PART 883—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM—STATE HOUSING AGENCIES Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619. Source: 45 FR 6889, Jan. 30, 1980, unless otherwise noted. Subpart A—Summary and Guide § 883.101 General. (a) The purpose of the Section 8 program is to provide decent, safe and sanitary housing for low-income families through the use of a system of housing assistance payments. These needs may be met by statewide or special purpose housing agencies established by the various States. (b) The regulations in this part 883 contain the policies and procedures applicable to the Section 8 program for these State agencies. [61 FR 13592, Mar. 27, 1996] § 883.105 Applicability of part 883 in effect as of February 29, 1980. (a) Part 883, in effect as of February 29, 1980, applies to projects for which the initial application was submitted on or after the February 29, 1980, effective date. (See 24 CFR part 883, revised as of April 1, 1980.) Projects for which applications or proposals were submitted before the February 29, 1980, effective date of part 883 have been processed under the part 883 regulations and procedures in effect at the date of submission. If, however, the agency notified HUD within 60 calendar days of the February 29, 1980, effective date of the part 883 regulations that they chose to have the provisions of part 883, in effect as of February 29, 1980, apply to a specific case, it must have promptly modified the application(s) and proposal(s) to comply. (b) Subpart F of this part, dealing with the HAP contract and subpart G of this part, dealing with management, apply to all projects for which an Agreement was not executed before the February 29, 1980, effective date of part 883. In cases where an Agreement has been executed: (1) The Agency, owner and HUD may agree to make the revised subpart F of this part applicable and execute appropriate amendments to the Agreement or Contract; (2) The Agency, Owner and HUD may agree to make the revised subpart G of this part applicable (with or without the limitation on distributions) and execute appropriate amendments to the Agreement or Contract. (c) Section 883.708, Termination of Tenancy and Modifications of Leases, applies to new families who begin occupancy or execute a lease on or after 30 days following the February 29, 1980, effective date of part 883. This section also applies to families not covered by the preceding sentence, including families currently under lease, who have a lease in which a renewal becomes effective on or after the 60th day following the February 29, 1980 effective date of part 883. A lease is considered renewed when both the landlord and the family fail to terminate a tenancy under a lease permitting either to terminate. (d) Notwithstanding the provisions of paragraph (b) of this section, the provisions of 24 CFR part 5 (concerning preferences for selection of applicants) apply to all projects, regardless of when am Agreement was executed. [61 FR 13592, Mar. 27, 1996] § 883.106 Applicability and relationships between HUD and State agencies. (a) Applicability. (b) General responsibilities and relationships. (c) Certifications and HUD monitoring. (2) HUD will periodically monitor the activities of HFA's participating under this part only with respect to Section 8 or other HUD programs. This monitoring is intended primarily to ensure that certifications submitted and projects operated under this part reflect appropriate compliance with Federal law and requirements. [61 FR 13592, Mar. 27, 1996] Subpart B [Reserved] Subpart C—Definitions and Other Requirements § 883.301 Applicability. The provisions of this subpart are applicable to newly constructed and substantially rehabilitated housing allocated contract authority under subpart B of this part and processed and constructed under the Fast Tract Procedures of subpart D. The definitions contained in § 883.302 and the provisions of § 883.307(b) regarding review and approval of financing documents, however, apply to all of this part. § 883.302 Definitions. The terms Fair Market Rent (FMR), HUD, Public Housing Agency (PHA) ACC (Annual Contributions Contract). Agency. Agreement—(Agreement to enter into Housing Assistance Payments Contract). Annual Income. Assisted unit. Application. Contract—(Housing Assistance Payments Contract). Contract Rent. Covered housing provider. Decent, safe, and sanitary. Existing Housing. Fast Track procedures. Financing Cost Contingency (FCC). Gross Rent. HFA (Housing Finance Agency). Household type. Housing Assistance Payment. Housing Assistance Plan (HAP). Housing type. Independent Public Accountant. Moderate rehabilitation. New construction. (a) At the date an application is submitted to HUD, a substantial amount of construction (generally at least 25 percent) remains to be completed; (b) At the date of application to HUD, the project cannot be completed and occupied by eligible families without assistance under this part; and (c) At the time construction was initiated, all of the parties reasonably expected that the project would be completed without assistance under this part. Override. Owner. Partially-assisted Project. Permanent financing. Project Account. Proposal. Rent. Replacement cost New construction. (b) Substantial rehabilitation. Single Room Occupancy (SRO) Housing. Secretary. Small Project. State Agency (Agency). Substantial rehabilitation. (b) Substantial Rehabilitation may also include renovation, alteration or remodeling for the conversion or adaptation of structurally sound property to the design and condition required for use under this part, or the repair or replacement of major building systems or components in danger of failure. (c) Housing on which rehabilitation work has already started when the Agreement is executed is eligible for assistance as a Substantial Rehabilitation project under this part provided: (1) At the date of application to HUD, a substantial amount of construction (generally at least 25 percent) remains to be completed; (2) At the date of application to HUD, the project cannot be completed and occupied by eligible families without assistance under this part; and (3) At the time construction was initiated, all of the parties reasonably expected that the project would be completed without assistance under this part. Tenant Rent. Total Tenant Payment. Utility Allowance. Utility reimbursement. Vacancy payments. Very Low-Income Family. [45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56326, Aug. 22, 1980; 48 FR 12708, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19946, May 10, 1984; 61 FR 5213, Feb. 9, 1996; 61 FR 13592, Mar. 27, 1996; 63 FR 46579, Sept. 1, 1998; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 2016; 89 FR 96098, Dec. 4, 2024] § 883.306 Limitation on distributions. (a) Non-profit owners are not entitled to distributions of project funds. (b) For the life of the Contract, project funds may only be distributed to profit-motivated owners at the end of each fiscal year of project operation following the effective date of the Contract and after all project expenses have been paid, or funds have been set aside for payment, and all reserve requirements have been met. The first year's distribution may not be made until the HFA certification of project costs, (See § 883.411), where applicable, has been submitted to HUD. The HFA must certify that distributions will not exceed the following maximum returns: (1) For projects for elderly families, the first year's distribution will be limited to 6 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 6 percent return on the value, in subsequent years, as determined in accordance with HUD guidelines, of the approved initial equity. Any such adjustments will be made in accordance with a Notice in the Federal Register. (2) For projects for non-elderly families the first year's distribution will be limited to 10 percent on equity. The Assistant Secretary may provide for increases in subsequent years' distributions on an annual or other basis so that the permitted return reflects a 10 percent return on the value, in subsequent years, as determined in accordance with HUD guidelines, of the approved initial equity. Any such adjustments will be made in accordance with a Notice in the Federal Register. (c) For the purpose of determining the allowable distribution, an owner's equity investment in a project is deemed to be 10 percent of the replacement cost of the part of the project attributable to dwelling use accepted by the HFA at cost certification (See § 883.411), or as specified in the Proposal where cost certification is not required, unless the owner justifies a higher equity contribution through cost certification documentation accepted by the HFA. (d) Any short-fall in return may be made up from surplus project funds in future years. (e) If the HFA determines at any time that surplus project funds are more than the amount needed for project operations, reserve requirements and permitted distributions, the HFA may require the excess to be placed in a separate account to be used to reduce housing assistance payments or for other project purposes. Upon termination of the Contract, any excess project funds must be remitted to HUD. Upon termination of the Annual Contributions Contract between HUD and the HFA, the Owner must request withdrawal of any funds that were placed in such an account at the direction of the HFA and immediately deposit such funds into an interest-bearing residual receipts account that complies with the requirements of 24 CFR 880.601(e)(2)(i). (f) Owners of small projects or partially assisted projects are exempt from the limitation on distributions contained in paragraphs (b) through (d) of this section. (g) HUD may permit increased distributions of surplus, in excess of the amounts otherwise permitted, to profit-motivated owners who participate in a HUD-approved initiative or program to preserve below-market housing stock. The increased distributions will be limited to a maximum amount based on market rents and calculated according to HUD instructions. Funds that the owner is authorized to retain under section 236(g)(2) of the National Housing Act are not considered distributions to the owner. (h) Any State or local law or regulation that restricts distributions to an amount lower than permitted by this section or permitted by the Commissioner under this paragraph (h) is preempted as provided by section 524(f) of the Multifamily Assisted Housing Reform and Affordability Act of 1997. [45 FR 6889, Jan. 30, 1980, as amended at 65 FR 61075, Oct. 13, 2000; 65 FR 68891, Nov. 15, 2000; 89 FR 96098, Dec. 4, 2024] § 883.307 Financing. (a) Types of financing. (b) HUD approval. (2) When an Agency which has received HUD approval of its financing documents proposes substantive changes in them which affect the Section 8 program, the revised documents must be submitted for review. HUD review will be limited to the areas indicated in paragraph (b)(1) of this section and must be carried out promptly. HUD will notify the Agency that the revised documents are acceptable, or, if unacceptable, will request clarification or changes. (3) The review and approval of financing documents required under 24 CFR part 811 will constitute HUD approval under this section. (4) The Agency must retain in its files, and make available for HUD inspection, the documentation relating to its financing of Section 8 projects, including any relating to the certifications of compliance with applicable Department of Treasury or HUD regulations (24 CFR part 811) regarding tax-exempt financing. (c) Pledge of Contracts. (d) Foreclosure and other transfers. (1) The Agreement, the Contract and the ACC will continue in effect, and (2) Housing assistance payments will continue in accordance with the terms of the Contract, unless approval to amend or terminate the Agreement, the Contract or the ACC has been obtained from the Assistant Secretary. (e) In the case of a newly constructed or substantially rehabilitated manufactured home park, the principal amount of any mortgage attributable to the rental spaces in the park may not exceed an amount per space determined in accordance with § 207.33(b) of this title. [45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56327, Aug. 22, 1980; 48 FR 12709, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 61 FR 13592, Mar. 27, 1996] § 883.308 Adjustments to reflect changes in terms of financing. (a) Certifications of projected financing terms. (1) Its projected rate of borrowing (net interest cost), based on a reasonable evaluation of market conditions, on obligations issued to provide interim and permanent financing for the project, (2) The projected cost of borrowing to the owner on interim financing for the project, (3) The projected loan amount for the project, (4) The projected cost of borrowing and the term of the permanent financing to be provided to the owner for the project, (5) The projected annual debt service for the permanent financing on which the Contract Rents are based, and (6) The override, if any. (b) Revised certifications. (c) Certifications of actual financing terms. (1) The HFA's actual cost of borrowing (net interest cost) on obligations from which funds were used to permanently finance the project, (2) The override, if any, added to the actual cost of borrowing on obligations in setting the rate of lending to the owner, (3) The annual debt service to the owner for the permanent financing on which contract rents are based; and, (4) The actual loan amount and the term on which the annual debt service is based. (d) Reduction of Contract Rents. (e) Increase of Contract Rents. (1) One and one-half percent if the projected override was three-fourths of one percent or less, or (2) One percent if such projected override was more than three-fourths of one percent but not more than one percent, or (3) One-half of one percent if such projected override was more than one percent. (f) Recoupment of savings in financing costs. (g) Compliance with other regulations. (1) That the terms of financing, the amount of the obligations issued with respect to the project and the use of the funds will be in compliance with any regulation governing the issuance of the obligations, e.g., Department of the Treasury regulations regarding arbitrage or HUD regulations regarding Tax Exemption of Obligations of Public Housing Agencies (24 CFR part 811), and (2) That the override, if any, on the permanent financing for the project will not be greater than the projected override nor greater than the override allowed for the borrowing as a whole under applicable regulations, e.g., the Department of Treasury regulations regarding arbitrage. The certifications required under 24 CFR 811.107(a)(2) will be sufficient to meet the certification requirements of this paragraph (g). § 883.310 Property standards. (a) New Construction. (1) [Reserved] (2) In the case of manufactured homes, the Federal Manufactured Home Construction and Safety Standards, pursuant to Title VI of the Housing and Community Development Act of 1974, and 24 CFR part 3280; (3) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards, (4) HUD requirements pursuant to Section 209 of the Housing and Community Development Act of 1974 for projects for the elderly or the handicapped; (5) HUD requirements pertaining to noise abatement and control; and (6) Applicable state and local laws, codes, ordinances, and regulations. (b) Substantial Rehabilitation. (1) [Reserved] (2) In the case of congregate or single room occupant housing, the appropriate HUD guidelines and standards, (3) HUD requirements pursuant to Section 209 of the HCD Act for projects for the elderly or the handicapped; (4) HUD requirements pertaining to noise abatement and control; (5) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, H, and R of this title. (6) Applicable State and local laws, codes, ordinances, and regulations. (c) Smoke detectors Performance requirement. (2) Acceptability criteria. [45 FR 6889, Jan. 30, 1980, as amended at 50 FR 9269, Mar. 7, 1985; 57 FR 33851, July 30, 1992; 63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999] § 883.313 Audit. Where housing assistance under the Section 8 Program is provided for projects developed or owned by non-Federal entities (as defined in 2 CFR 200.69), the audit requirements in 2 CFR part 200, subpart F, shall apply. [80 FR 75941, Dec. 7, 2015] § 883.314 Broadband infrastructure. Any new construction or substantial rehabilitation, as substantial rehabilitation is defined by 24 CFR 5.100, of a building with more than 4 rental units and that is subject to a Housing Assistance Payments contract executed or renewed after January 19, 2017 must include installation of broadband infrastructure, as this term is also defined in 24 CFR 5.100, except where the owner determines and documents the determination that: (a) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (b) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or (c) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [81 FR 92638, Dec. 20, 2016] Subparts D-E [Reserved] Subpart F—Housing Assistance Payments Contract § 883.601 Applicability. The provisions of this subpart apply to new construction and substantial rehabilitation projects using contract authority allocated under subpart B, Allocation and Assignment of Contract Authority, or processed and constructed under subpart D, Fast Track Procedures. § 883.602 The contract. (a) Contract. (b) Housing Assistance Payments to Owners under the Contract. (1) Payments to the owner to assist eligible families leasing assisted units, and (2) Payments to the owner for vacant assisted units (“vacancy payments”) if the conditions specified in § 880.611 of this chapter are satisfied. The housing assistance payments are made monthly by the State Agency upon proper requisition by the owner, except payments for vacancies of more than 60 days, which are made semi-annually by the Agency upon proper requisition by the owner. (c) Amount of Housing Assistance Payments to the Owner. (2) A housing assistance payment will be made to the owner for a vacant assisted unit in an amount equal to 80 percent of the contract rent for the first 60 days of vacancy, subject to the conditions in § 880.611 of this chapter. If the owner collects any tenant rent or other amount for this period which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid as the Agency directs in accordance with HUD guidelines. (3) For a vacancy that exceeds 60 days, a housing assistance payment for the vacant unit will be made, subject to the conditions in § 880.611 of this chapter, in an amount equal to the principal and interest payments required to amortize that portion of the debt attributable to the vacant unit for up to 12 additional months. (d) Payment of utility reimbursement. [45 FR 6889, Jan. 30, 1980, as amended at 49 FR 19946, May 10, 1984; 61 FR 13593, Mar. 27, 1996] § 883.603 Term of contract. (a) New Construction. (1) For assisted units in a project financed with the aid of a loan insured by the Federal government (including coinsurance under Section 244 of the National Housing Act) or a loan made, guaranteed or intended for purchase by the Federal government and for assisted units in newly constructed manufactured home parks, the term of the Contract will be 20 years. (2) For assisted units in a project owned by or financed by a loan or loan guarantee from a State or local agency, where the assisted units are intended for occupancy by non-elderly families and where it is located in an area designated by the Assistant Secretary as one requiring special financial assistance, the Contract will be for an initial term of 20 years for any dwelling unit, with provision for renewal for additional terms of not more than 5 years each. The total term of initial and renewal terms will not exceed the lesser of (i) 40 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (3) For assisted units in all other projects, the Contract will be for an initial term of 20 years for any dwelling unit, with provision for renewal for additional terms of not more than 5 years each. The total term of initial and renewal terms will not exceed the lesser of (i) 30 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (b) Substantial Rehabilitation. (1) The Contract term will cover the longest term, but not less than 20 years, of a single credit instrument covering: (i) The cost of rehabilitation or (ii) The existing indebtedness, or (iii) The cost of rehabilitation and the refinancing of the existing indebtedness, or (iv) The cost of rehabilitation and the acquisition of the property; and (2) For assisted units in a project financed with the aid of a loan (including coinsurance under Section 244 of the National Housing Act), or a loan made, guaranteed or intended for purchase by the Federal Government, and for assisted units in a substantially rehabilitated manufactured home park, the term of the Contract will not exceed 20 years; or (3) For assisted units in a project owned or financed by a loan or loan guarantee from a State or local agency where the assisted units are intended for occupancy by non-elderly families and where it is located in an area designated by the Assistant Secretary as one requiring special financial assistance, the Contract will be for an initial term of 20 years for any dwelling unit. There will be a provision for renewal for additional terms of not more than 5 years each. The total of initial and renewal terms will not exceed the lesser of (i) 40 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years); or (4) For assisted units in projects financed other than as described in paragraph (b) (2) or (3) of this section, the Contract will be for an initial term of 20 years for any dwelling unit. There will be a provision for renewal for additional terms of not more than 5 years each. The total of initial and renewal terms will not exceed the lesser of (i) 30 years for any dwelling unit, or (ii) the term of the permanent financing (but not less than 20 years). (c) Staged Projects. [45 FR 56327, Aug. 22, 1980, as amended at 48 FR 12710, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984] § 883.604 Maximum annual commitment and project account. (a) Maximum annual commitment. (b) Project Account. (2) Whenever a HUD-approved estimate of required payments under the ACC for a fiscal year exceeds the maximum annual commitment and would cause the amount in the project account to be less than 40 percent of the maximum, HUD will, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the 1937 Act, as may be necessary, to assure that payments under the ACC will be adequate to cover increases in contract rents and decreases in tenant rents. [45 FR 6889, Jan. 30, 1980, as amended at 61 FR 13593, Mar. 27, 1996] § 883.605 Leasing to eligible families. The provisions of 24 CFR 880.504 apply to this section, including reference at 24 CFR 880.504(f) to the requirements of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking), subject to the requirements of § 883.105. [81 FR 80813, Nov. 16, 2016] § 883.606 Administration fee. (a) The State Agency is responsible for administration of the Contract subject to periodic review and audit by HUD. (b) The Agency is entitled to a reasonable fee, determined by HUD, for administering a Contract on newly constructed or substantially rehabilitated units provided there is no override on the permanent loan granted by the Agency to the owner for a project containing assisted units. § 883.607 Default by owner and/or agency. (a) Rights of Owner if Agency defaults under Agreement or Contract. (b) Rights of HUD if Agency defaults under ACC. (c) Rights of Agency and HUD if Owner defaults under Contract. (i) Of the actions required to be taken to cure the default, (ii) Of the remedies to be applied by the Agency including specific performance under the Contract, abatement of housing assistance payments and recovery of overpayments, where appropriate; and (iii) That, if he/she fails to cure the default, the Agency has the right to terminate the Contract or to take other corrective action, in its discretion. (2) If the Agency provided the permanent financing, the Contract will also provide that HUD has an independent right to determine whether the owner is in default and to take corrective action and apply appropriate remedies, except that HUD will not have the right to terminate the Contract without proceeding in accordance with paragraph (c) of this section. § 883.608 Notice upon contract expiration. The provisions of § 880.508 of this chapter apply, subject to the requirements of § 883.105. [61 FR 13593, Mar. 27, 1996] Subpart G—Management § 883.701 Cross-reference. All of the provisions of part 880, subpart F, of this chapter apply to projects assisted under this part, subject to the requirements of § 883.105. For purposes of this subpart G, all references in part 880, subpart F, of this chapter to “contract administrator” shall be construed to refer to “Agency” while the Annual Contributions Contract between the State Agency and HUD is in effect. [61 FR 13593, Mar. 27, 1996, as amended at 89 FR 96098, Dec. 4, 2024] § 883.702 Replacement reserve. For projects that are required to maintain a replacement reserve account to fund capital repairs and building system replacements, while the Annual Contributions Contract (ACC) between the State Agency and HUD is in effect, funds in that replacement reserve account may be drawn and used only in accordance with State Agency guidelines and with the approval of, or as directed by, the State Agency. Upon termination of the ACC, the Owner must request withdrawal of any funds in the replacement reserve account and immediately deposit such funds into an interest-bearing replacement reserve account that complies with the requirements of 24 CFR 880.602(a)(1)(iv). [89 FR 96098, Dec. 4, 2024]