.609(b)) Yes (Sec. 983.4).... Yes (Sec. Yes (Sec. Yes (Sec. Yes (Sec. 891.105).
                 574.310(d)(1)). 92.203(b)(1)). 93.151(b)(1)(i)).
                Annual Income Calculation & Yes (Sec. 983.4).... Yes (Sec. No................... No................... Yes (Sec. 891.105).
                 Reexaminations (5.609(c)). 574.310(d)(1)).
                [[Page 48823]]
                
                Adjusted Income Mandatory Yes (Sec. 983.4).... Yes (Sec. Yes (Sec. Yes (Sec. Yes (Sec. 891.105).
                 Deductions (5.611(a)). 574.310(d)(1)). 92.203(e)). 93.151(e)(1)).
                Adjusted Income Additional Yes, ONLY when the PHA Yes (Sec. Yes, in PBRA units or Yes, in PBRA and No.
                 Deductions (5.611(b)). is an owner (Sec. 574.310(d)(1)). when tenant receives public housing units
                 983.4). Section 8 voucher or when tenant
                 assistance (Sec. receives Section 8
                 92.203(e)(3)). voucher assistance
                 (Sec.
                 93.151(e)(2)).
                Adjusted Income Financial Hardship Yes (Sec. 983.4).... Yes (Sec. Yes, if the grantee Yes, if the grantee No.
                 Exemptions (5.611(c)). 574.310(d)(1)). elects to do so in elects to do so in
                 PBRA units or when PBRA and public
                 tenant receives housing units or
                 Section 8 voucher when tenant receives
                 assistance (Sec. Section 8 voucher
                 92.203(e)(3)). assistance (Sec.
                 93.151(e)(2)).
                Asset restriction (5.618).......... Yes (Sec. 5.618(e)). Yes, except for the No................... No................... No.
                 provision of short-
                 term mortgage or
                 utility assistance or
                 other homeownership
                 assistance eligible
                 under the HOPWA
                 program, housing
                 information services,
                 or supportive
                 services (Sec.
                 574.310(f)).
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                 Specific solicitation of comment 1: What administrative burdens or
                other considerations (particularly related to Rental Assistance
                Demonstration conversions) should HUD be aware of in relation to
                certain sections applying to public housing and the HCV and project-
                based voucher (PBV) programs, but not to project-based rental
                assistance (PBRA) and Section 202/811?
                1. Income Reexaminations
                 Section 102(a)(1) of HOTMA revises the process by which PHAs and
                owners are required to review family income. To conform to these
                changes, this rule proposes to revise 24 CFR 5.657, 24 CFR 960.257, and
                24 CFR 982.516 for the Section 8 PBRA programs, public housing, and the
                HCV program (including PBV). Currently, these program regulations
                provide that families may request an interim reexamination of family
                income because of any changes since the last examination, and the PHA
                or owner must make the interim determination within a reasonable period
                of time after the family's request. HOTMA provides that reviews of
                family income shall be made upon the request of the family at any time
                the income or deductions of the family change by an amount that is
                estimated to result in a decrease of 10 percent or more in annual
                adjusted income, or of such lower amount as HUD may establish or permit
                the PHA or owner to establish. This proposed rule would revise
                Sec. Sec. 5.657, 960.257, and 982.516 to state that the owner or PHA
                may decline to process a family's request for an interim reexamination
                if the owner or PHA estimates the family's adjusted income will
                decrease by an amount that is less than 10 percent of the family's
                annual adjusted income. The proposed rule further provides that the
                owner or PHA may still choose to process the family request for an
                interim reexamination if the owner or PHA estimates the family's
                adjusted income will decrease by less than 10 percent, provided the
                owner or PHA has established a standard for conducting the interim
                reexamination that is more generous to the family (e.g., the owner or
                PHA will conduct an interim reexamination if the decrease in family
                income exceeds 5 percent of adjusted income) and the PHA estimates the
                family's adjusted income will decrease by an amount that exceeds the
                owner or PHA threshold. HUD believes that while the 10 percent standard
                is appropriate as the HUD standard and consequently is not exercising
                its discretion to establish a lower threshold, owners and PHAs should
                have the flexibility to establish a lower threshold if they wish to do
                so and are willing to take on the additional administrative burden. The
                owner or PHA may not establish an alternative threshold that is less
                generous to the family than the standard 10 percent decrease in
                adjusted income (e.g., the owner or PHA will only conduct an interim
                examination if the decrease in family adjusted income is estimated to
                be more than 20 percent decrease in adjusted income).
                 Additionally, HOTMA states that PHAs and owners must conduct a
                reexamination of family income at any time the family's adjusted income
                is estimated to have increased by 10 percent or more. This proposed
                rule would revise Sec. Sec. 5.657, 960.257, and 982.516 to reflect
                this change and would specify that the owner or PHA would be required
                to conduct the reexamination within a reasonable period of time after
                the owner or PHA becomes aware of the family's change in income. HOTMA
                provides some administrative relief to this requirement by allowing
                PHAs or owners to elect not to conduct an income review in the last 3
                months of a certification period, and that flexibility is incorporated
                into this proposed rule. PHAs or owners may not consider earned income
                of the family when estimating whether the family's adjusted income has
                increased, unless the increases in earned income correspond to previous
                decreases resulting from the family's request for an interim
                reexamination. This proposed rule would provide a definition for
                ``earned income'' in 24 CFR 5.100 that would apply when the term is
                used throughout this rule. The definition would mirror the definition
                of earned income that is currently in 24 CFR 984.103.
                 Specific solicitation of comment 2: HUD is specifically seeking
                comment about the ``reasonable period of time'' in which the PHA and
                owner must conduct an interim reexamination. HUD seeks comment on what
                should be considered reasonable and whether this rule should contain a
                specific time frame by which the PHA or owner must complete an interim
                reexamination. HUD seeks comment on what such a time frame might be
                (for example, 2 weeks from the time of the family request, or the time
                the PHA or owner is aware of the change in income or family
                composition).
                [[Page 48824]]
                 Specific solicitation of comment 3: HUD is seeking comments on
                whether HUD should continue to require PHAs and owners to use the
                Enterprise Income Verification (EIV) System for every income
                examination, or revise its regulations at 24 CFR 5.233 to require use
                of EIV only at initial and annual reexaminations and not at interim
                reexaminations. If HUD were to adopt such a proposal, housing providers
                could still use EIV for interim reexaminations but would not be
                required to use EIV. HUD is seeking comments on whether such a proposal
                would save time for PHAs and owners without significantly impacting the
                accuracy of the reexaminations.
                2. Calculation of Family Income
                 Section 102(a)(1) of HOTMA also describes how PHAs and owners must
                calculate family income, and this proposed rule would revise 24 CFR
                5.609 to account for this. Specifically, this proposed rule would
                revise Sec. 5.609 to direct PHAs and owners to estimate the income of
                the family for the upcoming year to determine family income for initial
                occupancy or for the initial provision of housing assistance or for an
                interim reexamination of family income. In determining family income
                for annual reviews, this proposed rule would provide that the PHA or
                owner must use the income of the family as determined by the PHA or
                owner for the preceding year, taking into account any redetermination
                of income undertaken during the preceding year. For example, if a PHA
                had made a redetermination of the family's income during the preceding
                year because the family's income had decreased by more than 10 percent,
                the PHA would be required at the annual review to use that
                redetermination to determine the family's income for the forthcoming
                year. This will not apply in situations where the PHA or owner uses a
                streamlined income determination. HOTMA provides that the PHA or owner
                may make adjustments, as it considers appropriate, to reflect current
                income if during the previous 12-month period there was a change in
                income that was not accounted for in a redetermination of income.
                However, in order to properly account for income, this rule proposes
                that the PHA or owner must make adjustments to reflect current income
                if during the previous 12-month period there was a change in income
                that was not accounted for in a redetermination of income. For example,
                if a family reported a decrease in income during the preceding year but
                the PHA had not conducted an interim redetermination because the
                decrease was less than 10 percent of the family's annual adjusted
                income, at the annual review the PHA would be required to adjust the
                determination of family income to reflect the decrease.
                 HOTMA provides for a ``safe harbor'' for PHAs or owners who
                determine family income prior to the application of deductions based on
                timely income determinations made for purposes of other means-tested
                Federal public assistance programs, including the Temporary Assistance
                for Needy Families block grant, Medicaid assistance, and the
                Supplemental Nutrition Assistance program. This proposed rule adopts
                this language in the new paragraph on calculation of income in 24 CFR
                5.609. Specifically, HUD is permitting PHAs and owners to utilize the
                income determinations, regardless of definitional differences between
                other forms of public assistance and the respective HUD program. HUD
                believes this maximizes the streamlining benefit of the provision.
                Further, HUD proposes to add the Earned Income Tax Credit to the list
                of means-tested Federal public assistance.
                 Specific solicitation of comment 4: HUD is soliciting feedback on
                how allowing PHAs and owners to use income determinations from other
                forms of public assistance may impact program administration, and
                whether HUD should establish requirements as to which income
                determination should be used if there is more than one determination of
                income from other public assistance programs available to the PHA or
                owner.
                 Specific solicitation of comment 5: HUD is soliciting feedback on
                whether there are other forms of Federal public assistance that should
                be added to the ``safe harbor'' list or whether HUD should limit the
                number of such programs.
                3. Annualization of Income
                 In order to conform to HOTMA, this proposed rule would also remove
                an existing provision in 24 CFR 5.609 on annualization of income, which
                states that if it is not feasible to anticipate a level of income over
                a 12-month period (e.g., seasonal or cyclic income), or the PHA
                believes that past income is the best available indicator of expected
                future income, the PHA may annualize the income anticipated for a
                shorter period, subject to a redetermination at the end of the shorter
                period.
                4. De Minimis Errors
                 HOTMA provides that a PHA or owner will not be out of compliance
                with the statute's new provisions regarding income review and income
                calculation solely due to any de minimis errors made by the agency or
                owner in calculating family income. HOTMA does not define de minimis
                error. HUD proposes to revise 24 CFR 5.609, 24 CFR 5.657, 24 CFR
                960.257, and 24 CFR 982.516 to provide that PHAs and owners will not be
                considered to have failed to comply with the requirements involving the
                calculation of income solely due to de minimis errors. Under this
                proposed rule, a de minimis error would be defined as any error where
                the PHA's or owner's calculation of a family's income or adjusted
                income varies from the correct income or adjusted income by no more
                than 5 percent. In such instance, the PHA's or owner's income
                determination would not be considered incorrect for purposes of HUD's
                monitoring and compliance oversight responsibilities. However, the PHA
                or owner would still be required to take necessary corrective action to
                repay a family if the de minimis error in the income determination
                resulted in the family being overcharged for their rent.
                 Specific solicitation of comment 6: HUD specifically seeks comment
                from PHAs and owners on the methodology HUD should use in determining
                what constitutes a de minimis error. For example, as alternatives to
                the 5 percent figure discussed above, HUD could calculate de minimis
                errors to be those that do not exceed $30 per month for any family,
                because a family's share of rent for 1937 Act programs is approximately
                $30 for every $100 of income. Or, HUD could calculate de minimis errors
                as those that represent less than 5 percent of all income
                determinations made during a calendar year.
                5. Earned Income Disallowance
                 Section 102(a)(2) of HOTMA eliminates section 3(d) of the 1937 Act,
                which had thus far allowed for the disallowance of earned income (EID)
                from rent determinations. This section had provided that the rent of
                certain public housing residents or recipients of Section 8 assistance
                could not be increased as a result of increased income due to
                employment during the 12-month period beginning on the date on which
                the employment started, and that following the expiration of that 12-
                month period, the PHA must exclude from the annual income of a
                qualified family at least 50 percent of any increase in the income of
                such family member, as a result of employment, over the family's
                baseline income for the subsequent 12-month period. Other HUD programs,
                including the HOME, HOPWA, and Supportive Housing
                [[Page 48825]]
                programs, similarly adopted an EID for persons with disabilities.
                Because the EID is no longer authorized under the 1937 Act, this
                proposed rule would eventually eliminate regulatory references to it.
                 Despite the elimination of the EID from HUD's regulations, HUD
                proposes to allow families who receive the EID benefit as of the
                effective date of a final rule implementing section 102 of HOTMA to
                continue receiving the benefits of EID until the allowed time frame
                expires, per the framework currently provided under Sec. 5.617 or
                Sec. 960.255. Given the time frames in Sec. 5.617 or Sec. 960.255,
                within 2 years from the effective date of a final rule implementing the
                elimination of EID, no family would receive the EID benefit.
                 Specific solicitation of comment 7: HUD specifically solicits
                comment on this proposal to allow current recipients of the EID benefit
                to continue to receive the benefit until the allowed time frame
                expires.
                6. Definition of ``Annual Income''
                 Section 102(c) of HOTMA provides a new definition for the term
                ``income.'' As a result, this proposed rule would significantly revise
                HUD regulations in 24 CFR 5.609. Specifically, this rule proposes to
                simplify the existing definition of annual income by removing the list
                of examples of income sources and providing a broader definition of
                income that mirrors the definition of income provided by HOTMA. HUD
                hopes that this streamlining effort will reduce the burden on PHAs and
                owners in determining a family's income and reduce confusion about what
                should be included as income.
                 This HOTMA definition sufficiently encompasses what HUD considers
                to be income under the current regulation, with the exception of the
                treatment of imputed returns on assets. Therefore, in addition to the
                HOTMA definition of income, this proposed rule would specify that
                annual income also includes the imputed return on assets over $50,000,
                based on the current passbook savings rate if the actual income from
                assets cannot be computed. The $50,000 figure will be adjusted for
                inflation, in accordance with HOTMA. By simplifying the definition of
                income and streamlining the regulatory provisions in Sec. 5.609, HUD
                seeks to reduce the complexity of the existing income regulations.
                 HUD wants to be clear that income sources that were previously
                included in annual income are generally unchanged. HUD is only
                simplifying the definition to eliminate confusing regulatory language
                that excluded some income that should have been included and which
                increased litigation risk for housing providers who rely on HUD's
                definition of income.
                 Specific solicitation of comment 8: HUD is seeking feedback from
                interested parties on the impact of the proposed redefinition of annual
                income and whether it simplifies the understanding of what is included
                in annual income.
                 Specific solicitation of comment 9: HUD solicits comment on what
                inflationary index to use for purposes of adjusting the amount of
                imputed return on assets included in annual income, and other
                provisions in HOTMA that require amounts to be adjusted annually for
                inflation.
                7. Income Exclusions
                 Additionally, HUD proposes updating the list of income exclusions
                to be consistent with HOTMA and to eliminate certain nonstatutory,
                discretionary exclusions from income in order to further streamline the
                income determination process. This proposed rule specifies that annual
                income does not include amounts that are explicitly excluded from the
                definition of income in HOTMA, but removes current exclusions for
                inheritances, capital gains, gifts, and other sporadic income. HUD has
                found that these provisions have caused confusion, there has been
                inconsistent application of these exclusions, and that these amounts
                should be included as annual income. HUD notes that with this change,
                realized capital gains--meaning those capital gains obtained from the
                sale of property in a given year--would be included as income under 24
                CFR 5.609(a)(1). The value of unrealized capital gains--meaning the
                value of any increase in an asset from one year to the next--would be
                included under the definition of Net Family Assets, which is used to
                determine imputed income under 24 CFR 5.609(a)(2).
                 Under this proposed rule, insurance payments remain excluded from
                annual income. However, HUD would strike the parentheses and the text
                enclosed in the parentheses that is intended to clarify that insurance
                payments include payments under health and accident insurance and
                worker's compensation. This proposed change does not represent any
                change in policy and payments under health and accident insurance and
                worker's compensation would continue to be excluded from annual income.
                HUD is proposing the change because HUD believes the current language
                has created more confusion in terms of what is meant by insurance
                payments than it has solved and to clarify that all insurance payments
                should be excluded from annual income, not just a select, few types.
                 Specific solicitation of comment 10: The proposed rule provides
                that distributions from a nonrevocable trust fund specifically provided
                to cover the cost of medical expenses for a minor is excluded income,
                as are any amounts recovered in any civil action or settlement based on
                a claim of malpractice, negligence, or other breach of duty, owed to a
                family member arising out of law, that resulted in a member of the
                family being disabled. Distributions from a non-revocable trust fund
                provided for other purposes would be considered income. HUD is seeking
                comment on whether this rule should treat subsequent withdrawals of an
                insurance payment or settlement for personal or property losses
                (whether related to a minor or not), or amounts recovered in the
                aforementioned civil action or settlement, as income. Start here For
                example, while the initial lump sum addition of an insurance payment or
                an amount recovered in the civil action or settlement would not count
                as annual income, HUD seeks comment on whether this rule should specify
                that any amount the family subsequently withdraws against the payment
                (e.g., from a bank account or trust fund into which the insurance
                payment or recovered amount was deposited) would be considered income.
                If this rule were to consider such subsequent withdrawals as income,
                HUD seeks comment on whether certain types of withdrawals should be
                excluded from annual income (in addition to the existing exclusion of
                distributions from a non-revocable trust fund specifically provided to
                cover the medical expenses of a minor). If the rule were to consider
                such subsequent withdrawals as income but exclude certain withdrawals
                that are used for a particular purpose (e.g., the family received an
                auto insurance payment after an accident that totaled the family car
                that the family deposited in their checking account and then
                subsequently used to purchase a replacement vehicle), HUD seeks comment
                on whether there are specific requirements that could be added to
                address the operational challenges that a PHA or owner would face in
                identifying, determining, and verifying that the withdrawal should be
                either included or excluded from annual income. Finally, HUD is
                requesting comment on whether the final rule should simply count the
                lump-sum insurance payment or settlement as
                [[Page 48826]]
                income, rather than excluding it from annual income at any point in
                time.
                 HOTMA provides HUD the discretion to establish exclusions to income
                beyond those explicitly listed in HOTMA and any amount required by
                Federal law to be excluded from consideration as income. As a result,
                with the exception of inheritances, capital gains, gifts, and other
                sporadic income, HUD proposes to maintain the other exclusions
                currently listed in Sec. 5.609, but would revise the explanatory
                language for some of those exclusions to provide greater clarity and
                understanding. One of these exclusions is for earnings in excess of
                $480 for full-time students 18 years or older who are not the head of
                household or spouse of the head of household. This proposed rule would
                effectively maintain that exclusion, but provide that the $480 figure
                be adjusted annually for inflation. As explained below, this is because
                there is a mandatory $480 deduction for dependents in the current
                regulations that HOTMA requires be adjusted for inflation, so the end
                result is that all earned income of dependent students should either be
                excluded or deducted from income. Additionally, this proposed rule
                would provide that the amount of the existing exclusion for adoption
                assistance payments, which is payments in excess of $480 per adopted
                child, would also be adjusted annually for inflation.
                 This proposed rule would add additional exclusions to income in
                order to conform with HUD policy. This proposed rule would provide that
                amounts in or from ABLE accounts created under section 529A of the
                Internal Revenue Code (IRC) are excluded from income. ABLE accounts are
                tax-advantaged savings accounts for individuals with disabilities. This
                proposed rule would exclude the income of foster adults from
                consideration of family income in order to prevent disincentives to
                housing such persons, and would codify HUD's existing policy that state
                kinship or guardianship care payments are excluded from the definition
                of income. Additionally, this proposed rule would specify that loan
                proceeds (for example, car loans or payday loans) must be excluded from
                income. Loan proceeds are not considered income by HUD because they are
                typically a pass-through payment for the purpose of purchasing
                something like a car. In the case of a payday loan, a family uses a
                paycheck as collateral, thus counting such a loan as income would
                effectively count that income amount twice.
                 This proposed rule would also add an exclusion for payments
                received by Indian persons as a result of claims relating to the
                mismanagement of assets held in trust by the United States (including
                payments from tribal trust settlements), to the extent such payments
                are also excluded from gross income under the Internal Revenue Code.
                HUD already consider such payments to be excluded from annual income,
                but relies on the current exclusion for temporary, nonrecurring, or
                sporadic income to do so, which this proposed rule would remove.
                 Finally, the rule would codify long-standing practice of excluding
                from annual income replacement housing ``gap'' payments that offset
                increased rent and utility costs to families that are displaced from
                one federally subsidized housing unit and move into another federally
                subsidized housing unit. HUD currently excludes these payments from
                income as ``temporary, nonrecurring, or sporadic income'' under Sec.
                5.609(c)(9). This rule preserves the gap payment exclusion and
                clarifies that this exclusion only exists to the extent that the
                tenant's out of pocket expenses for rent and utilities in their new
                federally subsidized housing are higher than they were in their
                previous federally subsidized housing. Later changes to a tenant's
                contribution due solely to changes in family income, size, or
                composition should not be considered when determining if a gap has been
                reduced or eliminated. If the gap is reduced or eliminated because of
                reasons such as a subsequent move by the tenant or change in the
                subsidy program applicable to the tenant's unit, and the tenant chooses
                to retain or continue to receive their replacement housing ``gap''
                payment, then the portion of the ``gap'' payment that is no longer
                needed to close the gap should be counted as income for purposes of
                determining annual income under Sec. 5.609.
                 HOTMA provides an income exclusion for full-time dependent students
                for any grant-in-aid or scholarship amounts used for the costs of
                tuition or books, and, in such amounts as HUD may allow, for the cost
                of room and board. In implementing this provision and as part of this
                proposed rule's objective to simplify income determinations, HUD
                proposes to combine the student financial assistance requirements under
                a new 24 CFR 5.609(b)(9) (currently, student financial assistance
                exclusion requirements are found at Sec. 5.609(b)(9) and at Sec.
                5.609(c)(6)). The proposed rule provides in general that the full
                amount of student financial assistance paid directly to the student or
                to the education institution on the student's behalf is excluded from
                annual income. The rule defines financial assistance to be any grant-
                in-aid, scholarship, or other assistance amounts an individual receives
                for the costs of tuition, books, room and board, and other fees charged
                to the student by the education institution.
                 Since 2005, HUD's Appropriations Acts have placed limits on the
                amount of financial assistance that is excluded from income for
                students applying for and receiving Section 8 assistance who are not
                over the age of 23 with dependent children. In accordance with that
                statutory restriction, this proposed rule would provide that, for those
                students, the financial assistance in excess of the cost of tuition and
                any other required fees and charges under the Higher Education Act of
                1965, from private sources, or an institution of higher education,
                shall be considered income. This categorization of funds as income does
                not apply to public housing students, students under other HUD
                programs, or to Section 8 students over the age of 23 with dependent
                children, for whom the financial assistance in excess of the cost of
                tuition the individual receives for the cost of books, room and board,
                and other fees charged by the education institution is excluded from
                annual income (in addition to the financial assistance that covers the
                student's tuition).
                 HOTMA also provides an income exclusion for any amount in or from,
                or any benefits from, any Coverdell educational savings account of or
                any qualified tuition program under section 530 and section 529 of the
                Internal Revenue Code of 1986, respectively. The proposed rule covers
                these HOTMA income exclusions under a new Sec. 5.609(b)(10).
                 Additionally, HOTMA provides an exclusion for payments related to
                aid and attendance under 38 U.S.C. 1521 to veterans in need of regular
                aid and attendance, and this proposed rule would include this
                exclusion.
                 Specific solicitation of comment 11: HUD is soliciting feedback
                about whether there are other income exclusions that should be provided
                for in this rulemaking. For example, deferred disability benefits are
                excluded from income under HOTMA and this proposed rule, but the rule
                could provide for exclusions from income for all veteran's disability
                benefits.
                8. Adjusted Income
                 Section 102(c) of HOTMA makes changes to ``adjusted income'' that
                require revisions to 24 CFR 5.611. Section 5.611 currently provides for
                a mandatory deduction of $480 for each
                [[Page 48827]]
                dependent. HOTMA provides for a mandatory deduction of $480 for minors,
                students, and persons with disabilities who are not the head of the
                household or that person's spouse, and provides that this figure be
                adjusted annually for inflation and the actual deduction should be
                determined for each year by rounding such amount to the next lowest
                multiple of $25. HOTMA also provides HUD the discretion to establish
                deductions in addition to those listed in HOTMA. As a result, HUD
                proposes to maintain the $480 deduction for each dependent, which
                amount will be annually adjusted for inflation. In line with HOTMA's
                requirement, this rule would also increase the deduction for any
                elderly or disabled family from the current $400 to $525, which amount
                will be annually adjusted for inflation and rounded to the next lowest
                multiple of $25.
                 This proposed rule would maintain other deductions currently
                allowed, such as those for child care and health and medical expenses.
                However, to conform to section 102(c) of HOTMA, this proposed rule
                would revise the deduction for health and medical expenses. Currently,
                this deduction is for the sum of (i) unreimbursed medical expenses of
                any elderly family, and (ii) the unreimbursed reasonable attendant care
                and auxiliary apparatus expenses for each member of the family who is a
                person with disabilities, to the extent necessary to enable any member
                of the family to be employed. The deduction is currently limited to the
                amount by which these total expenses exceed three percent of the
                family's income. HOTMA increases the health and medical expense
                threshold from three percent to 10 percent. In other words, the health
                and medical expense deduction is now limited to the amount by which
                those expenses exceed 10 percent of the family's annual income. This
                means families who receive a health and medical expense deduction at
                the time the HOTMA change is implemented may see a significant increase
                in their non-deductible health and medical expenses, which could result
                in an increase in their adjusted income and their rent. However, HUD
                notes that the reduction in the family's health and medical expense
                deduction may be offset to some degree by the HOTMA change that
                increases the deduction for elderly and disabled families from $400 to
                $525.
                 Section 102(c) provides that the Secretary shall by regulation
                provide hardship exemptions to the requirements of the health and
                medical expenses provision for impacted families who demonstrate an
                inability to pay calculated rents because of financial hardship, and
                that the regulations must include a requirement to notify tenants of
                any changes to determination of adjusted income based on the
                determination of the family's claim of financial hardship. In order to
                implement this provision, this proposed rule would provide, that if the
                family can demonstrate an inability to pay the new rent and the PHA or
                owner determines that the family's inability is the result of the
                change in the medical expense deduction (i.e., the increase in the
                amount of non-deductible expenses from 3 to 10 percent of family
                income), the PHA or owner would be required to recalculate the family's
                adjusted income. In recalculating the family's adjusted income, the PHA
                or owner would deduct the amount of eligible health and medical
                expenses that exceeds 6.5 percent of the family's annual income instead
                of the normally applicable 10 percent of family's annual income. HUD
                proposes a 6.5 percent threshold because it is half-way between the
                pre-HOTMA health and medical expense threshold of three percent and the
                new statutory 10 percent threshold. Under this proposed rule, the
                family's hardship exemption would expire at the family's next regular
                income reexamination or at such time that the PHA or owner determines
                the family can pay their rent under the normal adjusted income
                calculation, whichever comes first. The PHA or owner would be required
                to notify the family in writing of the change in the determination of
                adjusted income, the family's rent resulting from the hardship
                exemption, and when the hardship exemption will expire. The intent of
                the proposed regulation is to allow families receiving hardship
                exemptions to transition to their new adjusted income and higher rent
                incrementally, rather than immediately absorbing the full increase as a
                result of the medical expense deduction change.
                 Section 102(c) also allows a hardship exemption for the child care
                expense deduction, which provides that any reasonable child care
                expenses necessary to enable a member of the family to be employed or
                to further his or her education is deducted from annual income. Under
                this proposed rule, a hardship exemption would be provided to allow the
                deduction for reasonable child care costs to continue in certain
                circumstances for a family that no longer has a member that is employed
                or seeking to further his or her education. In order to qualify for the
                hardship exemption, the family would be required to demonstrate to the
                satisfaction of the PHA or owner that their inability to pay the
                increased rent is due to the loss of the child care deduction. In
                addition, the family would also have to demonstrate why the child care
                expense remains necessary now that no family member is employed,
                actively seeking employment, or furthering his or her education. For
                example, the family member may have had to temporarily suspend their
                educational pursuits as the result of injury or illness, and due to the
                injury or illness they are unable to be the primary full-time care
                giver for the child whose child care expenses were deducted from the
                family's adjusted income. Under this proposed rule, if the PHA or owner
                determines that the family qualifies for the hardship exemption, the
                PHA or owner would be required to recalculate the family's adjusted
                income and continue to include the deduction for the reasonable child
                care expenses. As is the case with the health and medical expense
                hardship exemption, the child care expense hardship exemption would be
                temporary and would end no later than the family's next regular
                reexamination. The child care hardship exemption would also end at any
                point in time that the PHA or owner determines that the family is
                either able to pay the rent without the child care expense deduction or
                the need for the child care expense no longer exists.
                 The PHA or owner would be required to notify the family in writing
                of the change in the determination of adjusted income and the family's
                rent for both the adjusted medical expense deduction and the
                continuation of the child care deduction hardship exemptions. The
                notice would also inform the family of the temporary nature of the
                hardship exemption and that the exemption will expire at the earlier of
                the family's next regular income reexamination or at such time the PHA
                or owner determines the need for the hardship exemption no longer
                exists.
                 Specific solicitation of comment 12: HUD is soliciting feedback
                from affected parties on the proposed implementation of the hardship
                exemption for both the health and medical expenses deduction and child
                care deduction. Specifically, HUD is soliciting comments on whether
                there are better approaches to implementing the hardship exemptions
                than what is proposed in this rule, whether HUD should establish
                specific requirements or parameters as to how the PHA or owner would
                determine that the family is unable to pay the rent (for example, the
                percentage of the family's income paid for rent and health and medical
                expenses exceeds a certain
                [[Page 48828]]
                percentage), or whether PHAs and owners should be given broad
                administrative discretion to establish their own policies on how to
                make this determination.
                 HUD's current regulations provide that for public housing, PHAs may
                adopt additional deductions from annual income. Under HOTMA, PHAs may
                also choose to adopt additional deductions from income for the voucher
                programs, and the Section 8 project-based rental assistance program
                (where the PHA is an owner) in addition to public housing. As such,
                this proposed rule would provide that for public housing and the
                voucher programs, and where the PHA is an owner in the Section 8
                project-based rental assistance program, PHAs may adopt additional
                deductions from annual income. Additionally, HOTMA requires that HUD
                establish procedures to ensure that any deductions adopted by PHAs do
                not materially increase Federal expenditures. Under this proposed rule,
                PHAs that adopt permissive deductions would not be eligible to receive
                any program funding to cover the increased cost to the impacted
                program. The rule provides that the PHA would have to identify the
                amount of subsidy provided on behalf of the family that is attributable
                to the permissive deduction as required by HUD. This information would
                then be used by HUD to ensure that the cost of the permissive deduction
                is not included in the subsidy for the public housing program, renewal
                funding for the HCV (including PBV) program, or the housing assistance
                payments provided to the PHA under the Section 8 project-based
                programs.
                 Specific solicitation of comment 13: HUD is soliciting feedback on
                whether the proposed implementation of permissive deductions (i.e.,
                that a PHA will not be eligible for additional subsidy to cover the
                costs associated with the deduction) has any unintended consequences,
                or whether HUD should define ``material'' differently. Further, HUD is
                soliciting feedback on whether the permissive deductions could be used
                to provide incentives for employment. For example, HUD could permit
                PHAs to be eligible for additional subsidy for certain permissive
                deductions of earned income (e.g., permissive deductions of the first
                $1,000 or $5,000 of earned income) or other work-related income.
                C. HOTMA Section 103
                 This proposed rule would create a new 24 CFR 960.507 in HUD's
                regulations to implement section 103 of HOTMA. Section 103 of HOTMA
                places an income limitation on a public housing tenancy for families at
                120 percent of the AMI. However, HUD can adjust the over-income limit
                if HUD determines that it is necessary due to prevailing levels of
                construction costs or unusually high or low family incomes, vacancy
                rates, or rental costs. This proposed rule would provide that the over-
                income limit is determined by using the very low-income (VLI) level for
                the applicable area as the baseline and multiplying it by 2.4. Pursuant
                to section 3(a)(5) of the 1937 Act, the over-income limit does not
                apply in instances where a PHA operating fewer than 250 public housing
                units has admitted families with income exceeding the over-income
                limit, if the PHA is renting to those families because there are no
                income-eligible families on the PHA's waiting list or applying for
                public housing assistance. To conform to HOTMA, this proposed rule
                would also remove existing 24 CFR 960.261 from HUD's regulations, which
                provides that PHAs may not evict or terminate the tenancy of a family
                that is over the income limit for public housing if the family is
                participating in the Family Self-Sufficiency program, or if it
                currently receives the earned income disallowance.
                 Following section 16(a)(5) of the 1937 Act, this proposed rule
                would provide in Sec. 960.507 that when a PHA becomes aware, through
                an annual reexamination or an interim reexamination of an increase in
                income, that if a family's income exceeds the over-income limit, the
                PHA must document that the family exceeds the threshold. This would be
                used to compare the family's current income with the family's income
                one year later. Once found to be over-income, the family's income would
                be reviewed one year later even if they have chosen to pay the flat
                rent. This proposed rule would also revise Sec. 960.253(f) to conform
                to the new requirements of section 103 by providing that for families
                that choose to pay a flat rent, once a family is determined to be over-
                income, the PHA must follow the documentation and reexaminations
                requirements in Sec. 960.507(c).
                 Under proposed Sec. 960.507, if the family's income continues to
                exceed the new over-income limit one year after the initial
                determination by the PHA, the PHA must, as required by section 16(a)(5)
                of the 1937 Act, provide written notification to the family that their
                income has exceeded the over-income limit for one year. If the family's
                income continues to exceed the over-income limit for the next 12
                consecutive months, the family would be subject to either a higher rent
                or termination based on the PHA's policies. If, however, a PHA
                discovers through an annual or interim reexamination that a previously
                over-income family has income that is now below the over-income limit,
                the family would no longer be subject to these provisions. The family
                would be entitled to a new two-year grace period if the family's income
                once again exceeds the over-income limit.
                 As reflected in this proposed rule, HOTMA requires that after a
                family's income has exceeded the over-income limit for two consecutive
                years, a PHA must terminate the family's tenancy within 6 months after
                the expiration of the two-year period or charge the family a monthly
                rent equal to the greater of: (1) The applicable Fair Market Rent
                (FMR); or (2) the amount of monthly subsidy for the unit including
                amounts from the operating and capital fund, as determined by
                regulations. To calculate the monthly subsidy for a unit, HUD would
                define the monthly amount of Public Housing Capital and Operating funds
                as the per unit subsidy amount provided to a PHA for the development in
                which the family resides for the most recent year for which HUD has
                calculated final eligibility. HUD would publish such funding amounts
                annually. PHAs would continue to charge these families the non-over-
                income rent amount (the family's choice of income-based or flat rent)
                for the time period during the 6-month period before termination.
                 HUD notes that PHAs are required to establish policies for
                continued occupancy in public housing. Through the development of those
                policies, a PHA is able to consider specific circumstances in which
                they would provide for flexibility in the administration of over-income
                requirements, provided such policies are in compliance with the 1937
                Act and all applicable fair housing requirements. PHAs are subject to,
                among other fair housing and civil rights authorities, Section 504 of
                the Rehabilitation Act (Section 504), the Fair Housing Act, and Title
                II of the Americans with Disabilities Act (ADA), which include, among
                other requirements, the obligation to grant reasonable accommodations
                that may be necessary for persons with disabilities.
                 HOTMA requires PHAs to submit an annual report that specifies the
                number of families in public housing with incomes exceeding the over-
                income limit and the number of families on the waiting lists for
                admission to public housing. Because the report data must reflect the
                numbers at the end of the calendar year, not at the end of a PHA's
                reporting year, and because not all
                [[Page 48829]]
                PHAs submit an annual plan, this report will be a separate report from
                other reporting requirements. However, HUD is developing a tool that
                will make it simple for PHAs to submit the relevant numbers and make
                those numbers public.
                D. HOTMA Section 104
                 Section 104 of HOTMA establishes a limitation on the amount and
                type of assets that a family assisted under the public housing or
                Section 8 programs can possess. To conform to HOTMA, this proposed rule
                would create a new section 24 CFR 5.618 to HUD regulations that would
                restrict assistance to families based on assets.
                1. Assets Restriction
                 The new Sec. 5.618 would provide that families would be ineligible
                for assistance under HUD's public housing or Section 8 programs if
                their net family assets exceed $100,000. HOTMA requires that this
                amount be adjusted annually for inflation and, as discussed earlier in
                this preamble HUD solicits comment on the inflationary index that
                should be used.
                2. Real Property
                 To conform to HOTMA, Sec. 5.618 would also provide that families
                could not receive assistance if they have a present ownership interest
                in, legal right to reside in, and the effective legal authority to sell
                real property in the jurisdiction in which the property is located that
                is suitable for occupancy by the family as a residence. Under this
                proposed rule, families would have to demonstrate that in the
                jurisdiction in which the property is located they do not have a
                present ownership interest in, legal right to reside in, or the legal
                authority to sell the real property for the property to be excluded
                from net family assets. HUD proposes to exclude from the real property
                restriction any property that is jointly owned by a member of the
                family and another individual or individuals who would not reside with
                the family. HUD proposes this exclusion because an assisted family may
                not have the effective legal authority to sell such property in the
                jurisdiction in which the property is located, and depending on the
                nature of the property or type of joint ownership, may not be able to
                live in the property.
                 Specific solicitation of comment 14: HUD is soliciting comment
                about the circumstances under which a family may not have a present
                ownership interest in, legal right to reside in, or effective legal
                authority to sell real property in the jurisdiction in which the
                property is located, and the feasibility of families demonstrating
                this.
                 While HOTMA does not define what it means for a property to be
                suitable for occupancy, this proposed rule would provide that a
                property is suitable for occupancy unless that family can demonstrate
                that the property: (i) Does not meet the disability-related needs of
                the family, including meeting physical accessibility requirements; (ii)
                is not sufficient for the size of the family, for example, there are
                not enough bedrooms; (iii) that it is geographically located so as to
                provide a hardship for the family; and (iv) that it is not safe to
                reside in because of its physical condition.
                 HOTMA provides certain exclusions to the real property restriction.
                Particularly, this restriction would not apply to the following: (i) A
                manufactured home for which the family is receiving Section 8 tenant-
                based assistance; (ii) property for which a family receives
                homeownership assistance from a PHA; (iii) any person who is a victim
                of domestic violence; or (iv) to any family that is offering the
                property for sale. Under this proposed rule, in order to demonstrate
                that a family is offering property for sale, a PHA or owner could
                require that the family provide evidence that the property has been
                listed for sale. This proposed rule would add that the restriction in
                this section also does not apply to victims of dating violence, sexual
                assault, or stalking, and that the terms ``domestic violence,''
                ``dating violence,'' ``sexual assault,'' and ``stalking'' are defined
                in HUD's regulations implementing the Violence Against Women Act
                (VAWA).
                 Specific solicitation of comment 15: HUD is soliciting feedback
                from the public on how the exemption for victims of domestic violence,
                dating violence, sexual assault, or stalking will be implemented and
                how it will operate.
                 To provide context for the references to real property in Sec.
                5.618, this proposed rule would provide a new definition in 24 CFR
                5.100 for ``real property,'' specifying that ``real property'' has the
                same meaning as that provided under the state law in which the real
                property is located.
                3. Self-Certification of Assets
                 In accordance with HOTMA, Sec. 5.618 would also provide that the
                PHA or owner could determine the net assets of a family based on a
                certification by the family that their net family assets do not exceed
                $50,000 after annual adjustment for inflation. This proposed rule would
                also revise Sec. 5.659 of the current regulations to reflect the
                requirement that families can self-certify. Similarly, Sec. 5.618
                would provide that the PHA or owner could determine that a family does
                not have any present ownership interest in any real property based on a
                certification by the family to that effect.
                4. Discretion on Enforcing the Asset Limitation
                 This proposed rule would conform to HOTMA by providing that PHAs
                and owners have the discretion to choose not to enforce the limitation
                on eligibility based on assets, or may establish exceptions to the
                restrictions based on eligibility criteria, if the PHA or owner does so
                in the PHA plan or under a policy adopted by the owner.
                 In HOTMA and these regulations, eligibility criteria for
                establishing exceptions may provide for separate treatment based on
                family type and may be based on different factors, such as age,
                disability, income, the ability of the family to find suitable
                alternative housing, and whether supportive services are being
                provided. This proposed rule clarifies that these policies cannot
                violate fair housing statutes or regulations. This means that these
                policies cannot be implemented in a manner that discriminates against
                any protected classes.
                 HOTMA provides that PHAs and owners who choose to enforce the asset
                limitations may delay for a period of not more than 6 months the
                eviction or termination of a family that does not meet the limitation
                on assets. This proposed rule would clarify that it is the start of the
                eviction or termination proceedings that could not be delayed for more
                than 6 months.
                5. Net Family Assets
                 This proposed rule would revise the definition of ``net family
                assets'' found in 24 CFR 5.603 to align it with the provisions in
                section 104 of HOTMA. The new regulatory definition would provide that
                the following will not be considered to be part of net family assets:
                (i) Equity in a manufactured home where the family receives Section 8
                tenant-based assistance; (ii) equity in property for which a family
                receives HCV homeownership assistance from a PHA; (iii) Family Self-
                Sufficiency Accounts; (iv) the value of any accounts specifically
                dedicated for retirement; (v) real property for which the family does
                not have the effective legal authority necessary to sell such property;
                (vi) amounts recovered in any civil action or settlement based on a
                claim of malpractice, negligence, or other breach of duty that resulted
                in a member of the family being disabled; and (vii) the
                [[Page 48830]]
                value of any Coverdell education savings account or any qualified
                tuition program under section 529 of the IRC. HUD proposes to exclude
                from the definition of net family assets the value of any ABLE account
                created under section 529A of the IRC. Per section 104 of HOTMA, with
                respect to non-revocable trusts, the value of the trust would not be
                considered an asset to the family as long as the fund continues to be
                held in trust. Any income distribution from any trust would be
                considered income, except in the case of distributions from non-
                revocable trusts, made to cover the medical expenses for a minor.
                Additionally, this proposed rule would continue some of the current
                exclusions from net family assets, including interest in Indian trust
                land.
                 HOTMA provides that the term ``net family assets'' does not include
                the value of personal property, except for items of personal property
                of significant value, as the Secretary may establish. Therefore, this
                proposed rule would revise the existing exclusion in HUD's regulations
                for the value of necessary items of personal property, to provide that
                the exclusion would apply to items of personal property with a total
                value under $50,000, other than necessary items. HUD proposes to
                consider items valued over $50,000 to be those of ``significant
                value,'' given HOTMA's provision that families may certify that their
                net assets do not exceed $50,000.
                 Specific solicitation of comment 16: HUD specifically seeks comment
                on the proposal to exclude items of personal property valued $50,000 or
                less, other than necessary items, from the calculation of net family
                assets, and comments on what such necessary items of personal property
                might be. Examples might include a car that the family relies on for
                transportation, or medical equipment.
                 This proposed rule would make additional changes to the definition
                of net family assets for clarity. It would eliminate the current
                exclusion from net family assets for equity accounts in HUD
                homeownership programs, as this terminology is vague and unclear. As
                mentioned above, the new definition for net family assets would exclude
                equity in a manufactured home where the family receives Section 8
                tenant-based assistance and equity in property for which a family
                receives homeownership assistance from a PHA.
                6. Authorization for Financial Disclosures
                 Section 104 of HOTMA that states that HUD must require PHAs to
                require all applicants and recipients under the 1937 Act to authorize
                the PHA to obtain financial information needed in connection with a
                determination with respect to eligibility. Currently, 24 CFR 5.230
                requires HUD assistance applicants and participants to sign a consent
                form that authorizes PHAs and owners to obtain information from certain
                sources in order to verify income. Further, 24 CFR 5.232 outlines that
                a refusal to sign the consent form would lead to termination. Following
                HOTMA's mandate, this proposed rule would amend Sec. 5.230 to include
                a provision authorizing PHAs to obtain any financial record from any
                financial institution, as the terms financial record and financial
                institution are defined in the Right to Financial Privacy Act (42
                U.S.C. 1304), whenever the PHA determines the record is needed in
                connection with a determination of an assistance applicant's or
                participant's eligibility or level of benefits. Additionally, this
                section currently states the consent form must contain a statement that
                the authorization to release the information requested by the consent
                form expires 15 months after the date the consent form is signed. HOTMA
                section 104 requires that the authorization allowing PHAs to obtain
                financial records from financial institutions shall remain effective
                until the earliest of: The rendering of a final adverse decision for an
                assistance applicant; the cessation of a participant's eligibility for
                assistance from HUD and the PHA; or the express revocation by the
                assistance applicant or recipient (or applicable family member) of the
                authorization, in a written notification to HUD. In an effort to
                streamline program administration, this proposed rule would revise the
                section to align the current authorization consent timeline to the
                HOTMA timeline, thereby reducing annual burden on PHAs.
                 HOTMA provides PHAs with the discretion to determine whether
                applicants or recipients are ineligible for benefits if they, or their
                family members, refuse to provide or revoke the authorization to obtain
                financial records. Therefore, this proposed rule would also revise 24
                CFR 5.232, which describes the penalties for failing to sign the
                consent form required in Sec. 5.230, to clarify that the penalties in
                Sec. 5.232 will not apply if applicants or participants or their
                family members revoke their consent for the PHA to access financial
                records, unless the PHA has established a policy in their annual plan
                that revocation of consent to access financial records will result in
                denial or termination of assistance or admission.
                E. CPD Program Changes
                 As discussed earlier in this preamble, this proposed rule would
                make changes to regulations for HUD's HOME, HTF, and HOPWA programs in
                order to better align regulations pertaining to income and assets among
                different HUD programs. The HOME and HTF programs are federal block
                grant programs that provide annual grants to States and local
                governments to create decent, safe and affordable housing for low-
                income, very low-income, and extremely low-income families, including
                homeless individuals. In fiscal year 2018, HUD allocated over $1.6
                billion to the States and localities nationwide to fund a wide range of
                activities including building, buying, and/or rehabilitating affordable
                housing for rent or homeownership or providing direct rental assistance
                to low-income people. The HOME and HTF programs often operate in
                conjunction with other federal, state or local housing programs and
                leverage community and private equity in support of affordable housing.
                To make housing affordable, HOME and HTF funds are frequently combined
                with other HUD federal programs such as Project-Based Section 8 Rental
                Assistance and used as gap financing in rental housing developed with
                Low-Income Housing Tax Credits (LIHTC). Many of these programs require
                the use of the Part 5 definition of annual income and adjusted income
                for the purpose of determining income eligibility and/or tenant
                payments.
                1. HOPWA
                 Section 859 of the AIDS Housing Opportunity Act (42 U.S.C. 12908)
                requires that HOPWA rental assistance ``be provided to the extent
                practicable in the manner'' of the Section 8 program. Therefore, HUD is
                proposing to incorporate into the HOPWA regulations in 24 CFR part 574
                the procedures on income examinations and net family assets proposed
                for the public housing, HCV, and Section 8 project-based rental
                assistance programs in this rule.
                 To determine the resident payment, as in the Section 8 program,
                annual reexaminations of family income will be the standard under the
                proposed rule. However, if a family has income from fixed-income
                sources, grantees will be able to apply a COLA to those sources of
                income and will only perform a full reexamination of income every three
                years. If a family has at least 90 percent of their income from fixed-
                income sources, the grantees will be able to apply a COLA to the entire
                income amount, provided the family certifies
                [[Page 48831]]
                that their income is at least 90 percent fixed-income, and the grantee
                will only have to conduct a full reexamination of family income every
                three years.
                 In between full reexaminations, this proposed rule would provide
                that families receiving HOPWA assistance may request an interim
                reexamination of family income at any time, but grantees are only
                required to conduct the reexamination if the family's adjusted income,
                as defined in the revised 24 CFR 5.611, changes by an amount that the
                grantee estimates will result in a change of at least 10 percent in
                annual adjusted income. HUD anticipates that this will decrease the
                number of reexaminations that HOPWA grantees conduct.
                 The proposed rule further amends the HOPWA regulations to cross
                reference Sec. 5.611 more generally and eliminate the reference to the
                earned income disregard. These changes, which impact calculation of the
                resident rent payment under HOPWA, similarly impact HUD's Section 8
                programs because of HOTMA.
                 Additionally, this proposed rule would revise part 574 to apply the
                part 5 definition of net family assets to HOTMA that applies to the
                Section 8 program, except the value of a home of a participant
                receiving short-term mortgage or utility assistance under Sec.
                574.300(b)(6) or other homeownership assistance eligible under the
                HOPWA program would be excluded from the definition. This proposed rule
                would also revise part 574 to incorporate HOTMA's provisions for
                restrictions on assistance to families with certain assets to the HOPWA
                program, but would specify that the requirements in 24 CFR 5.618 do not
                apply to short-term mortgage and utility assistance and other
                homeownership assistance eligible under the HOPWA program, or to
                housing information services or supportive services funded under HOPWA.
                2. HOME
                 The proposed rule at 24 CFR 92.203(b) would incorporate HUD's
                proposed revisions to the definition of income at 24 CFR 5.609(a) and
                (b), which is the definition of income established by HOTMA, as well as
                revisions to the definition of Net Family Assets at 24 CFR 5.603 used
                to determine the imputed income on assets over $50,000 based on the
                current passbook saving rate. In determining annual income, a
                participating jurisdiction would continue to exclude income and asset
                enhancements derived from HOME assistance pursuant to 24 CFR
                92.203(d)(1) (e.g., the rental income generated from HOME assistance
                provided to a multi-unit housing project where the owner occupies one
                of the units and rents out the other units acquired through the HOME
                assistance), and the value of a homeowner's principal residence
                pursuant to 24 CFR 92.203(b)(1) from the calculation of Net Family
                Assets, as defined in 24 CFR 5.603.
                 This proposed rule would revise 24 CFR 92.203(c) to move the first
                sentence into a new standalone paragraph (e) and incorporate the second
                and third sentences into paragraphs (e)(1) and (e)(2). The new
                paragraph (e) would incorporate the revisions to the definition of
                adjusted income at 24 CFR 5.611(a)-(c). It would require participating
                jurisdictions, when determining a family's adjusted income for the
                purpose of determining the appropriate amount of rent applicable to a
                tenant in HOME units receiving Federal or State project-based subsidy,
                the to apply the mandatory deductions from income established at 24 CFR
                5.611(a). For units with tenant-based rental assistance, Sec.
                92.203(e)(2) would permit a participating jurisdiction to apply the
                deductions at Sec. 5.611(a) and grant financial hardship exemptions
                according to the requirements of Sec. 5.611(c).
                 Finally, where a family applying for or living in a HOME-assisted
                unit receives assistance from the HCV program or where a PHA is the
                owner in the PBRA program, HUD proposes to add Sec. 92.203(e)(3) to
                require the use of the deductions in Sec. 5.611(a) and (b) to
                calculate a family's adjusted income. In such cases, HUD would allow a
                participating jurisdiction to accept a PHA's determination to grant a
                hardship exemption under Sec. 5.611(c).
                 Specific solicitation of comment 17: HUD is seeking feedback from
                interested parties on whether HUD should adopt all revisions made to
                adjusted income (mandatory deductions, additional deduction and
                hardship exemptions, as applicable) when combining HOME and other
                federal programs such as Section 8 in a rental project.
                 Specific solicitation of comment 18: HUD is seeking feedback from
                interested parties on whether HUD should adopt financial hardship
                exemptions for families receiving HOME-funded tenant-based rental
                assistance.
                 For purposes of calculating tenant income in the HOME program, HUD
                is not proposing to adopt the new section 5.609(c) for determining
                income at initial occupancy or interim reexaminations and the timing
                requirements of those determinations. The HOME regulations permit
                participating jurisdictions to choose, on a program (e.g.,
                homeownership) basis and on a rental project by project basis, one of
                two definitions of annual income: (1) Annual income as defined at 24
                CFR 5.609; or (2) the Internal Revenue Service definition of ``adjusted
                gross income.'' For families who are tenants in HOME-assisted housing
                and not receiving tenant-based rental assistance, the HOME program
                requires a participating jurisdiction to examine at least 2 months of
                source documents evidencing annual income at initial occupancy. For
                subsequent income determinations during the HOME compliance period, the
                existing HOME regulations permit a participating jurisdiction to use
                one of three methods to determine annual income. Adopting 24 CFR
                5.609(c) for the HOME program would impose different methods for
                calculating and verifying income that are more stringent than those
                currently required by the HOME regulations. HUD believes the methods
                described at 24 CFR 92.203(a)(1) provide a participating jurisdiction
                more flexibility in administering and managing its HOME-assisted rental
                housing portfolio.
                 Specific solicitation of comment 19: In light of revisions made to
                24 CFR 5.609(c)(3) to allow PHAs to accept a timely income
                determination of a family from another agency's means-tested Federal
                public assistance, HUD is seeking feedback from interested parties on
                whether 24 CFR 92.203(a)(1)(iii) should specify what HUD considers
                timely for purposes of accepting an income determination of a family
                made by an administrator of a government program under which the family
                receives benefits.
                 There is no independent statutory basis in the HOME program for
                applying the EID in 24 CFR 5.617 to persons with disabilities who are
                tenants in HOME-assisted rental housing or who are receiving tenant-
                based rental assistance. HUD applied 24 CFR 5.617 to HOME through 24
                CFR 92.203(d)(3) to be consistent with other programs governed by the
                1937 Act. With the revision to the 1937 Act removing the authority for
                disallowance of earned income and the sunset of the corresponding
                regulatory provision in 24 CFR 5.617(e), the HOME regulation at 24 CFR
                92.203(d)(3) would be revised so that the applicability to HOME will
                also sunset.
                 The HOME statute does not establish a limitation on the amount of
                and type of assets that a family assisted with HOME funds can have. HUD
                is not proposing to adopt the new asset restriction for the HOME
                program.
                 Specific solicitation of comment 20: HUD is seeking feedback from
                interested
                [[Page 48832]]
                parties on whether HUD should adopt asset restrictions for any housing
                programs funded with HOME (e.g., homebuyer, rental, tenant-based rental
                assistance and owner-occupied rehabilitation), as well as when housing
                programs funded with HOME are combined with other federal programs such
                as Section 8.
                3. HTF
                 The proposed rule at 24 CFR 93.151(b) incorporates HUD's proposed
                revisions to the definition of annual income at 24 CFR 5.609(a) and
                (b), which is the definition of income provided by HOTMA, as well as
                the revisions to the definition of Net Family Assets at 24 CFR 5.603
                that are used to determine the imputed income on assets over $50,000
                based on the current passbook saving rate.
                 For purposes of calculating tenant income in the HTF program, HUD
                is not proposing to adopt the new section 5.609(c) for determining
                income at initial occupancy or interim reexaminations and the timing
                requirements for those determinations. For families who are tenants in
                HTF-assisted housing, the HTF program requires a grantee to examine at
                least 2 months of source documents evidencing annual income at initial
                occupancy. For subsequent income determinations during the HTF
                compliance period, a grantee may use one of three methods to determine
                annual income. Adopting 24 CFR 5.609(c) for the HTF program would
                impose methods for calculating and verifying income that are more
                stringent than those currently required by the HTF regulations without
                providing additional benefit to the program. As HTF does not provide an
                ongoing subsidy to grantees, HUD believes the methods described at 24
                CFR 93.151(d) provide a grantee more flexibility in administering and
                managing its HTF-assisted rental housing portfolio.
                 Specific solicitation of comment 21: In light of revisions made to
                24 CFR 5.609(c)(3) to allow PHAs to accept a timely income
                determination of a family from another agency's means-tested Federal
                public assistance, HUD is seeking feedback from interested parties on
                whether 24 CFR 93.151(d) should specify what HUD considers timely for
                purposes of accepting an income determination of a family made by an
                administrator of a government program under which the family receives
                benefits.
                 This proposed rule would revise 24 CFR 93.151(b) to clarify that
                annual income includes income from all persons in the household
                regardless of which definition of annual income the grantee applies to
                its HTF-assisted program(s) or project(s). Furthermore, this proposed
                rule would revise 24 CFR 93.151 to add a new paragraph (e) to
                incorporate revisions to adjusted income in Sec. 5.611 and requires
                grantees to apply the deductions in Sec. 5.611(a) to determine the
                tenant's adjusted income. For public housing, the HCV program, and
                where the PHA is an owner in the PBRA program, paragraph (e)(2)
                requires the use of the deductions in Sec. 5.611(a) and (b) to
                determine the tenant's adjusted income and also permits a grantee to
                accept a PHA's decision to grant financial hardship exemptions under
                Sec. 5.611(c) to a family.
                 The HTF statute did not establish a limitation on the amount of and
                type of assets that a family assisted with HTF funds may have. HUD is
                not proposing to adopt the new asset restriction for the HTF program.
                 Specific solicitation of comment 22: HUD is seeking feedback from
                interested parties on whether HUD should adopt asset restrictions for
                any housing programs funded with HTF funds (e.g., homebuyer or rental
                housing), as well as when HTF funds are combined with other federal
                programs such as Section 8.
                III. Findings and Certifications
                Regulatory Review--Executive Orders 12866 and 13563
                 Under Executive Order 12866 (Regulatory Planning and Review), a
                determination must be made whether a regulatory action is significant
                and therefore, subject to review by the Office of Management and Budget
                (OMB) in accordance with the requirements of the order. Executive Order
                13563 (Improving Regulations and Regulatory Review) directs executive
                agencies to analyze regulations that are ``outmoded, ineffective,
                insufficient, or excessively burdensome, and to modify, streamline,
                expand, or repeal them in accordance with what has been learned.''
                 The rule would update HUD regulations for various programs to
                conform to sections 102, 103, and 104 of HOTMA by listing specific
                criteria for triggering family income reviews, providing methods for
                calculating family income, revising the definition of income and
                adjusted income, setting a limit on the amount and type of assets that
                assisted families may have, revising the definition of net family
                assets, and requiring that applicants for and recipients of assistance
                provide authorization to PHAs to obtain financial records. This
                proposed rule was determined to be a significant regulatory action
                under section 3(f) of Executive Order 12866 (although not an
                economically significant regulatory action under the order). HUD has
                prepared an initial Regulatory Impact Analysis (RIA) that addresses the
                costs and benefits of the proposed rule. HUD's RIA is part of the
                docket file for this rule.
                 The docket file is available for public inspection in the
                Regulations Division, Office of the General Counsel, Room 10276, 451
                7th Street SW, Washington, DC 20410-0500. Due to security measures at
                the HUD Headquarters building, please schedule an appointment to review
                the docket file by calling the Regulations Division at 202-402-3055
                (this is not a toll-free number). Individuals with speech or hearing
                impairments may access this number via TTY by calling the Federal Relay
                Service at toll-free 800-877-8339.
                Executive Order 13771
                 Executive Order 13771, entitled ``Reducing Regulation and
                Controlling Regulatory Costs,'' was issued on January 30, 2017. This
                proposed rule is expected to be an E.O. 13771 deregulatory action. HUD
                estimates that this rule would have annual net cost savings in the
                first year of about $2 million and after the first year, of about $23
                million to $27 million, accruing to Public Housing Agencies, HOPWA
                grantees, and Project-Based Rental Assistance owners. Around 20,000 to
                30,000 units may transfer from currently assisted households to
                households on the waitlist or new applicants. Further details on the
                estimated cost savings of this proposed rule can be found in the rule's
                RIA.
                Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.),
                generally requires an agency to conduct a regulatory flexibility
                analysis of any rule subject to notice and comment rulemaking
                requirements unless the agency certifies that the rule will not have a
                significant economic impact on a substantial number of small entities.
                 This proposed rule revises HUD regulations in certain ways that
                will reduce burden or provide flexibility for PHAs and owners and other
                housing providers. The proposed rule provides specific events that
                trigger an interim reexamination of family income, whereas current
                regulations provide that families may request reexaminations at any
                time. The proposed rule provides methods for calculating family income,
                but also provides a safe harbor for PHAs and owners who determine a
                family's income based on other means-tested
                [[Page 48833]]
                Federal public assistance programs. Additionally, this proposed rule
                provides for a limitation on assets, but provides that PHAs and owners
                may choose not to enforce this provision. This proposed rule also
                provides that applicants and recipients of assistance must provide
                authorization for PHAs to obtain financial records in order to verify
                family income.
                 For the reasons presented, the undersigned certifies that this rule
                will not have a significant economic impact on a substantial number of
                small entities.
                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 rule would not have
                Federalism implications and would not impose substantial direct
                compliance costs on state and local governments or preempt state law
                within the meaning of the Executive Order.
                Environmental Impact
                 The proposed rule relates to establishment and review of income
                limits and exclusions with regard to eligibility for or calculation of
                HUD housing assistance or rental assistance and related external
                administrative or fiscal requirements and procedures that do not
                constitute a development decision that affects the physical condition
                of specific project areas or building sites. Accordingly, under 24 CFR
                50.19(c)(6), this proposed rule is categorically excluded from
                environmental review under the National Environmental Policy Act of
                1969 (42 U.S.C. 4321).
                Unfunded Mandates Reform Act
                 Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
                4; approved March 22, 1995) (UMRA) establishes requirements for Federal
                agencies to assess the effects of their regulatory actions on state,
                local, and tribal governments, and on the private sector. This rule
                does not impose any Federal mandates on any state, local, or tribal
                government, or on the private sector, within the meaning of the UMRA.
                Paperwork Reduction Act
                 The information collection requirements contained in this proposed
                rule 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 2502-0204, 2506-0133, and 2577-0083. HUD
                expects to make changes to these existing recordkeeping items
                consistent with the changes in this proposed rule and believes that the
                changes will result in a decrease of burden of $8,337,744 and 345,495
                hours.
                 HUD would change the HOPWA PRA OMB No. 2506-0133 to reduce the
                recordkeeping burden hours from 60 hours to 50 hours per grantee to
                reflect the change to a triennial recertification and the reduction in
                the frequency of granting interim reexaminations. See Sec. 574.310(e).
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Information collection Annual burden Annual cost
                ----------------------------------------- Number of Annual number -------------------------------- Hourly cost -------------------------------
                 OMB No. 2502-0133 responses Current New Current New
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                Recordkeeping for Competitive, Renewal, 227 1 60.00 50.00 $23.85 $324,837 $270,698
                 and Formula Grantees...................
                 ---------------------------------------------------------------------------------------------------------------
                 Total............................... .............. .............. Savings 2,270 .............. Savings 54,139
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 HUD would change the Section 8 project-based PRA OMB No-2502-0204
                to reflect the regulatory change that a new consent to release of
                information would only apply at the time of initial tenancy, estimated
                at an approximate 80 percent reduction based on anticipated number of
                new participants, and reduce the number of certification compliances
                conducted by project owners to represent the decrease in interim
                reexaminations, estimated at 5 percent of recertifications. See
                Sec. Sec. 5.230 and 5.657.
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Information collection Number of responses Annual burden Annual cost
                -------------------------------------------------------------- Annual Hours per -------------------------- Hourly cost -------------------------
                 OMB No. 2502-0204 Current New number response Current New Current New
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                Certification Compliance........... 1,597,764 1,517,876 1 .6333 1,011,864 961,271 $25.00 $25,296,600 $24,031,771
                Consent for Release................ 1,597,764 302,022 1 .1667 266,347 50,347 25.00 6,658,675 1,258,675
                 --------------------------------------------------------------------------------------------------------------------
                 Total.......................... ........... ........... ........... ........... Savings 266,593 ........... Savings 6,664,829
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 HUD would also change the Public Housing and HCV programs PRA OMB
                No. 2577-0083. HUD provides for a new burden in the Public Housing
                context for providing notices to over-income tenants and reporting the
                number of families on the waiting list annually, and the change
                includes a reduction in burden for Public Housing and HCV to reflect
                the decrease in interim reexaminations, estimated at 5 percent of
                recertifications. HUD would also change the Public Housing and HCV
                programs PRA OMB No. 2501-0014 to reflect the regulatory change that a
                new consent to release information would only apply at the time of
                initial tenancy, estimated at an approximate 88 percent reduction based
                on anticipated number of new participants. See Sec. Sec. 5.230,
                960.257, 960.507 and 982.516.
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Information collection Number of responses Annual burden Annual cost
                -------------------------------------------------------------- Annual Hours per -------------------------- Hourly cost -------------------------
                 OMB No. Current New number response Current New Current New
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                Recertification (OMB No. 2577-0083) 2,398,462 2,278,539 1 .333 798,688 758,753 $17.50 $13,977,040 $13,278,178
                Over-Income Tenant Notification.... ........... 2,000 1 .1667 ........... 333 17.50 ........... 5,828
                [[Page 48834]]
                
                Public Housing Waiting List Data... ........... 2,929 1 4 ........... 11,716 17.50 ........... 205,030
                Consent for Release (OMB No, 2501- \2\ 421,693 1 .1667 627,738 70,296 30.00 18,832,140 2,108,880
                 0014)............................. 3,765,676
                 --------------------------------------------------------------------------------------------------------------------
                 Total.......................... ........... ........... ........... ........... Savings 585,328 ........... Savings 17,225,264
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 HUD believes that there are no PRA burden reductions for HOME and
                the HTF programs. Also, HUD finds that while changes to Sec. 5.609,
                Annual Income, and Sec. 5.611, Adjusted Income, will result in tenants
                providing different information, the net burden will not change. In
                accordance with the Paperwork Reduction Act of 1995, an agency 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.
                ---------------------------------------------------------------------------
                 \2\ This number is based on the PIH Information Center (PIC)
                database and the Tenant Rental Assistance Certification System
                (TRACS) database.
                ---------------------------------------------------------------------------
                 In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
                from members of the public and affected agencies concerning the
                information collection requirements in the proposed rule regarding:
                 (1) Whether the proposed collection of information is necessary for
                the proper performance of the functions of the agency, including
                whether the information will have practical utility;
                 (2) The accuracy of the agency's estimate of the burden of the
                proposed collection of information;
                 (3) Whether the proposed collection of information enhances the
                quality, utility, and clarity of the information to be collected; and
                 (4) Whether the proposed information collection minimizes the
                burden of the collection of information on those who are to respond;
                including through the use of appropriate automated collection
                techniques or other forms of information technology (e.g., permitting
                electronic submission of responses).
                 Interested persons are invited to submit comments regarding the
                information collection requirements in this rule. Under the provisions
                of 5 CFR part 1320, OMB is required to make a decision concerning this
                collection of information between 30 and 60 days after the publication
                date. Therefore, a comment on the information collection requirements
                is best assured of having its full effect if OMB receives the comment
                within 30 days of the publication. This time frame does not affect the
                deadline for comments to the agency on the proposed rule, however.
                Comments must refer to the proposed rule by name and docket number (FR-
                6057) and must be sent to:
                HUD Desk Officer, Office of Management and Budget, New Executive Office
                Building, Washington, DC 20503, Fax number: 202-395-6947
                and
                Colette Pollard, HUD Reports Liaison Officer, Department of Housing and
                Urban Development, 451 7th Street SW, Room 2204, Washington, DC 20410
                 Interested persons may submit comments regarding the information
                collection requirements electronically through the Federal eRulemaking
                Portal at http://www.regulations.gov. HUD strongly encourages
                commenters to submit comments electronically. Electronic submission of
                comments allows the commenter maximum time to prepare and submit a
                comment, ensures timely receipt by HUD, and enables HUD to make them
                immediately available to the public. Comments submitted electronically
                through the http://www.regulations.gov website can be viewed by other
                commenters and interested members of the public. Commenters should
                follow the instructions provided on that site to submit comments
                electronically.
                Catalog of Federal Domestic Assistance
                 The Catalog of Federal Domestic Assistance numbers applicable to
                the programs that would be affected by this rule are: 14.195, 14.239,
                14.241, 14.275, 14.850, 14.856, and 14.871.
                List of Subjects
                24 CFR Part 5
                 Administrative practice and procedure, Aged, Claims, Crime,
                Government contracts, Grant programs-housing and community development,
                Individuals with disabilities, Intergovernmental relations, Loan
                programs-housing and community development, Low and moderate income
                housing, Mortgage insurance, Penalties, Pets, Public housing, Rent
                subsidies, Reporting and recordkeeping requirements, Social security,
                Unemployment compensation, Wages.
                24 CFR Part 92
                 Administrative practice and procedure, Grant programs--housing and
                community development, Low and moderate income housing, Manufactured
                homes, Rent subsidies, and Reporting and recordkeeping requirements.
                24 CFR Part 93
                 Administrative practice and procedure, Grant programshousing and
                community development, Low- and moderate-income housing, Manufactured
                homes, Rent subsidies, Reporting and recordkeeping requirements.
                24 CFR Part 574
                 Community facilities, Grant programs-housing and community
                development, Grant programs--social programs, HIV/AIDS, Low and
                moderate income housing, Reporting and recordkeeping requirements
                24 CFR Part 960
                 Aged, Grant programs--housing and community development,
                Individuals with disabilities, Pets, Public housing.
                24 CFR Part 982
                 Grant programs--housing and community development, Grant programs--
                Indians, Indians, Public housing, Rent subsidies, Reporting and
                recordkeeping requirements.
                 Accordingly, for the reasons described in the preamble, HUD
                proposes to amend 24 CFR parts 5, 92, 93, 574, 960, 966, and 982 as
                follows:
                PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
                0
                1. The authority for part 5 continues to read as follows:
                 Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437d,
                1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 2936;
                Sec. 607, Pub. L. 109-162, 119 Stat. 3051 (42 U.S.C. 14043e et
                seq.); E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O.
                13559, 75 FR 71319, 3 CFR, 2010 Comp., p. 273.
                0
                2. In Sec. 5.100, add in alphabetical order the definitions for
                ``earned income'' and ``real property'' to read as follows:
                [[Page 48835]]
                Sec. 5.100 Definitions.
                * * * * *
                 Earned income means income or earnings included in annual income
                from wages, tips, salaries, other employee compensation, and self-
                employment. Earned income does not include any pension or annuity,
                transfer payments, or any cash or in-kind benefits.
                * * * * *
                 Real property as used in this part, has the same meaning as that
                provided under the state law in which the real property is located.
                * * * * *
                0
                3. In Sec. 5.210, revise the second sentence in paragraph (a) and the
                first sentence in paragraph (b)(2) to read as follows:
                Sec. 5.210 Purpose, applicability, and Federal preemption.
                 (a) * * * This subpart B also enables HUD and PHAs to obtain income
                information about applicants and participants in the covered programs
                through computer matches with State Wage Information Collection
                Agencies (SWICAs) and Federal agencies, and from financial institutions
                and employers, in order to verify an applicant's or participant's
                eligibility for or level of assistance. * * *
                 (b) * * *
                 (2) The information covered by consent forms described in this
                subpart involves income information from SWICAs and wages, income and
                resource information from financial institutions, net earnings from
                self-employment, payments of retirement income, and unearned income as
                referenced at 26 U.S.C. 6103. * * *
                * * * * *
                0
                4. In Sec. 5.230, revise paragraph (c)(4), and add paragraph (c)(5) to
                read as follows:
                Sec. 5.230 Consent by assistance applicants and participants.
                * * * * *
                 (c) * * *
                 (4) A provision authorizing PHAs to obtain any financial record
                from any financial institution, as the terms financial record and
                financial institution are defined in the Right to Financial Privacy Act
                (42 U.S.C. 1304), whenever the PHA determines the record is needed to
                determine an applicant's or participant's eligibility for assistance or
                level of benefits; and
                 (5) A statement that the authorization to release the information
                requested by the consent form shall remain effective until the earliest
                of:
                 (i) The rendering of a final adverse decision for an assistance
                applicant;
                 (ii) The cessation of a participant's eligibility for assistance
                from HUD and the PHA; or
                 (iii) The express revocation by the assistance applicant or
                recipient (or applicable family member) of the authorization, in a
                written notification to HUD.
                0
                5. In Sec. 5.232, add paragraph (c) to read as follows:
                Sec. 5.232 Penalties for failing to sign consent form.
                * * * * *
                 (c) This section does not apply if the applicant or participant, or
                any member of the assistance applicant's or participant's family
                revokes his/her consent with respect to the ability of the PHA to
                access financial records from financial institutions, unless the PHA
                establishes a policy in the PHA's Annual Plan that revocation of
                consent to access financial records will result in denial or
                termination of assistance or admission.
                0
                6. In Sec. 5.601:
                0
                a. Amend paragraph (d) by removing the phrases ``HOME Investment
                Partnerships Program (24 CFR part 92);'' and ``Housing Opportunities
                for Persons with AIDS (24 CFR part 574); Shelter Plus Care Program (24
                CFR part 582); Supportive Housing Program (McKinney Act Homeless
                Assistance (24 CFR part 583);'', and
                0
                b. Revise paragraph (e) to read as follows:
                Sec. 5.601 Purpose and applicability.
                * * * * *
                 (e) Limitations on eligibility for assistance based on assets, as
                provided in Sec. 5.618, in the Section 8 (tenant-based and project-
                based) and public housing programs.
                0
                7. In Sec. 5.603, add in alphabetical order definitions for
                ``Distribution from a trust'', ``Foster adults'', and ``Minor'', and
                revise the definitions for ``net family assets'' and ``responsible
                entity'' to read as follows:
                Sec. 5.603 Definitions.
                * * * * *
                 (b) * * *
                 Distribution from a trust. Any cash payout to the beneficiary or
                any payment to a third-party on behalf of the beneficiary.
                * * * * *
                 Foster adults. Persons with disabilities, not related to the
                family, who are unable to live alone.
                * * * * *
                 Minor. A member of the family, other than the head of family or
                spouse, who is less than 18 years of age.
                * * * * *
                 Net family assets. (1) Net cash value of all assets owned by the
                family, after deducting reasonable costs that would be incurred in
                disposing real property, savings, stocks, bonds, and other forms of
                investment.
                 (2) In determining net family assets, PHAs or owners, as
                applicable, shall include the value of any business or family assets
                disposed of by an applicant or tenant for less than fair market value
                (including a disposition in trust, but not in a foreclosure or
                bankruptcy sale) during the two years preceding the date of application
                for the program or reexamination, as applicable, in excess of the
                consideration received therefor. In the case of a disposition as part
                of a separation or divorce settlement, the disposition will not be
                considered to be for less than fair market value if the applicant or
                tenant receives important consideration not measurable in dollar terms.
                 (3) Excluded from the calculation of net family assets are:
                 (i) Interests in Indian trust land;
                 (ii) Equity in a manufactured home where the family receives
                assistance under 24 CFR part 982;
                 (iii) Equity in property under the Homeownership Option for which a
                family receives assistance under 24 CFR part 982.
                 (iv) Family Self-Sufficiency Accounts;
                 (v) Necessary items of personal property, and all items of personal
                property valued at $50,000 or less;
                 (vi) The value of any account under a retirement plan recognized as
                such by the Internal Revenue Service, including individual retirement
                arrangements (IRAs), employer retirement plans, and retirement plans
                for self-employed individuals;
                 (vii) Real property that the family does not have the effective
                legal authority to sell in the jurisdiction in which the property is
                located;
                 (viii) Any amounts recovered in any civil action or settlement
                based on a claim of malpractice, negligence, or other breach of duty
                owed to a family member arising out of law, that resulted in a member
                of the family being disabled; and
                 (ix) The value of any Coverdell education savings account under
                section 530 of the Internal Revenue Code of 1986, the value of any
                qualified tuition program under section 529 of such Code, and the value
                of any ABLE account authorized under Section 529A of such code.
                 (2) In cases where a trust fund has been established and the trust
                is not revocable by, or under the control of, any member of the family
                or household,
                [[Page 48836]]
                the value of the trust fund will not be considered in the calculation
                of net family assets, so long as the fund continues to be held in
                trust.
                * * * * *
                 Responsible entity. For Sec. 5.611, in addition to the definition
                of ``responsible entity'' in Sec. 5.100, ``responsible entity'' means:
                 (1) For the Rent Supplement Payments Program, the owner of the
                multifamily project;
                 (2) For the Rental Assistance Payments Program, the owner of the
                Section 236 project;
                 (3) For the Section 202 Supportive Housing Program for the Elderly,
                the ``Owner'' as defined in 24 CFR 891.205;
                 (4) For the Section 202 Direct Loans for Housing for the Elderly
                and Persons with Disabilities), the ``Borrower'' as defined in 24 CFR
                891.505; and
                 (5) For the Section 811 Supportive Housing Program for Persons with
                Disabilities, the ``owner'' as defined in 24 CFR 891.305.
                * * * * *
                0
                8. Revise Sec. 5.609 to read as follows:
                Sec. 5.609 Annual income.
                 (a) Annual income means, with respect to the family:
                 (1) All amounts, not specifically excluded in paragraph (b) of this
                section, received from all sources by each member of the family who is
                18 years of age or older or is the head of household or spouse of the
                head of household, plus unearned income by or on behalf of each
                dependent who is less than 18 years of age, and
                 (2) The imputed return on assets over $50,000 based on the current
                passbook savings rate, as determined by HUD, if the actual income on
                assets over $50,000 cannot be computed. The $50,000 figure in this
                paragraph shall be adjusted annually in accordance with a commonly
                recognized inflationary index, as determined by HUD.
                 (b) Annual income does not include the following:
                 (1) Any imputed return on assets of $50,000 or less, which figure
                shall be adjusted annually in accordance with a commonly recognized
                inflationary index, as determined by HUD;
                 (2) Distribution from a non-revocable trust fund specifically
                provided to cover the cost of medical expenses for a minor;
                 (3) Income from employment of children (including foster children)
                under the age of 18 years and foster adults;
                 (4) Payments received for the care of foster children or foster
                adults, or state kinship or guardianship care payments;
                 (5) Insurance payments and settlement for personal or property
                losses;
                 (6) Amounts received by the family that are specifically for, or in
                reimbursement of, the cost of medical expenses for any family member;
                 (7) Any amounts recovered in any civil action or settlement based
                on a claim of malpractice, negligence, or other breach of duty owed to
                a family member arising out of law, that resulted in a member of the
                family being disabled;
                 (8) Income of a live-in aide, as defined in Sec. 5.403;
                 (9) The full amount of student financial assistance paid directly
                to the student or to the educational institution on the student's
                behalf, except this does not apply for students applying for or
                receiving section 8 assistance pursuant to Sec. 5.612 who are not over
                the age of 23 with dependent children. Financial assistance is any
                grant-in-aid, scholarship or other assistance amounts an individual
                receives for the cost of tuition, books, room and board, and fees
                charged to the student by the education institution. For students
                applying for or receiving section 8 assistance who are not over the age
                of 23 with dependent children, the financial assistance in excess of
                the cost of tuition and any other required fees and charges under the
                Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), from private
                sources, or an institution of higher education (as defined under the
                Higher Education Act of 1965 (20 U.S.C. 1002), shall be considered
                income;
                 (10) Amounts from any Coverdell education savings account under
                section 530 of the Internal Revenue Code of 1986, any qualified tuition
                program under section 529 of such Code, and any amounts from ABLE
                accounts under section 529A of such Code;
                 (11) The special pay to a family member serving in the Armed Forces
                who is exposed to hostile fire;
                 (12)(i) Amounts received by a person with a disability that are
                disregarded for a limited time for purposes of Supplemental Security
                Income eligibility and benefits because they are set aside for use
                under a Plan to Attain Self-Sufficiency (PASS);
                 (ii) Amounts received by a participant in other publicly assisted
                programs which are specifically for or in reimbursement of out-of-
                pocket expenses incurred (special equipment, clothing, transportation,
                child care, etc.) and which are made solely to allow participation in a
                specific program;
                 (iii) Amounts received under a resident service stipend not to
                exceed $200 per month. A resident service stipend is a modest amount
                received by a resident for performing a service for the PHA or owner,
                on a part-time basis, that enhances the quality of life in the
                development;
                 (iv) Incremental earnings and benefits resulting to any family
                member from participation in training programs funded by HUD or in
                qualifying State or local employment training programs (including
                training programs not affiliated with a local government) and training
                of a family member as resident management staff. Amounts excluded by
                this provision must be received under employment training programs with
                clearly defined goals and objectives, and are excluded only for the
                period during which the family member participates in the employment
                training program;
                 (13) Reparation payments paid by a foreign government pursuant to
                claims filed under the laws of that government by persons who were
                persecuted during the Nazi era;
                 (14) Earned income of dependent full-time students, except that the
                earned income up to the amount of the deduction for a dependent in
                Sec. 5.611 of each dependent student shall be considered income;
                 (15) Adoption assistance payments in excess of $480 per adopted
                child, which amount will be adjusted annually in accordance with a
                commonly recognized inflationary index, as determined by HUD;
                 (16) Deferred periodic amounts from supplemental security income
                and Social Security benefits that are received in a lump sum amount or
                in prospective monthly amounts or any deferred Department of Veterans
                Affairs disability benefits that are received in a lump sum amount or
                in prospective monthly amounts;
                 (17) Payments related to aid and attendance under 38 U.S.C. 1521 to
                veterans in need of regular aid and attendance;
                 (18) Amounts received by the family in the form of refunds or
                rebates under State or local law for property taxes paid on the
                dwelling unit;
                 (19) Payments provided by a State Medicaid managed care system to a
                family to keep a member who has a disability living at home;
                 (20) Loan proceeds (the net amount disbursed by a lender to a
                borrower, under the terms of a loan agreement) received by the family
                (e.g., proceeds received by the family to finance the purchase a car);
                 (21) Payments received by Indian persons as a result of claims
                relating to the mismanagement of assets held in trust by the United
                States, to the extent
                [[Page 48837]]
                such payments are also excluded from gross income under the Internal
                Revenue Code;
                 (22) Amounts that HUD is required by Federal statute to exclude
                from consideration as income for purposes of determining eligibility or
                benefits under a category of assistance programs that includes
                assistance under any program to which the exclusions set forth in
                paragraph (b) of this section apply. A notice will be published in the
                Federal Register and distributed to PHAs and housing owners identifying
                the benefits that qualify for this exclusion. Updates will be published
                and distributed when necessary; or
                 (23) Replacement housing ``gap'' payments made in accordance with
                49 CFR part 24 to a displaced person that moves from a federally
                subsidized housing unit and occupies another federally subsidized
                housing unit when such payments offset the increased out of pocket cost
                to the displaced person for rent and utilities because of the
                displacement. Such replacement housing ``gap'' payments are not
                excluded from annual income, however, to the extent that the increased
                cost of rent and utilities is subsequently reduced or eliminated and
                the displaced person retains or continues to receive the replacement
                housing ``gap'' payments.
                 (c) Calculation of Income. The PHA or owner shall calculate family
                income as follows:
                 (1) Initial occupancy or assistance and interim reexaminations. The
                PHA or owner shall estimate the income of the family for the upcoming
                12-month period:
                 (i) To determine family income for initial occupancy or for the
                initial provision of housing assistance; or
                 (ii) To determine family income for an interim reexamination of
                family income under Sec. 5.657(c), 24 CFR 960.257(b), or 24 CFR
                982.516(c).
                 (2) Annual Reviews. (i) The PHA or owner shall determine the income
                of the family for the previous 12-month period and use this figure as
                the family income for annual reviews, except where the PHA or owner
                uses a streamlined income determination under Sec. 5.657(d), 24 CFR
                960.257(c), or 24 CFR 982.516(b).
                 (ii) In determining the income of the family for the previous 12-
                month period, the PHA or owner shall take into consideration any
                redetermination of income during the previous 12-month period resulting
                from an interim reexamination of family income under Sec. 5.657(c), 24
                CFR 960.257(b), or 24 CFR 982.516(c).
                 (iii) The PHA or owner must make adjustments to reflect current
                income if there was a change in income during the previous 12-month
                period that was not accounted for in a redetermination of income.
                 (3) The PHA or owner may determine the family's income prior to the
                application of any deductions applied in accordance with Sec. 5.611
                based on timely income determinations made within the previous 12-month
                period for purposes of the following means-tested Federal public
                assistance:
                 (i) The Temporary Assistance for Needy Families block grant (42
                U.S.C. 601, et seq.).
                 (ii) Medicaid assistance (42 U.S.C. 1396 et seq.).
                 (iii) The Supplemental Nutrition Assistance Program (7 U.S.C. 2011
                et seq.).
                 (iv) The Earned Income Tax Credit (26 U.S.C. 32).
                 (v) Other forms of Federal public assistance determined by the
                Secretary to have comparable reliability and announced through Federal
                Register notice.
                 (4) The PHA or owner will not be considered out of compliance with
                the requirements in this paragraph (c) solely due to de minimis errors
                in calculating family income. A de minimis error is an error where the
                PHA or owner determination of family income varies from the correct
                income determination by no more than 5 percent. The PHA or owner must
                still take any corrective action necessary to repay a family if the
                family has been overcharged for their rent as a result of the de
                minimis error in the income determination.
                0
                9. Revise Sec. 5.611 to read as follows:
                Sec. 5.611 Adjusted income.
                 Adjusted income means annual income (as determined under Sec.
                5.609) of the members of the family residing or intending to reside in
                the dwelling unit, after making the following deductions:
                 (a) Mandatory deductions. (1) $480 for each dependent, which amount
                will be adjusted annually in accordance with a commonly recognized
                inflationary index, as determined by HUD, rounded to the next lowest
                multiple of $25;
                 (2) $525 for any elderly family or disabled family, which amount
                will be adjusted annually in accordance with a commonly recognized
                inflationary index, as determined by HUD, rounded to the next lowest
                multiple of $25;
                 (3) The sum of the following, to the extent the sum exceeds ten
                percent of annual income:
                 (i) Unreimbursed medical expenses of any elderly family or disabled
                family; and
                 (ii) Unreimbursed reasonable attendant care and auxiliary apparatus
                expenses for each member of the family who is a person with
                disabilities, to the extent necessary to enable any member of the
                family (including the member who is a person with disabilities) to be
                employed. This deduction may not exceed the earned income received by
                family members who are 18 years of age or older and who are able to
                work because of such attendant care or auxiliary apparatus; and
                 (4) Any reasonable child care expenses necessary to enable a member
                of the family to be employed or to further his or her education.
                 (b) Additional deductions. (1) For public housing, the Housing
                Choice Voucher (HCV) program, and where the PHA is the owner in the
                Section 8 project-based programs, a PHA may adopt additional deductions
                from annual income. A PHA that adopts such deductions will not be
                eligible for an increase in subsidy for the public housing program,
                renewal funding for the HCV program, or housing assistance payments
                under the Section 8 project-based programs to cover the cost of the
                additional deductions. The PHA must establish a written policy for such
                deductions. The PHA must report to HUD the increased subsidy cost
                resulting from the additional deduction.
                 (2) For the HUD programs listed in Sec. 5.601(d), the responsible
                entity shall calculate such other deductions as required and permitted
                by the applicable program regulations.
                 (c) Financial hardship exemption for unreimbursed medical expense
                and child care expense deductions. (1) Exemption for unreimbursed
                medical expense deduction. A family may request a financial hardship
                exemption due to the change in the unreimbursed medical expense
                deduction under paragraph (a)(3) of this section, under which the
                amount of unreimbursed expenses that are not deductible has been
                increased from 3 to 10 percent of annual income. The family must
                demonstrate to the responsible entity's satisfaction an inability to
                pay their rent as a result of this change. If the hardship exemption is
                approved, the responsible entity must recalculate the family's adjusted
                income, and under paragraph (a)(3) of this section deduct the sum of
                the eligible expenses that exceeds 6.5 percent of annual income instead
                of 10 percent of annual income. The hardship exemption and the
                resulting alternative calculation for the unreimbursed medical expenses
                deduction will end at the family's next regular examination or such
                time that the responsible entity determines the family can now pay the
                [[Page 48838]]
                rent without the hardship exemption, whichever comes first.
                 (2) Exemption to continue child care expense deduction. A family
                may request a financial hardship exemption to continue the child care
                expense deduction under paragraph (a)(4) of this section. The
                responsible entity must recalculate the family's adjusted income and
                continue the child care deduction if the family demonstrates to the
                responsible entity's satisfaction that the family is unable to pay
                their rent because of loss of the child care expense deduction and the
                child care expense is still necessary even though the family member is
                no longer employed or furthering his or her education. The hardship
                exemption allowing the child care expense deduction to continue ends at
                the earliest of:
                 (i) The family's next regular reexamination;
                 (ii) Such time the responsible entity determines the need no longer
                exists for the childcare expense if no adult family member is employed
                or furthering their education no longer exists; or
                 (iii) Such time the responsible entity determines that family is
                able to pay their rent without the hardship exemption.
                 (3) Responsible entity determination of family's inability to pay
                the rent. The responsible entity must establish a policy on how it
                defines and determines the family's inability to pay the rent for
                purposes of determining eligibility for a hardship exemption under this
                paragraph (c).
                 (4) Family notification. The responsible entity must notify the
                family in writing of the change in the determination of adjusted income
                and the family's rent resulting from the hardship exemption. The notice
                must also inform the family that the hardship exemption will expire at
                the family's next regular income reexamination or at such time the
                responsibility entity determines the exemption is no longer necessary
                in accordance with paragraph (c)(1) or (c)(2) of this section.
                0
                10. Amend Sec. 5.617 by adding paragraph (e) to read as follows:
                Sec. 5.617 Self-sufficiency incentives for persons with
                disabilities--Disallowance of increase in annual income.
                * * * * *
                 (e) Effective [EFFECTIVE DATE OF FINAL RULE], this section will not
                apply to any family who is not eligible for and participating in the
                disallowance of earned income under this section on [EFFECTIVE DATE OF
                FINAL RULE].
                Sec. 5.617 [Removed]
                0
                11. Remove Sec. 5.617.
                0
                12. Add Sec. 5.618 to subpart F to read as follows:
                Sec. 5.618 Restriction on assistance to families based on assets.
                 (a) Restrictions based on net assets and property ownership. (1) A
                dwelling unit may not be rented, and assistance may not be provided,
                either initially or upon reexamination of family income, to any family
                if:
                 (i) The net family assets (as defined in Sec. 5.603) exceed
                $100,000, which amount will be adjusted annually in accordance with a
                commonly recognized inflationary index, as determined by HUD; or
                 (ii) The family has a present ownership interest in, a legal right
                to reside in, and the effective legal authority to sell, in the
                jurisdiction in which the property is located, real property that is
                suitable for occupancy by the family as a residence, except this
                restriction does not apply to:
                 (A) Any property for which the family is receiving assistance under
                24 CFR 982.620; or under the Homeownership Option in 24 CFR part 982;
                 (B) Any property that is jointly owned by a member of the family
                and another individual or individuals who would not reside with the
                family;
                 (C) Any person that is a victim of domestic violence, dating
                violence, sexual assault, or stalking, as defined in this part 5
                (subpart L); or
                 (D) Any family that is offering such property for sale.
                 (2) A property will be considered ``suitable for occupancy'' under
                paragraph (a)(1)(ii) of this section unless the family demonstrates
                that it:
                 (i) Does not meet the disability-related needs for all members of
                the family, including physical accessibility requirements;
                 (ii) Is not sufficient for the size of the family;
                 (iii) Is geographically located so as to provide a hardship for the
                family; or
                 (iv) Is not safe to reside in because of the physical condition of
                the property.
                 (b) Self-certification. (1) A PHA or owner may determine the net
                assets of a family based on a certification by the family that the net
                family assets (as defined in Sec. 5.603) do not exceed $50,000, which
                amount will be adjusted annually in accordance with a commonly
                recognized inflationary index, as determined by HUD, without taking
                additional steps to verify the accuracy of the declaration. The
                declaration must state the amount of income the family expects to
                receive from such assets; this amount must be included in the family's
                income.
                 (2) A PHA or owner may determine compliance with paragraph
                (a)(1)(ii) of this section based on a certification by a family that
                certifies that such family does not have any present ownership interest
                in any real property at the time of the income determination or review.
                 (c) Enforcement. (1) When recertifying the income of a family that
                is subject to the restrictions in paragraph (a) of this section, a PHA
                or owner may choose not to enforce such restrictions, or alternatively,
                may establish exceptions to the restrictions based on eligibility
                criteria.
                 (2) The PHA or owner may only choose not to enforce the
                restrictions in paragraph (a) of this section or establish exceptions
                to such restrictions pursuant to a policy set forth in the public
                housing agency plan or under a policy adopted by the owner.
                 (3) Eligibility criteria for establishing exceptions may provide
                for separate treatment based on family type and may be based on
                different factors, such as age, disability, income, the ability of the
                family to find suitable alternative housing, and whether supportive
                services are being provided. Such policies must be in conformance with
                all applicable fair housing statutes and regulations, as discussed in
                this part 5.
                 (d) Eviction delays. The PHA or owner may delay for a period of not
                more than 6 months the initiation of eviction or termination
                proceedings of a family based on noncompliance under this provision.
                 (e) Applicability. This section applies to the Section 8 (tenant-
                based and project-based) and public housing programs.
                0
                13. In Sec. 5.657, revise paragraph (c) and add paragraph (e) to read
                as follows:
                Sec. 5.657 Section 8 project-based assistance programs: Reexamination
                of family income and composition.
                * * * * *
                 (c) Interim reexaminations. (1) A family may request an interim
                reexamination of family income. The owner must make the interim
                reexamination within a reasonable time after the family request.
                 (2) The owner may decline to process a family request for an
                interim reexamination if the owner estimates the family's adjusted
                income will decrease by an amount that is less than 10 percent of the
                family's annual adjusted income, or if the family's adjusted income
                will decrease by a lower threshold amount that is less than 10 percent,
                if such lower threshold has been established by the owner. If the owner
                determines the estimated decrease in family adjusted income is at least
                10 percent (or the lower alternative threshold established by the
                owner) the
                [[Page 48839]]
                owner must make the interim reexamination within a reasonable time
                after the family's request.
                 (3) The owner must conduct a reexamination of family income within
                a reasonable time after the owner becomes aware that the family's
                adjusted income (as defined in Sec. 5.611) has changed by an amount
                that the owner estimates will result in an increase of 10 percent or
                more in annual adjusted income, except:
                 (i) The owner may not consider any increase in the earned income of
                the family when estimating whether the family's adjusted income has
                increased, unless the family has previously received an interim
                reduction under paragraph (c)(2) of this section during the year;
                 (ii) The owner may choose not to conduct an interim reexamination
                in the last three months of a certification period; and
                 (iii) The owner will not be considered out of compliance with the
                requirements in this paragraph solely due to de minimis errors in
                calculating family income but is still obligated to correct errors once
                the PHA becomes aware of the errors. A de minimis error is an error
                where the owner determination of family income varies from the correct
                income determination by no more than 5 percent. The owner must still
                take any corrective action necessary to repay a family if the family
                has been overcharged for their rent as a result of the de minimis error
                in the income determination.
                 (4) The owner must adopt policies consistent with this section
                prescribing when and under what conditions the family must report a
                change in family income or composition.
                * * * * *
                 (e) Reviews of family income under this section are subject to the
                provisions in Section 904 of the Stewart B. McKinney Homeless
                Assistance Amendments Act of 1988 (42 U.S.C. 3544) and any applicable
                privacy rules in subpart B of this part.
                0
                14. In Sec. 5.659, revise paragraph (e) to read as follows:
                Sec. 5.659 Family information and verification.
                * * * * *
                 (e) Verification of assets. For a family with net family assets (as
                the term is defined in Sec. 5.603) equal to or less than $50,000,
                which amount will be adjusted annually in accordance with a commonly
                recognized inflationary index, as determined by HUD, an owner may
                accept, for purposes of recertification of income, a family's
                declaration under Sec. 5.618(b), except that the owner must obtain
                third-party verification of all family assets every 3 years.
                * * * * *
                PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
                0
                15. The authority citation for part 92 continues to read as follows:
                 Authority: 42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.
                0
                16. In Sec. 92.203, add subject headings to paragraphs (a) and (b),
                revise paragraphs (b)(1), and (c), add a heading to paragraph (d),
                revise paragraph (d)(1), and add paragraph (e) to read as follows:
                Sec. 92.203 Income determinations.
                 (a) Methods of determining income. * * *
                 (b) Defining income for eligibility. * * *
                 (1) Annual income as defined at 24 CFR 5.609 (a) and (b) (except
                when determining the income of a homeowner for an owner-occupied
                rehabilitation project, the value of the homeowner's principal
                residence may be excluded from the calculation of Net Family Assets, as
                defined in 24 CFR 5.603); or
                * * * * *
                 (c) Using Income Definitions. The participating jurisdiction may
                use only one definition of annual income for each HOME-assisted program
                (e.g., downpayment assistance program) that it administers and for each
                rental housing project.
                 (d) Projecting Income. (1) The participating jurisdiction must
                calculate the annual income of the family by projecting the prevailing
                rate of income of the family at the time the participating jurisdiction
                determines that the family is income eligible. Annual income includes
                income from all persons in the household. Income or asset enhancement
                derived from the HOME-assisted project shall not be considered in
                calculating annual income.
                * * * * *
                 (e) Determining Adjusted Income. Although the participating
                jurisdiction may use either of the definitions of ``annual income''
                permitted in paragraph (b) of this section to calculate annual income,
                it must then apply deductions from income in 24 CFR 5.611(a) to
                determine the family's adjusted income.
                 (1) The participating jurisdiction must use a family's adjusted
                income when determining tenant contribution in units receiving Federal
                or State project-based rental subsidy pursuant to Sec. 92.252(b).
                 (2) The participating jurisdiction may base the amount of tenant-
                based rental assistance on the adjusted income of the family in
                accordance with Sec. 92.209(h) and may grant financial hardship
                exemptions to a family receiving tenant-based rental assistance in
                accordance with Sec. 5.611(c) of this title.
                 (3) When a family applying for or living in a HOME-assisted rental
                unit receives section 8 housing choice voucher assistance, or when a
                public housing agency owns the HOME-assisted rental unit in the
                project-based Section 8 programs, the participating jurisdiction must
                apply the income deductions in 24 CFR 5.611(a) and (b) to determine the
                family's adjusted income and may accept a public housing agency's
                determination to grant financial hardship exemptions to the family
                under 24 CFR 5.611(c).
                Sec. 92.203 [Amended]
                0
                17. Amend Sec. 92.203 by removing paragraph (d)(3).
                PART 93--HOUSING TRUST FUND
                0
                18. The authority citation for part 93 continues to read as follows:
                 Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.
                0
                19. In Sec. 93.151, revise paragraph (b)(1)(i) and add paragraphs
                (b)(3) and (e) to read as follows:
                Sec. 93.151 Income determinations.
                * * * * *
                 (b) * * *
                 (1) * * *
                 (i) ``Annual income'' as defined at 24 CFR 5.609(a) and (b); or
                * * * * *
                 (3) Annual income includes income from all persons in the
                household.
                * * * * *
                 (e) Adjusted Income. (1) Although the grantee may use either of the
                definitions of ``annual income'' permitted in paragraph (b) of this
                section to calculate annual income, the grantee must then apply
                deductions established in 24 CFR 5.611(a) to determine the tenant's
                adjusted income.
                 (2) For public housing, the housing choice voucher program, and
                where the public housing agency is the owner in the Section 8 project-
                based programs, a grantee must apply the public housing agency income
                deductions at 24 CFR 5.611(a) and (b) to determine the family's
                adjusted income and may accept a public housing agency's determination
                to grant financial hardship exemptions pursuant to 24 CFR 5.611(c).
                [[Page 48840]]
                PART 574--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS
                0
                20. The authority citation for part 574 continues to read as follows:
                 Authority: 12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d) and 5301-
                5320.
                0
                21. In Sec. 574.310, revise paragraph (d)(1); redesignate paragraph
                (e) as paragraph (g), and add new paragraphs (e) and (f) to read as
                follows:
                Sec. 574.310 General Standards for eligible housing activities.
                * * * * *
                 (d) * * *
                 (1) 30 percent of the family's monthly adjusted income (calculated
                under 24 CFR 5.611);
                * * * * *
                 (e) Reexamination of family income. (1) Annual reexaminations. For
                purposes of determining resident rent payments, grantees will conduct a
                reexamination and redetermination of family income every year.
                 (2) Interim reexaminations. (i) A family may request an interim
                reexamination of family income at any time. The grantee must make the
                interim reexamination within a reasonable period of time after the
                family's request.
                 (ii) Grantees may decline to process a family request for an
                interim reexamination if the grantee estimates the family's adjusted
                income will decrease by an amount that is less than 10 percent of the
                family's annual adjusted income, or if the family's adjusted income
                will decrease by a lower threshold amount that is less than 10 percent,
                if such lower threshold has been established by the grantee. If the
                grantee determines the estimated decrease in family adjusted income is
                at least 10 percent (or the lower alternative threshold established by
                the grantee) the grantee must make the interim reexamination within a
                reasonable time after the family's request.
                 (iii) Grantees must conduct the reexamination of family income
                within a reasonable time after the grantee becomes aware that the
                family's adjusted income (as defined in Sec. 5.611 of this title) has
                changed by an amount that the grantee estimates will result in an
                increase of 10 percent or more in annual adjusted income, except:
                 (A) The grantee may not consider any increase in the earned income
                of the family when estimating whether the family's adjusted income has
                increased unless the family has previously received an interim
                reduction under paragraph (e)(2)(ii) of this section during the year;
                 (B) The grantee may choose not to conduct an interim reexamination
                in the last three months of a certification period; and
                 (C) The grantee will not be considered out of compliance with the
                requirements in this paragraph solely due to de minimis errors in
                calculating family income but is still obligated to correct errors once
                the grantee becomes aware of the errors. A de minimis error is an error
                where the grantee's determination of family income varies from the
                correct income determination by no more than 5 percent. The grantee
                must still take any corrective action necessary to repay a family if
                the family has been overcharged for their rent as a result of the de
                minimis error in the income determination.
                 (iv) The grantee must adopt policies consistent with this section
                prescribing when and under what conditions the family must report a
                change in family income or composition.
                 (3) Streamlined income determinations. (i) A grantee may elect to
                apply a streamlined income determination to families receiving fixed
                income as described in paragraph (e)(3)(iii) of this section.
                 (ii) Definition of fixed income. For purposes of this section,
                fixed income means periodic payments at reasonably predictable levels
                from one or more of the following sources:
                 (A) Social Security, Supplemental Security Income, Supplemental
                Disability Insurance.
                 (B) Federal, state, local, or private pension plans.
                 (C) Annuities or other retirement benefit programs, insurance
                policies, disability or death benefits, or other similar types of
                periodic receipts.
                 (D) Any other source of income subject to adjustment by a
                verifiable COLA or current rate of interest.
                 (iii) Method of streamlined income determination. Grantees using
                the streamlined income determination must adjust a family's income
                according to the percentage of a family's unadjusted income that is
                from fixed income.
                 (A) When 90 percent or more of a family's unadjusted income
                consists of fixed income, grantees using streamlined income
                determinations must apply a COLA or COLAs to the family's fixed-income
                sources, provided that the family certifies both that 90 percent or
                more of their unadjusted income is fixed income and that their sources
                of fixed income have not changed from the previous year. For non-fixed
                income, grantees may choose to make adjustments pursuant to paragraph
                (e)(1) of this section.
                 (B) When less than 90 percent of a family's unadjusted income
                consists of fixed income, grantees using streamlined income
                determinations must apply a COLA to each of the family's sources of
                fixed income. Grantees must determine all other income pursuant to
                paragraph (e)(1) of this section.
                 (iv) COLA rate applied by grantees. Grantees using streamlined
                income determinations must adjust a family's fixed income using a COLA
                or current interest rate that applies to each specific source of fixed
                income and is available from a public source or through tenant-
                provided, third-party-generated documentation. If no public
                verification or tenant-provided documentation is available, then the
                grantee must obtain third-party verification of the income amounts in
                order to calculate the change in income for the source.
                 (v) Triennial verification. For any income determined pursuant to a
                streamlined income determination, a grantee must obtain third-party
                verification of all income amounts every 3 years.
                 (f) Net family assets and restriction on assistance to families
                based on assets. (1) The definition of net family assets in Sec. 5.603
                of this title applies to this part, except the value of a home of a
                participant receiving short-term mortgage or utility assistance under
                Sec. 574.300(b)(6) or other homeownership assistance eligible under
                the HOPWA program is excluded from the definition.
                 (2) The requirements in Sec. 5.618(a) through (d) of this title on
                providing assistance to families who have certain assets apply to HOPWA
                assistance provided under this part, except that Sec. 5.618 of this
                title does not apply to the provision of short-term mortgage or utility
                assistance under Sec. 574.300(b)(6) or other homeownership assistance
                eligible under the HOPWA program, housing information services, as
                described in Sec. 574.300(b)(1), or supportive services, as described
                in Sec. 574.300(b)(7).
                * * * * *
                PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING
                0
                22. The authority citation for part 960 continues to read as follows:
                 Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and
                3535(d).
                0
                23. In Sec. 960.102, revise the definition of ``Over-income family''
                in paragraph (b) to read as follows:
                Sec. 960.102 Definitions.
                * * * * *
                 (b) * * *
                [[Page 48841]]
                 Over-income family. A family whose income exceeds the local over-
                income limit. See subpart E of this part.
                * * * * *
                0
                24. In Sec. 960.253, revise paragraph (f)(1) to read as follows:
                Sec. 960.253 Choice of rent.
                * * * * *
                 (f) * * *
                 (1) For a family that chooses the flat rent option, the PHA must
                conduct a reexamination of family income and composition at least once
                every three years, except for families that are found to be over-
                income. Once a family is determined to be over-income, the PHA must
                follow the documentation and reexamination requirements under Sec.
                960.507(c).
                0
                25. Amend Sec. 960.255. by adding paragraph (e) to read as follows:
                Sec. 960.255 Self-sufficiency incentives--Disallowance of increase in
                annual income.
                * * * * *
                 (e) Effective [EFFECTIVE DATE OF FINAL RULE], this section will not
                apply to any family who is not eligible for and participating in the
                disallowance of earned income under this section on [EFFECTIVE DATE OF
                FINAL RULE].
                Sec. 960.255 [Removed]
                0
                26. Remove Sec. 960.255.
                0
                27. In Sec. 960.257, revise paragraph (b), and add paragraph (e) to
                read as follows:
                Sec. 960.257 Family income and composition: Annual and interim
                reexaminations.
                * * * * *
                 (b) Interim reexaminations. (1) A family may request an interim
                reexamination of family income or composition because of any changes
                since the last determination. The PHA must conduct the interim
                reexamination within a reasonable period of time after the family
                request.
                 (2) The PHA may decline to process a family request for an interim
                income reexamination if the PHA estimates the family's adjusted income
                will decrease by an amount that is less than 10 percent of the family's
                annual adjusted income, or if the family's adjusted income will
                decrease by a lower threshold amount that is less than 10 percent, if
                such lower threshold has been established by the PHA. If the PHA
                determines the estimated decrease in family adjusted income is at least
                10 percent (or the lower alternative threshold established by the PHA),
                the PHA must conduct the interim income reexamination within a
                reasonable period of time after the family's request.
                 (3) The PHA must conduct a reexamination of family income within a
                reasonable time after the PHA becomes aware that the family's adjusted
                income (as defined in 24 CFR 5.611) has changed by an amount that the
                PHA estimates will result in an increase of 10 percent or more in
                annual adjusted income, except:
                 (i) The PHA may not consider any increase in the earned income of
                the family when estimating whether the family's adjusted income has
                increased, unless the family has previously received an interim
                reduction under paragraph (b)(2) of this section during the year;
                 (ii) The PHA may choose not to conduct an interim reexamination in
                the last three months of a certification period; and
                 (iii) The PHA will not be considered out of compliance with the
                requirements in this paragraph solely due to de minimis errors in
                calculating family income but is still obligated to correct errors once
                the PHA becomes aware of the errors. A de minimis error is an error
                where the PHA determination of family income varies from the correct
                income determination by no more than 5 percent. The PHA must still take
                any corrective action necessary to repay a family if the family has
                been overcharged for their rent as a result of the de minimis error in
                the income determination.
                 (4) The PHA must adopt policies consistent with this section
                prescribing when and under what conditions the family must report a
                change in family income or composition.
                * * * * *
                 (e) Reviews of family income under this section are subject to the
                provisions in Section 904 of the Stewart B. McKinney Homeless
                Assistance Amendments Act of 1988 (42 U.S.C. 3544).
                0
                28. In Sec. 960.259, revise paragraph (c)(2) to read as follows:
                Sec. 960.259 Family information and verification.
                * * * * *
                 (c) * * *
                 (2) For a family with net family assets (as the term is defined in
                24 CFR 5.603) equal to or less than $50,000, which amount will be
                adjusted annually in accordance with a commonly recognized inflationary
                index, as determined by HUD, a PHA may accept, for purposes of
                recertification of income, a family's declaration under 24 CFR
                5.618(b), except that the PHA must obtain third-party verification of
                all family assets every 3 years.
                Sec. 960.261 [Removed]
                0
                29. Remove Sec. 960.261.
                0
                30. Add Sec. 960.507 to Subpart E read as follows:
                Sec. 960.507 Families exceeding the income limit.
                 (a) In general. Families residing in public housing may not, except
                as provided in Sec. 960.503, have incomes that exceed the local over-
                income limit.
                 (b) Determination of over-income limit. The local over-income limit
                is determined by multiplying the applicable income limit for a very
                low-income family as defined in 24 CFR 5.603(b), by a factor of 2.4.
                 (c) Documenting over-income families. (1) When a PHA becomes aware,
                through an annual reexamination, or an interim reexamination for an
                increase in income, that a family's income exceeds the applicable over-
                income limit, the PHA must document that the family exceeds the
                threshold.
                 (2) If, a year after the documentation in paragraph (c)(1) of this
                section, the PHA determines that the family still has an income
                exceeding the over-income limit, the PHA must provide written
                notification to the family that their income has exceeded the over-
                income limit for one year, and that if the family's income continues to
                exceed the over-income limit for the next 12 consecutive months, the
                family will be subject to either a higher rent payment or termination,
                based on the PHA's policies under paragraph (d).
                 (3) If a PHA discovers that a previously over-income family has
                income that is now below the over-income limit, the family is no longer
                subject to these provisions. The family is entitled to a new 2-year
                grace period if the family's income once again exceeds the over-income
                limit.
                 (d) End of grace period. Once a family has exceeded the over-income
                limit for two consecutive years, the PHA must, as detailed in its
                Admissions and Continued Occupancy Policies (ACOP)--
                 (1) Charge the family a monthly rent equal to the greater of--
                 (i) The applicable fair market rent for the unit; or
                 (ii) The amount of the monthly subsidy provided for the unit, which
                will be determined by summing the per unit assistance provided to a
                public housing property as calculated through the applicable formulas
                for the Public Housing Capital Fund and Public Housing Operating Fund.
                 (A) For the Public Housing Capital Fund, the amount of Capital
                Funds provided to the unit will be calculated as the per unit Capital
                Fund assistance provided to a PHA for the development
                [[Page 48842]]
                in which the family resides for the most recent funding year for which
                Capital Funds have been allocated;
                 (B) For the Public Housing Operating Fund, the amount of Operating
                Funds provided to the unit will be calculated as the per unit amount
                provided to the public housing project where the unit is located for
                the most recent funding year for which a final funding eligibility
                determination has been made;
                 (C) HUD will publish such funding amounts no later than December
                31st each year; or
                 (2) Terminate the tenancy of the family no more than 6 months after
                the third determination that the family's income exceeds the income
                limit in paragraph (a) of this section. PHAs must continue to charge
                these families the non-over-income rent amount (the family's choice of
                income-based or flat rent) for the time period during the 6-month
                period before termination.
                 (e) Reporting. Each PHA must submit a report annually to HUD that
                specifies, as of the end of the year, the number of families residing
                in public housing with incomes exceeding the over-income limit and the
                number of families on the waiting lists for admission to public housing
                projects. These reports must also be publicly available.
                PART 966--PUBLIC HOUSING LEASE AND GRIEVANCE PROCEDURE
                0
                31. The authority citation for part 966 continues to read as follows:
                 Authority: 42 U.S.C. 1437d and 3535(d).
                0
                32. In Sec. 966.4, revise paragraph (l)(2)(ii) to read as follows:
                Sec. 966.4 Lease requirements.
                * * * * *
                 (l) * * *
                 (2) * * *
                 (ii) Being over the income limit for the program, as provided in 24
                CFR 960.507.
                PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER
                PROGRAM
                0
                33. The authority citation for part 982 continues to read as follows:
                 Authority: 42 U.S.C. 1437f and 3535(d).
                0
                34. In Sec. 982.516, revise paragraphs (a)(3), (c), and (d), and add
                paragraph (h) to read as follows:
                Sec. 982.516 Family income and composition: Annual and interim
                reexaminations.
                 (a) * * *
                 (3) For a family with net family assets (as the term is defined in
                24 CFR 5.603) equal to or less than $50,000, which amount will be
                adjusted annually in accordance with a commonly recognized inflationary
                index, as determined by HUD, a PHA may accept, for purposes of
                recertification of income, a family's declaration under 24 CFR
                5.618(b), except that the PHA must obtain third-party verification of
                all family assets every 3 years.
                * * * * *
                 (c) Interim reexaminations. (1) A family may request an interim
                determination of family income or composition because of any changes
                since the last determination. The PHA must conduct an interim
                reexamination within a reasonable period of time after the family
                request.
                 (2) The PHA may decline to process a family request for an interim
                income reexamination if the owner or PHA estimates the family's
                adjusted income will decrease by an amount that is less than 10 percent
                of the family's annual adjusted income, or if the family's adjusted
                income will decrease by a lower threshold amount that is less than 10
                percent, if such lower threshold has been established by the PHA. If
                the PHA determines the estimated decrease in family adjusted income is
                at least 10 percent (or the lower alternative threshold established by
                the PHA), the PHA must conduct the interim income reexamination within
                a reasonable period of time after the family's request.
                 (3) The PHA must conduct a reexamination of family income within a
                reasonable time after the PHA becomes aware that the family's adjusted
                income (as defined in 24 CFR 5.611) has changed by an amount that the
                PHA estimates will result in an increase of 10 percent or more in
                annual adjusted income, except:
                 (i) The PHA may not consider any increase in the earned income of
                the family when estimating whether the family's adjusted income has
                increased, unless the family has previously received an interim
                reduction under paragraph (c)(2) of this section during the year;
                 (ii) The PHA may choose not to conduct an interim reexamination in
                the last three months of a certification period; and
                 (iii) The PHA will not be considered out of compliance with the
                requirements in this paragraph solely due to de minimis errors in
                calculating family income but is still obligated to correct errors once
                the PHA becomes aware of the errors. A de minimis error is an error
                where the PHA determination of family income varies from the correct
                income determination by no more than 5 percent. The PHA must still take
                any corrective action necessary to repay a family if the family has
                been overcharged for their rent as a result of the de minimis error in
                the income determination.
                 (4) The PHA must adopt policies consistent with this section
                prescribing when and under what conditions the family must report a
                change in family income or composition.
                 (d) Family reporting of change. The PHA must adopt policies
                consistent with this section prescribing when and under what conditions
                the family must report a change in family income or composition.
                * * * * *
                 (h) Reviews of family income under this section are subject to the
                provisions in Section 904 of the Stewart B. McKinney Homeless
                Assistance Amendments Act of 1988 (42 U.S.C. 3544).
                 Dated: August 13, 2019.
                Brian D. Montgomery,
                Acting Deputy Secretary.
                [FR Doc. 2019-19774 Filed 9-16-19; 8:45 am]
                BILLING CODE 4210-67-P
                

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