24 CFR Part 891 — Supportive Housing for the Elderly and Persons with Disabilities

PART 891—SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH DISABILITIES Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013. Source: 61 FR 11956, Mar. 22, 1996, unless otherwise noted. Subpart A—General Program Requirements § 891.100 Purpose and policy. (a) Purpose. (b) General policy Supportive Housing for the Elderly. (2) Supportive Housing for Persons with Disabilities. (c) Use of capital advance funds. (d) Amendments. § 891.105 Definitions. The following definitions apply, as appropriate, throughout this part. Other terms with definitions unique to the particular program are defined in §§ 891.205, 891.305, 891.505, and 891.805, as applicable. Acquisition with or without repair Adjusted income Affiliated entities Annual income Covered housing provider. Family Gross rent Household (eligible household) Housing and related facilities Low-income families National Sponsor Net family assets Operating costs (1) Administrative expenses, including salary and management expenses related to the provision of shelter and, in the case of the Section 202 Program, the coordination of services; (2) Maintenance expenses, including routine and minor repairs and groundskeeping; (3) Security expenses; (4) Utilities expenses, including gas, oil, electricity, water, sewer, trash removal, and extermination services. The term “ operating costs (5) Taxes and insurance; (6) Allowances for reserves; and (7) Allowances for services (in the Section 202 Program only). Project rental assistance contract (PRAC) Project rental assistance payment Rehabilitation Replacement reserve account Section 202 Section 811 Single-asset entity, Start-up expenses Tenant rent Total tenant payment Utility allowance Very low-income families [61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 FR 8175, Jan. 30, 2001; 68 FR 67320, Dec. 1, 2003; 70 FR 54209, Sept. 13, 2005; 77 FR 5675, Feb. 3, 2012; 78 FR 37112, June 20, 2013; 81 FR 80814, Nov. 16, 2016; 88 FR 9668, Feb. 14, 2023] § 891.110 Allocation of authority. In accordance with 24 CFR part 791, the Assistant Secretary will separately allocate the amounts available for capital advances for the development of housing for elderly households and for disabled households, less amounts set aside by Congress for specific types of projects, and for amendments of fund reservations made in prior years, for technical assistance, and for other contracted services. § 891.115 Notice of funding availability. Following an allocation of authority under § 891.110, HUD shall publish a separate Notice of Funding Availability (NOFA) for the Section 202 Program of Supportive Housing for the Elderly and for the Section 811 Program of Supportive Housing for Persons with Disabilities in the Federal Register. § 891.120 Project design and cost standards. In addition to the special project standards described in §§ 891.210 and 891.310, as applicable, the following standards apply: (a) Property standards. (b) Accessibility requirements. (c) Restrictions on amenities. (d) Smoke detectors. (e) Projects under this part may have on their sites commercial facilities for the benefit of residents of the project and of the community in which the project is located, so long as the commercial facilities are not subsidized with funding under the supportive housing programs for the elderly or persons with disabilities. Such commercial facilities are considered public accommodations under Title III of the Americans with Disabilities Act and must be accessible under the requirements of that Act. (f) Broadband infrastructure. (1) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible; (2) 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 (3) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67320, Dec. 1, 2003; 73 FR 29985, May 23, 2008; 78 FR 37112, June 20, 2013; 81 FR 92638, Dec. 20, 2016; 82 FR 3623, Jan. 12, 2017] § 891.125 Site and neighborhood standards. All sites must meet the following site and neighborhood requirements: (a) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities (water, sewer, gas, and electricity) and streets must be available to service the site. (b) The site and neighborhood must be suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964, the Fair Housing Act, Executive Order 11063 (27 FR 11527, 3 CFR, 1958-1963 Comp., p. 652); as amended by Executive Order 12259, (46 FR 1253, 3 CFR, 1980 Comp., p. 307)); section 504 of the Rehabilitation Act of 1973, and implementing HUD regulations. (c) New construction sites must meet the following site and neighborhood requirements: (1) The site must not be located in an area of minority concentration (or minority elderly concentration under the Section 202 Program) except as permitted under paragraph (c)(2) of this section, and must not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents (or minority elderly to nonminority elderly residents, under the Section 202 Program) in the area. (2) A project may be located in an area of minority concentration (or minority elderly concentration, under the Section 202 Program) only if: (i) Sufficient, comparable opportunities exist for housing for minority elderly households or minority disabled households, as applicable (or minority families, for projects funded under §§ 891.655 through 891.790), in the income range to be served by the proposed project, outside areas of minority concentration (see paragraph (c)(3) of this section for further guidance on this criterion); or (ii) The project is necessary to meet overriding housing needs that cannot be met in that housing market area (see paragraph (c)(4) of this section for further guidance on this criterion). (3)(i) Sufficient (ii) Units may be considered to be comparable opportunities (iii) Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUD-assisted housing on the availability of housing choices for very low-income minority elderly or disabled households, as applicable (or low-income minority families, for projects funded under §§ 891.655 through 891.790), in and outside areas of minority concentration, and must take into account the extent to which the following factors are present, along with any other factor relevant to housing choice: (A) A significant number of assisted housing units are available outside areas of minority concentration. (B) There is significant integration of assisted housing projects constructed or rehabilitated in the past ten years, relative to the racial mix of the eligible population. (C) There are racially integrated neighborhoods in the locality. (D) Programs are operated by the locality to assist minority elderly or disabled households, as applicable (or minority families, for projects funded under §§ 891.655 through 891.790), that wish to find housing outside areas of minority concentration. (E) Minority elderly or disabled households, as applicable (or minority families, for projects funded under §§ 891.655 through 891.790), have benefitted from local activities (e.g., acquisition and write-down of sites, tax relief programs for homeowners, acquisitions of units for use as assisted housing units) undertaken to expand choice for minority households (or families) outside of areas of minority concentration. (F) A significant proportion of minority elderly or disabled households, as applicable (or minority households, for projects funded under §§ 891.655 through 891.790), have been successful in finding units in nonminority areas under the Section 8 Housing Voucher programs. (G) Comparable housing opportunities have been made available outside areas of minority concentration through other programs. (4) Application of the overriding housing needs overriding housing need, (d) The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions. (e) The housing must be accessible to social, recreational, educational, commercial, and health facilities and services, and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents. (f) For the Section 811 Program of Supportive Housing for Persons with Disabilities, the additional site and neighborhood requirements in § 891.320 apply. [61 FR 11956, Mar. 22, 1996, as amended at 89 FR 38292, May 7, 2024] § 891.130 Prohibited relationships. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as to loans financed under §§ 891.655 through 891.790. (a) Conflicts of interest. (2) The following contracts between the Owner (or Borrower, as applicable) and the Sponsor or the Sponsor's nonprofit affiliate will not constitute a conflict of interest if no more than two persons salaried by the Sponsor or management affiliate serve as nonvoting directors on the Owner's board of directors: (i) Management contracts (including associated management fees); (ii) Supportive services contracts (including service fees) under the Supportive Housing for the Elderly Program; (iii) Developer (consultant) contracts; and (iv) Contracts for the sale of land. (b) Identity of interest. [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 78 FR 37112, June 20, 2013] § 891.135 Amount and terms of capital advances. (a) Amount of capital advances. (b) Estimated development cost. § 891.140 Development cost limits. (a) HUD shall use the development cost limits, established by Notice in the Federal Register (b) The Replacement Reserve Account established under paragraph (a) of this section may only be used for repairs, replacements, and capital improvements to the project. § 891.145 Owner deposit (Minimum Capital Investment). As a Minimum Capital Investment, the Owner must deposit in a special escrow account one-half of one percent (0.5%) of the HUD-approved capital advance, not to exceed $10,000, to assure the Owner's commitment to the housing. Under the Section 202 Program, if an Owner has a National Sponsor or a National Co-Sponsor, the Minimum Capital Investment shall be one-half of one percent (0.5%) of the HUD-approved capital advance, not to exceed $25,000. § 891.150 Operating cost standards. HUD shall establish operating cost standards based on the average annual operating cost of comparable housing for the elderly or for persons with disabilities in each field office, and shall adjust the standard annually based on appropriate indices of increases in housing costs such as the Consumer Price Index. The operating cost standards shall be developed based on the number of units. However, under the Section 811 Program and for projects funded under §§ 891.655 through 891.790, the operating cost standard for group homes shall be based on the number of residents. HUD may adjust the operating cost standard applicable to an approved project to reflect such factors as differences in costs based on location within the field office jurisdiction. The operating cost standard will be used to determine the amount of the project assistance initially reserved for a project. § 891.155 Other Federal requirements. In addition to the requirements set forth in 24 CFR part 5, the following requirements in this § 891.155 apply to the Section 202 and Section 811 Programs, as well as projects funded under §§ 891.655 through 891.790. Other requirements unique to a particular program are described in subparts B and C of this part, as applicable. (a) Affirmative fair housing marketing. (2) The fair housing advertising and poster guidelines at 24 CFR parts 109 and 110. (b) Environmental. (c) Flood insurance. (d) Labor standards. (2) Contracts involving employment of laborers and mechanics shall be subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333). (3) Sponsors, Owners, contractors, and subcontractors must comply with all related rules, regulations, and requirements. (e) Displacement, relocation, and real property acquisition Minimizing displacement. (2) Relocation assistance for displaced persons. (3) Real property acquisition requirements. (f) Intergovernmental review. (g) Lead-based paint. [61 FR 11956, Mar. 22, 1996, as amended at 64 FR 50227, Sept. 15, 1999; 69 FR 34275, June 21, 2004] § 891.160 Audit requirements. Nonprofit organizations receiving assistance under this part are subject to the audit requirements of 2 CFR part 200, subpart F. [78 FR 37112, June 20, 2013, as amended at 80 FR 75941, Dec. 7, 2015] § 891.165 Duration of capital advance. (a) The duration of the fund reservation for a capital advance with construction advances is 24 months from the date of issuance of the award letter to the date of initial closing. This duration can be up to 36 months, as approved by HUD on a case-by-case basis. (b) The duration of the fund reservation for projects that elect not to receive any capital advance before construction completion is 24 months from the date of issuance of the award letter to the start of construction. This duration can be up to 36 months, as approved by HUD on a case-by-case basis. [78 FR 37112, June 20, 2013, as amended at 78 FR 49681, Aug. 15, 2013] § 891.170 Repayment of capital advance. (a) Interest prohibition and repayment. (b) Transfer of assets. [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 78 FR 37113, June 20, 2013] § 891.175 Technical assistance. For purposes of the Section 202 Program and the Section 811 Program, the Secretary shall make available appropriate technical assistance to assure that applicants having limited resources, particularly minority applicants, are able to participate more fully in the programs. § 891.180 Physical condition standards; physical inspection requirements. Housing assisted under this part must be maintained and inspected in accordance with the requirements in 24 CFR part 5, subpart G. [63 FR 46580, Sept. 1, 1998] § 891.185 Preemption of rent control laws. The Department finds that it is necessary and desirable to assist project owners to preserve the continued viability of each project assisted under this part (except subpart E) as a housing resource for very low-income elderly persons or persons with disabilities. The Department also finds that it is necessary to protect the substantial economic interest of the Federal Government in those projects. Therefore, the Department concludes that it is in the national interest to preempt, and it does hereby preempt, the entire field of rent regulation by local rent control boards or other authority acting pursuant to state or local law as it affects those projects. Part 246 of this title applies to projects covered by subpart E of this part. [63 FR 64803, Nov. 23, 1998] § 891.190 Emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking. (a) Covered housing providers must develop and implement an emergency transfer plan that meets the requirements in 24 CFR 5.2005(e). (b) In order to facilitate emergency transfers for victims of domestic violence, dating violence, sexual assault, and stalking, covered housing providers have discretion to adopt new, and modify any existing, admission preferences or transfer waitlist priorities. (c) In addition to following requirements in 24 CFR 5.2005(e), when a safe unit is not immediately available for a victim of domestic violence, dating violence, sexual assault, or stalking who qualifies for an emergency transfer, covered housing providers must: (1) Review the covered housing provider's existing inventory of units and determine when the next vacant unit may be available; and (2) Provide a listing of nearby HUD subsidized rental properties, with or without preference for persons of domestic violence, dating violence, sexual assault, or stalking, and contact information for the local HUD field office. (d) Each year, covered housing providers must submit to HUD data on all emergency transfers requested under 24 CFR 5.2005(e), including data on the outcomes of such requests. [81 FR 80814, Nov. 16, 2016] Subpart B—Section 202 Supportive Housing for the Elderly § 891.200 Applicability. The requirements set forth in this subpart B apply to the Section 202 Program of Supportive Housing for the Elderly only, and to applicants, Sponsors, and Owners under that program. § 891.205 Definitions. As used in this part in reference to the Section 202 Program, and in addition to the applicable definitions in § 891.105: Acquisition Activities of daily living (ADL) (1) Eating (2) Bathing (3) Grooming (4) Dressing (5) Home management activities Congregate space (hereinafter referred to as community space) community spaces Elderly person Frail elderly Owner Private nonprofit organization (1) No part of the net earnings of which inures to the benefit of any member, founder, contributor, or individual; (2) That has a governing board: (i) The membership of which is selected in a manner to assure that there is significant representation of the views of the community in which such housing is located; and (ii) Which is responsible for the operation of the housing assisted under this section, except that, in the case of a nonprofit organization that is the sponsoring organization of multiple housing projects assisted under this section, HUD may determine the criteria or conditions under which financial, compliance, and other administrative responsibilities exercised by a single-entity private nonprofit organization that is the owner corporation of an individual housing project may be shared or transferred to the governing board of such sponsoring organization; and (3) Which is approved by HUD as to financial responsibility. Services expenses Sponsor (1) No part of the net earnings of which inures to the benefit of any private shareholder, member, founder, contributor, or individual; (2) That is not controlled by, or under the direction of, persons or firms seeking to derive profit or gain therefrom; and (3) That is approved by the Secretary as to administrative and financial capacity and responsibility. The term Sponsor includes an instrumentality of a public body. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 FR 54209, Sept. 13, 2005; 78 FR 37113, June 20, 2013] § 891.210 Special project standards. (a) In general. (b) Exception. [78 FR 37113, June 20, 2013] § 891.215 Limits on number of units. (a) HUD may establish, through publication of a notice in the Federal Register, (b) Affiliated entities that submit separate applications shall be deemed to be a single entity for purposes of these limits. (c) HUD may also establish, through publication of a notice in the Federal Register, § 891.220 Prohibited facilities. Projects may not include facilities for infirmaries, nursing stations, or spaces for overnight care. § 891.225 Provision of services. (a) In carrying out the provisions of this part, HUD shall ensure that housing assisted under this part provides services as described in section 202 (12 U.S.C. 1701q(g)(1)). (b)(1) HUD shall ensure that Owners have the managerial capacity to perform the coordination of services described in 12 U.S.C. 1701q(g)(2). (2) Any cost associated with this paragraph shall be an eligible cost under the contract for project rental assistance. Any cost associated with the employment of a service coordinator shall also be an eligible cost, except if the project is receiving congregate housing services assistance under section 802 of the National Affordable Housing Act. The HUD-approved service costs will be an eligible expense to be paid from project rental assistance, not to exceed $15 per unit per month. The balance of service costs shall be provided from other sources, which may include co-payment by the tenant receiving the service. Such co-payment shall not be included in the Total Tenant Payment. Subpart C—Section 811 Supportive Housing for Persons With Disabilities § 891.300 Applicability. The requirements set forth in this subpart C apply to the Section 811 Program of Supportive Housing for Persons with Disabilities only, and to applicants, Sponsors, and Owners under that program. § 891.305 Definitions. As used in this part in reference to the Section 811 Program, and in addition to the applicable definitions in § 891.105: Acquisition Congregate space (hereinafter referred to as community space) Disabled household (1) One or more persons at least one of whom is an adult (18 years or older) who has a disability; (2) Two or more persons with disabilities living together, or one or more such persons living with another person who is determined by HUD, based upon a certification from an appropriate professional (e.g., a rehabilitation counselor, social worker, or licensed physician) to be important to their care or well being; or (3) The surviving member or members of any household described in paragraph (1) of this definition who were living in a unit assisted under this part, with the deceased member of the household at the time of his or her death. Owner Person with disabilities person with disabilities (1) A person who has a developmental disability, as defined in section 102(7) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5)), i.e., if he or she has a severe chronic disability which: (i) Is attributable to a mental or physical impairment or combination of mental and physical impairments; (ii) Is manifested before the person attains age twenty-two; (iii) Is likely to continue indefinitely; (iv) Results in substantial functional limitation in three or more of the following areas of major life activity: (A) Self-care; (B) Receptive and expressive language; (C) Learning; (D) Mobility; (E) Self-direction; (F) Capacity for independent living; (G) Economic self-sufficiency; and (v) Reflects the person's need for a combination and sequence of special, interdisciplinary, or generic care, treatment, or other services which are of lifelong or extended duration and are individually planned and coordinated. (2) A person with a chronic mental illness, i.e., a severe and persistent mental or emotional impairment that seriously limits his or her ability to live independently, and which impairment could be improved by more suitable housing conditions. (3) A person infected with the human acquired immunodeficiency virus (HIV) and a person who suffers from alcoholism or drug addiction, provided they meet the definition of “ person with disabilities Private nonprofit organization (1) That has tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq. (2) No part of the net earnings of which inures to the benefit of any Board member, founder, contributor, or individual; (3) That has a governing board; (i) The membership of which is selected in a manner to assure that there is significant representation of the views of the community in which such housing is located (including persons with disabilities); and (ii) That is responsible for the operation of the housing assisted under this part; and (4) That is approved by HUD as to financial responsibility. Sponsor (1) That has tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq. (2) No part of the net earnings of which inures to the benefit of any private shareholder, member, founder, contributor or individual; (3) That is not controlled by or under the direction of persons or firms seeking to derive profit or gain therefrom; (4) That has a governing board the membership of which is selected in a manner to assure that there is significant representation of the views of persons with disabilities; and (5) That is approved by HUD as to administrative and financial capacity and responsibility. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 FR 54210, Sept. 13, 2005; 78 FR 37113, June 20, 2013] § 891.310 Special project standards. In addition to the applicable project standards in § 891.120, the following special standards apply to the Section 811 Program and to projects funded under §§ 891.655 through 891.790: (a) Minimum group home standards. (b) Additional accessibility requirements. (1) All entrances, common areas, units to be occupied by resident staff, and amenities must be readily accessible to and usable by persons with disabilities. (2) In projects for chronically mentally ill individuals, a minimum of 10 percent of all dwelling units in an independent living facility (or 10 percent of all bedrooms and bathrooms in a group home, but at least one of each such space), must be designed to be accessible or adaptable for persons with disabilities. (3) In projects for developmentally disabled or physically disabled persons, all dwelling units in an independent living facility (or all bedrooms and bathrooms in a group home) must be designed to be accessible or adaptable for persons with physical disabilities. A project involving acquisition and/or rehabilitation may provide a lesser number if: (i) The cost of providing full accessibility makes the project financially infeasible; (ii) Fewer than one-half of the intended occupants have mobility impairments; and (iii) The project complies with the requirements of 24 CFR 8.23. (4) For the purposes of paragraph (b) of this section, the following definitions apply: (i) Accessible (ii) Adaptability § 891.315 Prohibited facilities. This section shall apply to capital advances under the Section 811 Program, as well as loans financed under subpart E of this part. Project facilities may not include infirmaries, nursing stations, spaces dedicated to the delivery of medical treatment or physical therapy, padded rooms, or space for respite care or sheltered workshops, even if paid for from sources other than the HUD capital advance or loan. Except for office space used by the Owner (or Borrower, if applicable) exclusively for the administration of the project, project facilities may not include office space. § 891.320 Site and neighborhood standards. In addition to the requirements in § 891.125 and § 891.680, if applicable, the following site and neighborhood requirements apply to the Section 811 Program: (a) Travel time and cost via public transportation or private automobile, from the neighborhood to places of employment providing a range of jobs for very low-income workers (or low-income workers, as applicable), must not be excessive. (b) Projects should be located in neighborhoods where other family housing is located. Projects should not be located adjacent to the following facilities, or in areas where such facilities are concentrated: schools or day-care centers for persons with disabilities, workshops, medical facilities, or other housing primarily serving persons with disabilities. Not more than one group home may be located on any one site and no such home may be located on a site contiguous to another site containing such a home. § 891.325 Lead-based paint requirements. The requirements of 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, J, and R of this title apply to the section 811 program and to projects funded under §§ 891.655 through 891.790. [69 FR 34276, June 21, 2004] Subpart D—Project Management § 891.400 Responsibilities of owner. (a) Marketing. (2) Marketing must be done in accordance with a HUD-approved affirmative fair housing marketing plan and all Federal, State or local fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible households of similar income levels in the same housing market area have a like range of housing choices available to them regardless of discriminatory considerations such as their race, color, creed, religion, familial status, disability, sex or national origin. (3) At the time of PRAC execution, the Owner must submit to HUD a list of leased and unleased assisted units (or in the case of a group home, leased and unleased residential spaces) with a justification for the unleased units or residential spaces, in order to qualify for vacancy payments for the unleased units or residential spaces. (b) Management and maintenance. (c) Contracting for services. (2) Consistent with the objectives of Executive Order No. 11625 (36 FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139)); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198); and Executive Order No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; as amended by Executive Order No. 12608 (52 FR 34617, 3 CFR, 1987 Comp., p. 245)), the Owner will promote awareness and participation of minority and women's business enterprises in contracting and procurement activities. (d) Submission of financial and operating statements. (1) Within 60 days after the end of each fiscal year of project operations, financial statements for the project audited by an independent public accountant and in the form required by HUD; and (2) Other statements regarding project operation, financial conditions and occupancy as HUD may require to administer the PRAC and to monitor project operations. (e) Use of project funds. (f) Reports. (Approved by the Office of Management and Budget under control number 2502-0470) § 891.405 Replacement reserve. (a) Establishment of reserve. (b) Deposits to reserve. (c) Level of reserve. (d) Administration of reserve. [61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003] § 891.410 Selection and admission of tenants. (a) Written procedures. (b) Application for admission. (c) Determination of eligibility and selection of tenants. (2) Under the Section 811 Program: (i) In order to be eligible for admission, the applicant must also meet any project occupancy requirements approved by HUD. (ii) Owners shall make selections in a nondiscriminatory manner without regard to considerations such as race, religion, color, sex, national origin, familial status, or disability. An Owner may, with the approval of the Secretary, limit occupancy within housing developed under this part 891 to persons with disabilities who have similar disabilities and require a similar set of supportive services in a supportive housing environment. However, the Owner must permit occupancy by any qualified person with a disability who could benefit from the housing and/or services provided regardless of the person's disability. (d) Unit assignment. (e) Ineligibility determination. (f) Records. (g) Reexamination of household family income and composition Regular reexaminations. (2) Interim reexaminations. (3) Continuation of project rental assistance payment. (ii) A household's eligibility for project rental assistance payment may be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including information related to disclosure and verification of Social Security Numbers, as provided by 24 CFR part 5, subpart B or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies (as provided by 24 CFR part 5, subpart B). (4) Streamlined income determination. [61 FR 11956, Mar. 22, 1996, as amended at 65 FR 16724, Mar. 29, 2000; 81 FR 12371, Mar. 8, 2016; 88 FR 9668, Feb. 14, 2023] § 891.415 Obligations of the household or family. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. (a) Requirements. (1) Pay amounts due under the lease directly to the Owner (or Borrower, as applicable); (2) Supply such certification, release of information, consent, completed forms or documentation as the Owner (or Borrower, as applicable) or HUD determines necessary, including information and documentation relating to the disclosure and verification of Social Security Numbers, as provided by 24 CFR part 5, subpart B; the signing and submission of consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B; and any certification of family net assets, as provided by 24 CFR 5.659(e); (3) Allow the Owner (or Borrower, as applicable) to inspect the dwelling unit or residential space at reasonable times and after reasonable notice; (4) Notify the Owner (or Borrower, as applicable) before vacating the dwelling unit or residential space; and (5) Use the dwelling unit or residential space solely for residence by the household (or family, as applicable) and as the household's (or family's) principal place of residence. (b) Prohibitions. (1) Assign the lease or transfer the unit or residential space; or (2) Occupy, or receive assistance for the occupancy of, a unit or residential space governed under this part 891 while occupying, or receiving assistance for the occupancy of, another unit assisted under any Federal housing assistance program, including any section 8 program. (Approved by the Office of Management and Budget under control number 2502-0470) [61 FR 11956, Mar. 22, 1996, as amended at 82 FR 58340, Dec. 12, 2017] § 891.420 Overcrowded and underoccupied units. If the Owner determines that because of change in household size, an assisted unit is smaller than appropriate for the eligible household to which it is leased, or that the assisted unit is larger than appropriate, project rental assistance payment with respect to the unit will not be reduced or terminated until the eligible household has been relocated to an appropriate alternate unit. If possible, the Owner will, as promptly as possible, offer the household an appropriate alternate unit. The Owner may receive vacancy payments for the vacated unit if the Owner complies with the requirements of § 891.445. § 891.425 Lease requirements. Link to an amendment published at 91 FR 9453, Feb. 26, 2026. Link to a delay of the above amendment published at 91 FR 12301, Mar. 13, 2026. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. (a) Term of lease. (b) Termination by the household (or family, as applicable). (c) Form. (d) Notification for nonpayment of rent. [61 FR 11956, Mar. 22, 1996, as amended at 89 FR 101303, Dec. 13, 2024] § 891.430 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 and Section 811 capital advance projects. (b) The provisions of part 247 of this title apply to all decisions by an owner to terminate the tenancy or modify the lease of a household residing in a unit (or residential space in a group home). [66 FR 28798, May 24, 2001] § 891.435 Security deposits. This section shall apply to capital advances under the Section 202 Program and the Section 811 Program, as well as loans financed under subpart E of this part. For loans financed under subpart E of this part, the requirements in § 891.635 also apply. (a) Collection of security deposits. (b) Security deposit provisions applicable to units Administration of security deposit. (2) Household (or family, as applicable) notification requirement. (3) Use of security deposit. (i) Refund to a household (or family) that does not owe any amount under the lease the full amount of the household's (or family's) security deposit balance; (ii) Provide to a household (or family) owing amounts under the lease a list itemizing each amount, along with a statement of the household's (or family's) rights under State and local law. If the amount that the Owner (or Borrower) claims is owed by the household (or family) is less than the amount of the household's (or family's) security deposit balance, the Owner (or Borrower) must refund the excess balance to the household (or family). If the Owner (or Borrower) fails to provide the list, the household (or family) will be entitled to the refund of the full amount of the household's (or family's) security deposit balance. (4) Disagreements. (5) Decedent's interest in security deposit. (c) Reimbursement by HUD for assisted units. (1) The amount owed the Owner (or Borrower); or (2) One month's per unit operating cost (or contract rent, if applicable), minus the amount of the household's (or family's) security deposit balance. Any reimbursement under this section will be applied first toward any unpaid tenant rent due under the lease. No reimbursement may be claimed for any unpaid tenant rent for the period after termination of the tenancy. The Owner (or Borrower) may be eligible for vacancy payments following a vacancy in accordance with the requirements of § 891.445 (or §§ 891.650 or 891.790, as applicable). [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] § 891.440 Adjustment of utility allowances. This section shall apply to projects funded under the Section 202 Program, to independent living complexes funded under Section 811 Program, and to projects financed with loans under subpart E of this part. The Owner (or Borrower, as applicable) must submit an analysis of any utility allowances applicable. Such data as changes in utility rates and other facts affecting utility consumption must be provided as part of this analysis to permit appropriate adjustments in the utility allowances for assisted units. In addition, when utility rate changes would result in a cumulative increase of 10 percent or more in the most recently approved utility allowances, the Owner (or Borrower) must advise HUD and request approval of new utility allowances. Whenever a utility allowance for an assisted unit is adjusted, the Owner (or Borrower) will promptly notify affected households (or families, as applicable) and make a corresponding adjustment of the tenant rent and the amount of the project rental assistance payment (or housing or project assistance payment, as applicable). (Approved by the Office of Management and Budget under control number 2502-0470) [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] § 891.445 Conditions for receipt of vacancy payments for assisted units. (a) General. (b) Vacancies during rent-up. (1) Conducted marketing in accordance with § 891.400(a) and otherwise complied with § 891.400; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. (1) Certifies that it did not cause the vacancy by violating the lease, the PRAC, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in § 891.400(a) (2) and (3) and § 891.445(b) (2) and (3); and (4) For any vacancy resulting from the Owner's eviction of an eligible household, certifies that it has complied with § 891.430. (d) Prohibition of double compensation for vacancies. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023] § 891.450 HUD review. HUD shall conduct periodic on-site management reviews of the Owner's compliance with the requirements of this part. Subpart E—Loans for Housing for the Elderly and Persons with Disabilities § 891.500 Purpose and policy. (a) Purpose. (b) General policy. (c) Applicability. et seq § 891.505 Definitions. For the purposes of this subpart E: Act Borrower Borrower Elderly family (1) Families of two or more persons the head of which (or his or her spouse) is 62 years of age or older; (2) The surviving member or members of any family described in paragraph (1) of this definition living in a unit assisted under subpart E of this part with the deceased member of the family at the time of his or her death; (3) A single person who is 62 years of age or older; or (4) Two or more elderly persons living together, or one or more such persons living with another person who is determined by HUD, based upon a licensed physician's certificate provided by the family, to be essential to their care or well being. Handicapped family (1) Families of two or more persons the head of which (or his or her spouse) is handicapped; (2) The surviving member or members of any family described in paragraph (1) of this definition living in a unit assisted under subpart E of this part with the deceased member of the family at the time of his or her death; (3) A single handicapped person over the age of 18; or (4) Two or more handicapped persons living together, or one or more such persons living with another person who is determined by HUD, based upon a licensed physician's certificate provided by the family, to be essential to their care or well being. Handicapped person or individual (1) Any adult having a physical, mental, or emotional impairment that is expected to be of long-continued and indefinite duration, substantially impedes his or her ability to live independently, and is of a nature that such ability could be improved by more suitable housing conditions. (2) A person with a developmental disability, as defined in section 102(7) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5), i.e., a person with a severe chronic disability that: (i) Is attributable to a mental or physical impairment or combination of mental and physical impairments; (ii) Is manifested before the person attains age twenty-two; (iii) Is likely to continue indefinitely; (iv) Results in substantial functional limitation in three or more of the following areas of major life activity: (A) Self-care; (B) Receptive and expressive language; (C) Learning; (D) Mobility; (E) Self-direction; (F) Capacity for independent living; (G) Economic self-sufficiency; and (v) Reflects the person's need for a combination and sequence of special, interdisciplinary, or generic care, treatment, or other services that are of lifelong or extended duration and are individually planned and coordinated. (3) A person with a chronic mental illness, i.e., if he or she has a severe and persistent mental or emotional impairment that seriously limits his or her ability to live independently, and whose impairment could be improved by more suitable housing conditions. (4) Persons infected with the human acquired immunodeficiency virus (HIV) who are disabled as a result of infection with the HIV are eligible for occupancy in section 202 projects designed for the physically disabled, developmentally disabled, or chronically mentally ill depending upon the nature of the person's disability. A person whose sole impairment is alcoholism or drug addition (i.e., who does not have a developmental disability, chronic mental illness, or physical disability that is the disabling condition required for eligibility in a particular project) will not be considered to be disabled for the purposes of the section 202 program. Housing and related facilities Nonelderly handicapped family Section 8 Program § 891.510 Displacement, relocation, and real property acquisition. (a) Minimizing displacement. (b) Relocation assistance for displaced persons. (c) Real property acquisition requirements. (d) Appeals. “displaced person,” (e) Responsibility of Sponsor/Borrower. (f) Definition of a displaced person. displaced person (i) After notice by the Sponsor/Borrower to move permanently from the property if the move occurs on or after: (A) The date of the submission of an application to HUD that is later approved, if the Sponsor has control of an appropriate site; or (B) The date that the Sponsor obtains control of an approvable site, if such control is obtained after the submission of an application to HUD: (ii) Before the date described in paragraph (f)(1)(i) of this section, if the Sponsor, Borrower or HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the project; (iii) By a tenant-occupant of a dwelling unit, if any one of the following three situations occurs; (A) The tenant moves after execution of the Agreement between the Sponsor/Borrower and HUD, and the move occurs before the tenant is provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe, and sanitary dwelling in the same building/complex upon completion of the project under reasonable terms and conditions. Such reasonable terms and conditions include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: ( 1 ( 2 (B) The tenant is required to relocate temporarily, does not return to the building/complex, and either: ( 1 ( 2 (C) The tenant is required to move to another dwelling in the same building/complex but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move, or other conditions of the move are not reasonable. (2) Notwithstanding the provisions of paragraph (f)(1) of this section, however, a person does not qualify as a “displaced person” (and is not eligible for relocation assistance at URA levels), if: (i) The person has been evicted for cause based upon a serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State, or local law, or other good cause, and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance. (ii) The person moved into the property after the submission of the application and, before signing a lease and commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g., displacement, temporary relocation or a rent increase) and the fact that he or she will not qualify as a displaced person as a result of the project; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or (iv) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project; (3) The Sponsor/Borrower may request, at any time, a HUD determination of whether a displacement is or would be covered by this section. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] § 891.515 Audit requirements. Nonprofits receiving assistance under this part are subject to the audit requirements in 2 CFR part 200, subpart F. [61 FR 11956, Mar. 22, 1996, as amended at 80 FR 75941, Dec. 7, 2015] Section 202 Projects for the Elderly or Handicapped—Section 8 Assistance § 891.520 Definitions applicable to 202/8 projects. The following definitions apply to projects for eligible families receiving assistance under section 8 of the United States Housing Act of 1937 in addition to reservations under section 202 of the Housing Act of 1959 (202/8 projects): Adjusted income Assisted unit Contract rent Family (eligible family) HAP contract (housing assistance payments contract) Housing assistance payment Project account Project occupancy requirements Rent, Tenant rent Total tenant payment Utility allowance Utility reimbursement Vacancy payment [61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 FR 8174, Jan. 30, 2001; 88 FR 9669, Feb. 14, 2023; 88 FR 75233, Nov. 2, 2023] § 891.525 Amount and terms of financing. (a) The amount of financing approved shall be the amount stated in the Notice of Section 202 Fund Reservation, including any increase approved by the field office prior to the final closing of a loan; provided, however, that the amount of financing provided shall not exceed the lesser of: (1) The dollar amounts stated in paragraphs (b) through (f) of this section; or (2) The total development cost of the project as determined by the field office. (b) For such part of the property or project attributable to dwelling use (excluding exterior land improvements, as defined by the Assistant Secretary) the maximum loan amount, depending on the number of bedrooms, may not exceed: (1) $28,032 per family unit without a bedroom. (2) $32,321 per family unit with one bedroom. (3) $38,979 per family unit with two bedrooms. (c) In order to compensate for the higher costs incident to construction of elevator type structures of sound standards of construction and design, the field office may increase the dollar limitations per family unit, as provided in paragraph (b) of this section, to not to exceed: (1) $29,500 per family unit without a bedroom. (2) $33,816 per family unit with one bedroom. (3) $41,120 per family unit with two bedrooms. (d) Reduced loan amount—leaseholds. (e) Adjusted loan amount—rehabilitation projects. (1) Property held in fee. (2) Property subject to existing mortgage. (3) Property to be acquired. (f) Increased Mortgage Limits—High Cost Areas. (A) By not to exceed 110 percent in any geographical area in which the Assistant Secretary finds that cost levels so require; and (B) By not to exceed 140 percent where the Assistant Secretary determines it necessary on a project-by-project basis. (ii) In no case, however, may any such increase exceed 90 percent, where the Assistant Secretary determines that there is involved a mortgage purchased or to be purchased by the Government National Mortgage Association (GNMA) in implementing its Special Assistance Functions under section 305 of the National Housing Act (as section 305 existed immediately before its repeal on November 30, 1983). (2) If the Assistant Secretary finds that because of high costs in Alaska, Guam, or Hawaii it is not feasible to construct dwellings without the sacrifice of sound standards of construction, design, and livability within the limitations of maximum loan amounts provided in this section, the principal amount of mortgages may be increased by such amounts as may be necessary to compensate for such costs, but not to exceed in any event the maximum, including high cost area increases, if any, otherwise applicable by more than one-half thereof. (g) Loan interest rate. (1) Annual interest rate. (i) The average yield on the most recently issued 30-year marketable obligations of the United States during the 3-month period immediately preceding the fiscal year in which the loan is made (adjusted to the nearest one-eighth of one percent), plus an allowance to cover administrative costs and probable losses under the program; and (ii) Any applicable statutory ceiling on the loan interest rate including the allowance to cover administrative costs and probable losses. (2) Optional interest rate. (i) If the Borrower elects the optional loan interest rate, the loan interest rate shall not exceed: (A) The average yield on the most recently issued 30-year marketable obligations of the United States during the 3-month period immediately preceding the fiscal year in which the request for commitment is submitted (adjusted to the nearest one-eighth of one percent), plus an allowance to cover administrative costs and probable losses under the program; (B) The average yield on the most recently issued 30-year marketable obligations of the United States during the 1-month period immediately preceding the month in which the request for commitment is submitted (adjusted to the nearest one-eighth of one percent), plus an allowance to cover the administrative costs and probable losses under the program; and (C) Any applicable statutory ceiling on the loan interest rate including an allowance to cover administrative costs and probable losses under the program. (ii) The date of submission of a request for conditional or firm commitment is the date that the Borrower submits the complete and acceptable request to HUD. The date of the submission of a request for commitment will not be affected by any subsequent resubmission of the request by the Borrower or by any reprocessing of the request by HUD. (iii) The Borrower may withdraw its election of the optional interest rate at any time before initial loan closing. If the Borrower elected the optional interest rate with its request for conditional commitment and withdraws its election, the loan will bear interest at the rate determined under paragraph (g)(1) of this section, unless the Borrower elects an optional interest rate with its request for firm commitment. If the Borrower withdraws its election after the date of submission of its request for firm commitment, the loan will bear interest at the rate determined under paragraph (g)(1) of this section. (iv) If initial loan closing has not occurred within 18 months after the Notice of Section 202 Fund Reservation is issued, the Borrower's election of the optional rate will be cancelled and the loan will bear interest at the rate determined under paragraph (g)(1) of this section. (3) Allowance for administrative costs and probable losses. (h) Announcement of interest rates. Federal Register. Federal Register (2) Upon the Borrower's request, HUD will provide available current information concerning the determination of the interest rate under paragraph (g)(2) of this section. (i) The loan shall be secured by a first mortgage on real estate in fee simple or long term leasehold. The mortgage shall be repayable during a term not to exceed 40 years and shall be subject to such terms and conditions as shall be determined by the Assistant Secretary. (j) In order to assure HUD of the Borrower's continued commitment to the development, management, and operation of the project, a minimum capital investment is required of Section 202 Borrowers of one-half of one percent (0.5%) of the mortgage amount committed to be disbursed, not to exceed the amount of $10,000. Section 106(b) loans made pursuant to section 106 of the Housing Act of 1968 may not be utilized to meet the minimum capital investment requirement. Such minimum capital investment shall be placed in escrow at the initial closing of the Section 202 loan and shall be held by HUD or other escrow agent acceptable to the field office for not less than a 3-year period from the date of initial occupancy and may be used for operating expenses or deficits as may be directed by the field office. Any unexpended balance remaining in the minimum capital investment account at the end of the escrow period shall be returned to the Borrower. § 891.530 Prepayment privileges. (a) The prepayment (whether in whole or in part) or the assignment or transfer of physical and financial assets of any Section 202 project is prohibited, unless the Secretary gives prior written approval. (b) The Secretary may not grant approval unless he or she has determined that the prepayment or transfer of the loan is part of a transaction that will ensure the continued operation of the project, until the original maturity date of the loan, in a manner that will provide rental housing for the elderly and handicapped on terms at least as advantageous to existing and future tenants as the terms required by the original Section 202 loan agreement and any other loan agreements entered into under other provisions of law. § 891.535 Requirements for awarding construction contracts. (a) Awards shall be made only to responsible contractors that possess the potential ability to perform successfully under the terms and conditions of a proposed construction contract. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. (b) Each Borrower is permitted to use either competitive bidding (formal advertising) in selecting a construction contractor or the negotiated noncompetitive method of contract award under paragraph (c) of this section. In competitive bidding, sealed bids are publicly solicited and a firm, fixed-price contract is awarded (in accordance with the requirements of this paragraph (b)) to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest in price. Regardless of which method a Borrower uses, there should be an opportunity for minority owned and women owned businesses to be awarded a contract. (1) Bids shall be solicited from an adequate number of known contractors a reasonable time prior to the date set forth for opening of bids. In addition, the invitation shall be publicly advertised. (2) The invitation for bids shall specify: (i) The name of the Borrower; (ii) A brief description of the proposed project and the proposed construction contract; (iii) A preliminary estimate of cost; (iv) That bids will be received at a specified place until a specified time at which time and place all bids will be publicly opened; (v) The location where the proposed forms of contract and bid documents, including plans and specifications, are on file and may be obtained on payment of a specified returnable deposit; (vi) That a certified check or bank draft or satisfactory bid bond in the amount of 5 percent of the bid shall be submitted with the bid; (vii) That the successful bidder will be required to provide assurance of completion in the form of a performance and payment bond or cash escrow; and (viii) That the Borrower reserves the right to reject any or all bids and to waive any informality. (3) The bid form, which must be submitted by all bidders, must specify: (i) The name of the project; (ii) The name and address of the bidder; (iii) That the bidder proposes to furnish all labor, materials, equipment and services required to construct and complete the project, as described in the invitation for bids (including the contents of all documents on file), for a specified lump-sum price; (iv) That the security specified in paragraph (b)(2)(vi) of this section accompanies the bid; (v) The period after the bid opening during which the bid shall not be withdrawn without the consent of the Borrower; (vi) That the bidder will, if notified of acceptance of such bid within a specified period after the opening, execute and deliver a contract in the prescribed form and furnish the required bond within ten days thereafter; (vii) That the bidder acknowledges any amendments to the invitation for bids; and (viii) That the bidder certifies that the bid is in strict accordance with all terms of the invitation for bids (including the contents of all documents on file) and that the bid is signed by a person authorized to bind the bidder. (4) Bidding shall be open to all general contractors who furnish the security guaranteeing their bid, as described in paragraph (b)(2)(vi) of this section. (5) All bids shall be opened publicly at the time and place stated in the invitation for bids, in the presence of the HUD Regional Administrator or his designee. (6) A firm, fixed-price contract award shall be made by written notice to the responsible bidder whose bid, conforming to the invitation for bids, is lowest. The contract may provide for an incentive payment to the contractor for an early completion. (c) A Sponsor or Borrower may award a negotiated, noncompetitive construction contract. § 891.540 Loan disbursement procedures. (a) Disbursements of loan proceeds shall be made directly by HUD to or for the account of the Borrower and may be made through an approved lender, mortgage servicer, title insurance company, or other agent satisfactory to the Borrower and HUD. (b) All disbursements to the Borrower shall be made on a periodic basis in an amount not to exceed the HUD-approved cost of portions of construction or rehabilitation work completed and in place (except as modified in paragraph (d) of this section), minus the appropriate holdback, as determined by the field office. (c) Requisitions for loan disbursements shall be submitted by the Borrower on forms to be prescribed by the Assistant Secretary and shall be accompanied by such additional information as the field office may require in order to approve loan disbursements under subpart E of this part, including but not limited to evidence of compliance with the Davis-Bacon Act, Department of Labor regulations, all applicable zoning, building, and other governmental requirements, and such evidence of continued priority of the mortgage of the Borrower as the Assistant Secretary may prescribe. (d) In loan disbursements for building components stored off-site, the term building component (1) Storage. (ii) Each building component shall be adequately marked so as to be readily identifiable in the inventory of the off-site location. It shall be kept together with all other building components of the same manufacturer intended for use in the same project for which loan disbursements have been made and separate and apart from similar units not for use in the project. (iii) Storage costs, if any, shall be borne the general contractor. (2) Responsibility for transportation, storage and insurance of off-site building components. (i) Insuring the components in the name of the Borrower while in transit and storage; and (ii) Delivering or contracting for the delivery of the components to the storage area and to the construction site, including payment of freight. (3) Loan disbursements. (A) Obtain a bill of sale for the component; (B) Provide HUD with a security agreement pledged by a first lien on the building components with the exception of such other liens or encumbrances as may be approved by HUD; and (C) File a financing statement in accordance with the Uniform Commercial Code. (ii) Before each loan disbursement for building components stored off-site is made the manufacturer and the general contractor shall certify to HUD that the components, in their intended use, comply with HUD-approved contract plan and specifications. (iii) Loan disbursements may be made only for components stored off-site in a quantity required to permit uninterrupted installation at the site. (iv) At no time shall the invoice value of building components being stored off-site, for which advances have been insured, represent more than 25 percent of the total estimated construction costs for the insured mortgaged project as specified in the construction contract. Notwithstanding the preceding sentence and other regulatory requirements that set bonding requirements, the percentage of total estimated construction costs insured by advances under this section may exceed 25 percent but not 50 percent if the mortgagor furnishes assurance of completion in the form of a corporate surety bond for the payment and performance each in the amount of 100 percent of the amount of the construction contract. In no event will insurance of components stored off-site be made in the absence of a payment and performance bond. (v) No single loan disbursement which is to be made shall be in an amount less than ten thousand ($10,000) dollars. § 891.545 Completion of project, cost certification, and HUD approvals. (a) The Borrower must satisfy the requirements for completion of construction and substantial rehabilitation and approvals by HUD before submission of a final requisition for disbursement of loan proceeds. (b) The Borrower shall submit to the field office all documentation required for final disbursement of the loan, including: (1) A Borrower's/Mortgagor's Certificate of Actual Cost, showing the actual cost to the mortgagor of the construction contract, architectural, legal, organizational, offsite costs, and all other items of eligible expense. The certificate shall not include as actual cost any kickbacks, rebates, trade discounts, or other similar payments to the mortgagor or to any of its officers, directors, or members. (2) A verification of the Certificate of Actual Cost by an independent Certified Public Accountant or independent public accountant acceptable to the field office. (3) In the case of projects not subject to competitive bidding, a certification of the general contractor (and of such subcontractors, material suppliers, and equipment lessors as the Assistant Secretary or field office may require), on a form prescribed by the Assistant Secretary, as to all actual costs paid for labor, materials, and subcontract work under the general contract exclusive of the builder's fee and kickbacks, rebates, trade discounts, or other similar payments to the general contractor, the mortgagor, or any of its officers, directors, stockholders, partners, or members. (c) In lieu of the requirements set forth in paragraphs (c)(1) and (3) of this section, a simplified form of cost certification prescribed by the Secretary may be completed and submitted by the Borrower for projects with mortgages of $500,000 or less. The simplified cost certification shall be verified by an independent Certified Public Accountant or an independent public accountant in a manner acceptable to the Secretary. (d) If the Borrower's certified costs provided in accordance with paragraph (c) or (d) of this section and as approved by HUD are less than the loan amount, the contract rents will be reduced accordingly. (e) If the contract rents are reduced pursuant to paragraph (e) of this section, the maximum annual HAP Contract commitment will be reduced. If contract rents are reduced based on cost certification after HAP Contract execution, any overpayment after the effective date of the Contract will be recovered from the Borrower by HUD. (Approved by the Office of Management and Budget under control number 2502-0044) § 891.550 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 funded by a grant awarded 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] § 891.560 HAP contract. (a) HAP contract. (b) HAP contract execution. (2) The effective date of the HAP contract may be earlier than the date of execution, but no earlier than the date of HUD's issuance of the permission to occupy. (3) If the project is completed in stages, the procedures of paragraph (b) of this section shall apply to each stage. (c) Housing assistance payments to owners under the HAP contract. (1) Payments to the Borrower to assist eligible families leasing assisted units. (2) Payments to the Borrower for vacant assisted units (vacancy payments). (d) Payment of utility reimbursement. § 891.565 Term of HAP contract. The term of the HAP contract for assisted units shall be 20 years. If the project is completed in stages, the term of the HAP contract for assisted units in each stage shall be 20 years. The term of the HAP contract for all assisted units in all stages of a project shall not exceed 22 years. § 891.570 Maximum annual commitment and project account. (a) Maximum annual commitment. (b) Project account. (2) If the HUD-approved estimate of required annual payments under the HAP contract for a fiscal year exceeds the maximum annual commitment for that fiscal year plus the current balance in the project account, HUD will, within a reasonable time, take such steps authorized by section 8(c)(6) of the United States Housing Act of 1937 (42 U.S.C. 1437f note), as may be necessary, to assure that payments under the HAP contract will be adequate to cover increases in contract rents and decreases in tenant income. § 891.575 Leasing to eligible families. (a) Availability of assisted units for occupancy by eligible families. (i) Is conducting marketing in accordance with § 891.600(a); (ii) Has leased or is making good faith efforts to lease the units to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; (iii) Has not rejected any such applicant family except for reasons acceptable to HUD. (2) If the Borrower is temporarily unable to lease all units for which assistance is committed under the HAP contract to eligible families, one or more units may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income eligibility requirements of 24 CFR 5.653. Failure on the part of the Borrower to comply with these requirements is a violation of the HAP contract and grounds for all available legal remedies, including an action for specific performance of the HAP contract, suspension or debarment from HUD programs, and reduction of the number of units under the HAP contract as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by the HAP contract. (1) The Borrower fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD, HUD determines that the inability to lease units to eligible families is not a temporary problem. (c) Restoration. (1) HUD determines that the restoration is justified by demand; (2) The Borrower otherwise has a record of compliance with the Borrower's obligations under the HAP contract; and (3) Contract and budget authority is available. (d) Applicability. (e) Occupancy by families that are not elderly or handicapped. (1) The Borrower has made reasonable efforts to lease assisted and unassisted units to eligible families; (2) The Borrower has been granted HUD approval under paragraph (a) of this section; and (3) The Borrower is temporarily unable to achieve or maintain a level of occupancy sufficient to prevent financial default and foreclosure under the Section 202 loan documents. HUD approval under paragraph (e)(3) of this section will be of limited duration. HUD may impose terms and conditions to this approval that are consistent with program objectives and necessary to protect its interest in the Section 202 loan. (f) The regulations of 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to this section. [61 FR 11956, Mar. 22, 1996, as amended at 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016; 88 FR 75233, Nov. 2, 2023] § 891.580 HAP contract administration. HUD is responsible for the administration of the HAP contract. § 891.582 Management and occupancy reviews. (a) The contract administrator will conduct management and occupancy reviews to determine whether the owner is in compliance with the HAP Contract. Such reviews will be conducted in accordance with a schedule set out by the Secretary and published in the Federal Register, (b) HUD or the Contract Administrator may inspect project operations and units at any time. (c) Equal Opportunity reviews may be conducted by HUD at any time. [87 FR 37997, June 27, 2022] § 891.585 Default by Borrower. (a) HAP contract provisions. (1) That if HUD determines that the Borrower is in default under the HAP contract, HUD will notify the Borrower of the actions required to be taken to cure the default and of the remedies to be applied by HUD including an action for specific performance under the HAP contract, reduction or suspension of housing assistance payments and recovery of overpayments, where appropriate; and (2) That if the Borrower fails to cure the default, HUD has the right to terminate the HAP contract or to take other corrective action. (b) Loan provisions. § 891.590 Notice upon HAP contract expiration. (a) Notice required. (b) Service requirements. (c) Contents of notice. (1) The actual (if known) or the estimated rent that will be charged following the expiration of the HAP contract; (2) The difference between the new rent and the total tenant payment toward rent under the HAP contract; and (3) The date the HAP contract will expire. (d) Certification to HUD. (e) Applicability. (Approved by the Office of Management and Budget under control number 2502-0371) § 891.595 HAP contract extension or renewal. Upon expiration of the term of the HAP contract, HUD and the Borrower may agree (subject to available funds) to extend the term of the HAP contract or to renew the HAP contract. The number of assisted units under the extended or renewed HAP contract shall equal the number of assisted units under the original HAP contract, except that: (a) HUD and the Borrower may agree to reduce the number of assisted units by the number of assisted units that are not occupied by eligible families at the time of the extension or renewal; and (b) HUD and the Borrower may agree to permit reductions in the number of assisted units during the term of the extended or renewed HAP contract as assisted units are vacated by eligible families. Nothing in this section shall prohibit HUD from reducing the number of units covered under the extended or renewed HAP contract in accordance with § 891.575(b). § 891.600 Responsibilities of Borrower. (a) Marketing. (2) Marketing must be done in accordance with the HUD-approved affirmative fair housing marketing plan and all Federal, State, or local fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible families of similar income levels in the same housing market have a like range of housing choices available to them regardless of discriminatory considerations, such as their race, color, creed, religion, familial status, disability, sex or national origin. Marketing must also be done in accordance with the communication and notice requirements of Section 504 at 24 CFR 8.6 and 24 CFR 8.54. (3) At the time of HAP contract execution, the Borrower must submit to HUD a list of leased and unleased assisted units, with a justification for the unleased units, in order to qualify for vacancy payments for the unleased units. (b) Management and maintenance. (c) Contracting for services. (2) Consistent with the objectives of Executive Order No. 11625 (36 FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139; unless otherwise noted); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198; unless otherwise noted); and Executive Order No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; unless otherwise noted), the Borrower will promote awareness and participation of minority and women's business enterprises in contracting and procurement activities. (d) Submission of financial and operating statements. (1) Within 60 days after the end of each fiscal year of project operations, financial statements for the project audited by an independent public accountant and in the form required by HUD; and (2) Other statements regarding project operation, financial conditions and occupancy as HUD may require to administer the housing assistance payments contract (HAP contract) or the project assistance contract (PAC), as applicable, and to monitor project operations. (e) Use of project funds. (f) Reports. (Approved by the Office of Management and Budget under control number 2502-0371) § 891.605 Replacement reserve. (a) Establishment of reserve. (b) Deposits to reserve. (c) Level of reserve. (d) Administration of reserve. § 891.610 Selection and admission of tenants. (a) Written procedures. (b) Application for admission. (c) Determination of eligibility and selection of tenants. (d) Unit assignment. (e) Ineligibility determination. e.g., (f) Records. (g) Reexamination of family income and composition Regular reexaminations. (2) Interim reexaminations. (3) Continuation of housing assistance payments. (ii) A family's eligibility for housing assistance payments may be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including information related to disclosure and verification of Social Security Numbers, or failure to sign and submit consent forms for the obtaining of wage and claim information from State wage information collection agencies, as provided by 24 CFR part 5, subpart B. (4) Streamlined income determination. (Approved by the Office of Management and Budget under control number 2502-0371) [61 FR 11956, Mar. 22, 1996, as amended at 70 FR 77744, Dec. 30, 2005; 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 12371, Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 88 FR 9669, Feb. 14, 2023] § 891.615 Obligations of the family. The obligations of the family are provided in § 891.415. § 891.620 Overcrowded and underoccupied units. If the Borrower determines that because of change in family size, an assisted unit is smaller than appropriate for the eligible family to which it is leased, or that the assisted unit is larger than appropriate, housing assistance payments or project assistance payments (as applicable) with respect to the unit will not be reduced or terminated until the eligible family has been relocated to an appropriate alternate unit. If possible, the Borrower will, as promptly as possible, offer the family an appropriate alternate unit. The Borrower may receive vacancy payments for the vacated unit if the Borrower complies with the requirements of § 891.650. § 891.625 Lease requirements. The lease requirements are provided in § 891.425. § 891.630 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 direct loan projects. (b) The provisions of part 247 of this title apply to all decisions by a Borrower to terminate the tenancy or modify the lease of a family residing in a unit. (c) In actions or potential actions to terminate tenancy, the owner shall follow 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking). [66 FR 28798, May 24, 2001, as amended at 73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016] § 891.635 Security deposits. The general requirements for security deposits on assisted units are provided in § 891.435. For purposes of subpart E of this part, the additional requirements apply: (a) The Borrower may require each family occupying an unassisted unit (or residential space in a group home) to pay a security deposit equal to one month's rent payable by the family. (b) The Borrower shall maintain a record of the amount in the segregated interest-bearing account that is attributable to each family in residence in the project. Annually for all families, and when computing the amount available for disbursement under § 891.435(b)(3), the Borrower shall allocate to the family's balance the interest accrued on the balance during the year. Unless prohibited by State or local law, the Borrower may deduct for the family, from the accrued interest for the year, the administrative cost of computing the allocation to the family's balance. The amount of the administrative cost adjustment shall not exceed the accrued interest allocated to the family's balance for the year. § 891.640 Adjustment of rents. (a) Contract rents Adjustment based on approved budget. (2) Annual and special adjustments. (i) Consistent with the HAP contract, contract rents may be adjusted in accordance with part 888 of this chapter; (ii) Special additional adjustments will be granted, to the extent determined necessary by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the assisted units that have resulted from substantial general increases in real property taxes, assessments, utility rates or similar costs (i.e., assessments and utilities not covered by regulated rates), and that are not adequately compensated for by an annual adjustment. The Borrower must submit to HUD required supporting data, financial statements, and certifications for the special additional adjustment. (b) Rent for unassisted units. (Approved by the Office of Management and Budget under control number 2502-0371) § 891.645 Adjustment of utility allowances. In connection with adjustments of contract rents as provided in § 891.640(a), the requirements for the adjustment of utility allowances provided in § 891.440 apply. § 891.650 Conditions for receipt of vacancy payments for assisted units. (a) General. (b) Vacancies during rent-up. (1) Complied with § 891.600; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. (1) Certifies that it did not cause the vacancy by violating the lease, the HAP contract, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy immediately upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in § 891.600(a)(2) and (3), and in paragraphs (b)(2) and (3) of this section; and (4) For any vacancy resulting from the Borrower's eviction of an eligible family, certifies that it has complied with § 891.630. (d) Vacancies for longer than 60 days. (1) The unit was in decent, safe, and sanitary condition during the vacancy period for which payment is claimed; (2) The Borrower has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c) of this section, as appropriate; and (3) The Borrower has demonstrated to the satisfaction of HUD that: (i) For the period of vacancy, the project is not providing the Borrower with revenues at least equal to project expenses (exclusive of depreciation) and the amount of payments requested is not more than the portion of the deficiency attributable to the vacant unit; and (ii) The project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. (Approved by the Office of Management and Budget under control number 2502-0371) Section 202 Projects for the Nonelderly Handicapped Families and Individuals—Section 162 Assistance § 891.655 Definitions applicable to 202/162 projects. The following definitions apply to projects for eligible families receiving project assistance payments under section 202(h) of the Housing Act of 1959 in addition to reservations under section 202 (202/162 projects): Annual income Assisted unit Contract rent Family (eligible family) means a annual income” Group home Housing for handicapped families Independent living complex Operating costs (1) Administrative expenses, including salary and management expenses related to the provision of shelter; (2) Maintenance expenses, including routine and minor repairs and groundskeeping; (3) Security expenses; (4) Utilities expenses, including gas, oil, electricity, water, sewer, trash removal, and extermination services. Operating costs exclude telephone services for families; (5) Taxes and insurance; and (6) Allowances for reserves. PAC (project assistance contract) Project account Project assistance payment Tenant rent Total tenant payment Utility allowance Utility reimbursement Vacancy payment [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023; 88 FR 75233, Nov. 2, 2023] § 891.660 Project standards. (a) Property standards. (b) Minimum group home standards. (c) Accessibility requirements. (d) Smoke detectors. § 891.665 Project size limitations. (a) Maximum project size. (1) Group homes may not be designed to serve more than 15 persons on one site; (2) Independent living complexes for chronically mentally ill individuals may not be designed to serve more than 20 persons on one site; and (3) Independent living complexes for handicapped families in the developmental disability or physically handicapped occupancy categories may not have more than 24 units nor more than 24 households on one site. For the purposes of this section, household handicapped family, (b) Additional limitations. (c) Exemptions. (1) The increased number of units is necessary for the economic feasibility of the project; (2) A project of the size proposed is compatible with other residential development and the population density of the area in which the project is to be located; (3) A project of the size proposed can be successfully integrated into the community; and (4) A project of the size proposed is marketable in the community. § 891.670 Cost containment and modest design standards. (a) Restrictions on amenities. (b) Unit sizes. (c) Special spaces and accommodations. (2) Special spaces and accommodations exclude offices, halls, mechanical rooms, laundry rooms, and parking areas; dwelling units and lobbies in independent living complexes; and bedrooms, living rooms, dining and kitchen areas, shared bathrooms, and resident staff dwelling units in group homes. (d) Exceptions. (1) The Sponsor demonstrates a willingness and ability to contribute the incremental development cost and continuing operating costs associated with the additional amenities or design features; or (2) The proposed project involves substantial rehabilitation or acquisition with or without moderate rehabilitation, the additional amenities or design features were incorporated into the existing structure before the submission of the application, and the total development cost of the project with the additional amenities or design features does not exceed the cost limits. § 891.675 Prohibited facilities. The requirements for prohibited facilities for 202/162 projects are provided in § 891.315, except that Section 202/162 projects may not include commercial spaces. § 891.680 Site and neighborhood standards. The general requirements for site and neighborhood standards for 202/162 projects are provided in §§ 891.125 and 891.320. In addition to the requirements in §§ 891.125 and 891.320, the following requirements apply to 202/162 projects: (a) The site must promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons. (b) Projects must be located in neighborhoods where other family housing is located. Except as provided below, projects may not be located adjacent to the following facilities, or in areas where such facilities are concentrated: schools or day care centers for handicapped persons, workshops, medical facilities, or other housing primarily serving handicapped persons. Projects may be located adjacent to other housing primarily serving handicapped persons if the projects together do not exceed the project size limitations under § 891.665(a). § 891.685 Prohibited relationships. The requirements for prohibited relationships for 202/162 projects are provided in § 891.130. § 891.690 Other Federal requirements. In addition to the Federal requirements set forth in 24 CFR part 5, other Federal requirements for the 202/162 projects are provided in §§ 891.155 and 891.325. § 891.695 Operating cost standards. The requirements for the operating cost standards are provided in § 891.150. § 891.700 Prepayment of loans. (a) Prepayment prohibition. (b) HUD-approved prepayment. § 891.705 Project assistance contract. (a) Project assistance contract (PAC). (b) PAC execution. (2) The effective date of the PAC may be earlier than the date of execution, but no earlier than the date of HUD's issuance of the permission to occupy. (3) If the project is completed in stages, the procedures of paragraph (b) of this section shall apply to each stage. (c) Project assistance payments to owners under the PAC. (1) Payments to the Borrower to assist eligible families leasing assisted units. The amount of the project assistance payment made to the Borrower for an assisted unit (or residential space in a group home) that is leased to an eligible family is equal to the difference between the contract rent for the unit (or pro rata share of the contract rent in a group home) and the tenant rent payable by the family. (2) Payments to the Borrower for vacant assisted units (“vacancy payments”). The amount of and conditions for vacancy payments are described in § 891.790. HUD makes the project assistance payments monthly upon proper requisition by the Borrower, except payments for vacancies of more than 60 days, which HUD makes semiannually upon requisition by the Borrower. (d) Payment of utility reimbursement. § 891.710 Term of PAC. The term of the PAC shall be 20 years. If the project is completed in stages, the term of the PAC for each stage shall be 20 years. The term of the PAC for stages of a project shall not exceed 22 years. § 891.715 Maximum annual commitment and project account. (a) Maximum annual commitment. (b) Project account. (2) If the HUD-approved estimate of required annual payments under the PAC for a fiscal year exceeds the maximum annual commitment for that fiscal year plus the current balance in the project account, HUD will, within a reasonable time, take such steps authorized by section 202(h)(4)(A) of the Housing Act of 1959, as may be necessary, to assure that payments under the PAC will be adequate to cover increases in contract rents and decreases in tenant income. § 891.720 Leasing to eligible families. (a) Availability of assisted units for occupancy by eligible families. (1) Is conducting marketing in accordance with § 891.740(a); (2) Has leased or is making good faith efforts to lease the units or residential spaces to eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies by renting to such families; and (3) Has not rejected any such applicant family except for reasons acceptable to HUD. If the Borrower is temporarily unable to lease all units or residential spaces to eligible families, one or more units or residential spaces may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income requirements of part 813 of this chapter, as modified by § 891.505. Failure on the part of the Borrower to comply with these requirements is a violation of the PAC and grounds for all available legal remedies, including an action for specific performance of the PAC, suspension or debarment from HUD programs, and reduction of the number of units (or in the case of group homes, reduction of the number of residential spaces) under the PAC as set forth in paragraph (b) of this section. (3) Has not rejected any such applicant family except for reasons acceptable to HUD. If the Borrower is temporarily unable to lease all units or residential spaces to eligible families, one or more units or residential spaces may, with the prior approval of HUD, be leased to otherwise eligible families that do not meet the income requirements of part 5, subpart F of this title. Failure on the part of the Borrower to comply with these requirements is a violation of the PAC and grounds for all available legal remedies, including an action for specific performance of the PAC, suspension or debarment from HUD programs, and reduction of the number of units (or in the case of group homes, reduction of the number of residential spaces) under the PAC as set forth in paragraph (b) of this section. (b) Reduction of number of units covered by the PAC. (1) The Borrower fails to comply with the requirements of paragraph (a) of this section; or (2) Notwithstanding any prior approval by HUD, HUD determines that the inability to lease units or residential spaces to eligible families is not a temporary problem. (c) Restoration. (1) HUD determines that the restoration is justified by demand; (2) The Borrower otherwise has a record of compliance with the Borrower's obligations under the PAC; and (3) Contract and budget authority is available. (d) Occupancy by families that are not handicapped. (1) The Borrower has made reasonable efforts to lease to eligible families; (2) The Borrower has been granted HUD approval under paragraph (a) of this section; and (3) The Borrower is temporarily unable to achieve or maintain a level of occupancy sufficient to prevent financial default and foreclosure under the Section 202 loan documents. HUD approval under this paragraph will be of limited duration. HUD may impose terms and conditions to this approval that are consistent with program objectives and necessary to protect its interest in the Section 202 loan. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] § 891.725 PAC administration. HUD is responsible for the administration of the PAC. § 891.730 Default by Borrower. (a) PAC provisions. (1) That if HUD determines that the Borrower is in default under the PAC, HUD will notify the Borrower of the actions required to be taken to cure the default and of the remedies to be applied by HUD, including an action for specific performance under the PAC, reduction or suspension of project assistance payment and recovery of overpayments, as appropriate; and (2) That if the Borrower fails to cure the default, HUD has the right to terminate the PAC or to take other corrective action. (b) Loan provisions. § 891.735 Notice upon PAC expiration. The PAC will provide that the Borrower will, at least 90 days before the end of the PAC contract term, notify each family occupying an assisted unit (or residential space in a group home) of any increase in the amount the family will be required to pay as rent as a result of the expiration. The notice of expiration will contain such information and will be served in such manner as HUD may prescribe. § 891.740 Responsibilities of Borrower. (a) Marketing. (2) Marketing must be done in accordance with the HUD-approved affirmative fair housing marketing plan and all fair housing and equal opportunity requirements. The purpose of the plan and requirements is to achieve a condition in which eligible families of similar income levels in the same housing market have a like range of housing choices available to them regardless of their race, color, religion, sex (including actual or perceived sexual orientation and gender identity), disability, familial status, or national origin. (3) At the time of PAC execution, the Borrower must submit to HUD a list of leased and unleased assisted units (or in the case of a group home, leased and unleased residential spaces) with a justification for the unleased units or residential spaces, in order to qualify for vacancy payments for the unleased units or residential spaces. (b) Management and maintenance. (c) Contracting for services. (d) Submission of financial and operating statements. (e) Use of project funds. (f) Reports. [61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023] § 891.745 Replacement reserve. The general requirements for the replacement reserve are provided in § 891.605. For projects funded under §§ 891.655 through 891.790, the amount of the deposits for the initial year of operation shall be an amount equal to 0.6 percent of the cost of the total structures (for new construction projects), 0.4 percent of the cost of the initial mortgage amount (for all other projects), or such higher rate as required by HUD. For the purposes of this section, total structures include main buildings, accessory buildings, garages, and other buildings. The amount of the deposits will be adjusted each year by the amount of the annual adjustment factor as described in part 888 of this chapter. § 891.750 Selection and admission of tenants. (a) Application for admission. (b) Determination of eligibility and selection of tenants. (1) Local residency requirements are prohibited. (2) If the Borrower determines that the family is eligible and is otherwise acceptable and units (or residential spaces in a group home) are available, the Borrower will assign the family a unit or residential space in a group home. If the family will occupy an assisted unit the Borrower will assign the family a unit of the appropriate size in accordance with HUD standards. If no suitable unit (or residential space in a group home) is available, the Borrower will place the family on a waiting list for the project and notify the family when a suitable unit or residential space may become available. If the waiting list is so long that the applicant would not be likely to be admitted within the next 12 months, the Borrower may advise the applicant that no additional applications for admission are being considered for that reason. (3) If the Borrower determines that an applicant is ineligible for admission or the Borrower is not selecting the applicant for other reasons, the Borrower will promptly notify the applicant in writing of the determination, the reasons for the determination, and that the applicant has a right to request a meeting to review the rejection, in accordance with HUD requirements. The review, if requested, may not be conducted by the member of the Borrower's staff who made the initial decision to reject the applicant. The applicant may also exercise other rights, including filing a complaint with HUD's Office of Fair Housing and Equal Opportunity, if the applicant believes the applicant is being discriminated against on the basis of race, color, religion, sex (including actual or perceived sexual orientation and gender identity), disability, familial status, or national origin. (4) Records on applicants and approved eligible families, which provide racial, ethnic, gender and place of previous residency data required by HUD, must be maintained and retained for three years. (c) Reexamination of family income and composition Regular reexaminations. (2) Interim reexamination. (3) Continuation of project assistance payment. (ii) A family's eligibility for project assistance payment may also be terminated in accordance with HUD requirements for such reasons as failure to submit requested verification information, including failure to meet the disclosure and verification requirements for Social Security Numbers, or failure to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by 24 CFR part 5, subpart B. (4) Streamlined income determination. (Approved by the Office of Management and Budget under control number 2502-0204 and 2505-0267) [61 FR 11956, Mar. 22, 1996, as amended at 81 FR 12371, Mar. 8, 2016; 88 FR 75234, Nov. 2, 2023] § 891.755 Obligations of the family. The obligations of the family are provided in § 891.415. § 891.760 Overcrowded and underoccupied units. The requirements for overcrowded and underoccupied units are provided in § 891.620. § 891.765 Lease requirements. The lease requirements are provided in § 891.425. § 891.770 Denial of admission, termination of tenancy, and modification of lease. (a) The provisions of part 5, subpart I, of this title apply to Section 202 direct loan projects with Section 162 assistance for disabled families. (b) The provisions of part 247 of this title apply to all decisions by a Borrower to terminate the tenancy or modify the lease of a family residing in a unit (or residential space in a group home). [66 FR 28798, May 24, 2001] § 891.775 Security deposits. The general requirements for security deposits on assisted units are provided in § 891.435. For purposes of subpart E of this part, the additional requirements in § 891.635 apply. § 891.780 Adjustment of rents. (a) Contract rents. (b) Rent for unassisted units. § 891.785 Adjustment of utility allowances. In connection with adjustments of contract rents as provided in § 891.780(a), the requirements for the adjustment of utility allowances provided in § 891.440 apply. § 891.790 Conditions for receipt of vacancy payments for assisted units. (a) General. (b) Vacancies during rent-up. (1) Complied with § 891.740; (2) Has taken and continues to take all feasible actions to fill the vacancy; and (3) Has not rejected any eligible applicant except for good cause acceptable to HUD. (c) Vacancies after rent-up. (1) Certifies that it did not cause the vacancy by violating the lease, the PAC, or any applicable law; (2) Notified HUD of the vacancy or prospective vacancy and the reasons for the vacancy immediately upon learning of the vacancy or prospective vacancy; (3) Has fulfilled and continues to fulfill the requirements specified in § 891.740(a)(2) and (3), and in paragraphs (b)(2) and (3) of this section; and (4) For any vacancy resulting from the Borrower's eviction of an eligible family, certifies that it has complied with § 891.770. (d) Vacancies for longer than 60 days. (1) The unit was in decent, safe, and sanitary condition during the vacancy period for which payment is claimed; (2) The Borrower has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c) of this section, as appropriate; and (3) The Borrower has demonstrated to the satisfaction of HUD that: (i) For the period of vacancy, the project is not providing the Borrower with revenues at least equal to project expenses (exclusive of depreciation) and the amount of payments requested is not more than the portion of the deficiency attributable to the vacant unit (or residential space in a group home); and (ii) The project can achieve financial soundness within a reasonable time. (e) Prohibition of double compensation for vacancies. Subpart F—For-Profit Limited Partnerships and Mixed-Finance Development for Supportive Housing for the Elderly or Persons with Disabilities Source: 70 FR 54210, Sept. 13, 2005, unless otherwise noted. § 891.800 Purpose. The purpose of this subpart is to establish rules allowing for, and regulating the participation of, for-profit limited partnerships, of which the sole general partner is a Nonprofit Organization meeting the requirements of 12 U.S.C. 1701q(k)(4) or 42 U.S.C. 8032(k)(6), in the development of housing for the elderly and persons with disabilities using mixed-finance development methods. These rules are intended to develop more supportive housing for the elderly and persons with disabilities by allowing the use of federal assistance, private capital and expertise, and low-income housing tax credits. § 891.802 Applicability of other provisions. The provisions of 24 CFR part 891, subparts A through D, apply to this subpart F unless otherwise stated. § 891.805 Definitions. In addition to the definitions at §§ 891.105, 891.205, and 891.305, the following definitions apply to this subpart: Mixed-finance owner, Private nonprofit organization, (1) In the case of supportive housing for the elderly: (i) An organization that meets the requirements of the definition of “private nonprofit organization” in § 891.205; and (ii) A for-profit limited partnership, the sole general partner of which owns at least one-hundredth of one percent of the partnership assets, whereby the sole general partner is either: an organization meeting the requirements of § 891.205 or a for-profit corporation wholly owned and controlled by one or more organizations meeting the requirements of § 891.205 or a limited liability company wholly owned and controlled by one or more organizations meeting the requirements of § 891.205. If the project will include units financed with the use of federal Low-Income Housing Tax Credits and the organization is a limited partnership, the requirements of section 42 of the IRS code, including the requirements of section 42(h)(5), apply. The general partner may also be the sponsor, so long as it meets the requirements of this part for sponsors and general partners. (2) In the case of supportive housing for persons with disabilities: (i) An organization that meets the requirements of the definition of “private nonprofit organization” in § 891.305; and (ii) A for-profit limited partnership, the sole general partner of which owns at least one-hundredth of one percent of the partnership assets, whereby the sole general partner is either: an organization meeting the requirements of § 891.305 or a corporation owned and controlled by an organization meeting the requirements of § 891.305. If the project will include units financed with the use of federal Low-Income Housing Tax Credits and the organization is a limited partnership, the requirements of section 42 of the IRS code, including the requirements of section 42(h)(5), apply. The general partner may also be the sponsor, so long as it meets the requirements of this part for sponsors and general partners. [78 FR 37113, June 20, 2013] § 891.808 Capital advance funds. (a) HUD is authorized to provide capital advance funds to expand the supply of supportive housing for the elderly and persons with disabilities in accordance with the rules and regulations of the Section 202 and Section 811 supportive housing programs. For mixed-finance projects, HUD provides a capital advance funds reservation to the sponsor, which transfers the fund reservation to the mixed-finance owner meeting the requirements of this subpart. The sponsor may transfer the fund reservation directly to the owner or to the general partner of the owner, or the sponsor may be the general partner of the mixed-finance owner if the sponsor meets the applicable statutory and regulatory requirements. (b) Developments built with mixed-finance funds may combine Section 202 or Section 811 units with other units, which may or may not benefit from federal assistance. The number of Section 202 or Section 811 supportive housing units must not be less than the number specified in the agreement letter for a capital advance. In the case of a Section 811 mixed-finance project, the additional units cannot cause the project to exceed the applicable Section 811 project size limit if they will also house persons with disabilities. § 891.809 Limitations on capital advance funds. Capital advances are not available in connection with: (a) Acquisition of facilities currently owned and operated by the sponsor as housing for the elderly, except with rehabilitation as defined in 24 CFR 891.105; (b) The financing or refinancing of federally assisted or insured projects; (c) Facilities currently owned and operated by the sponsor as housing for persons with disabilities, except with rehabilitation as defined in 24 CFR 891.105; or (d) Units in Section 202 direct loan projects previously refinanced under the provisions of section 811 of the American Homeownership and Economic Opportunity Act of 2000, 12 U.S.C. 1701q note. § 891.810 Project rental assistance. Project Rental Assistance is defined in § 891.105. Project Rental Assistance is provided for operating costs, not covered by tenant contributions, attributable to the number of units funded by capital advances under the Section 202 and Section 811 supportive housing programs, subject to the provisions of 24 CFR 891.445. The sponsor of a mixed-finance development must obtain the necessary funds from a source other than project rental assistance funds for operating costs related to non-202 or -811 units. § 891.813 Eligible uses for assistance provided under this subpart. (a) Assistance under this subpart may be used to finance the construction, reconstruction, or rehabilitation of a structure or a portion of a structure; or the acquisition of a structure to be used as supportive housing for the elderly; or the acquisition of housing to be used as supportive housing for persons with disabilities. Such assistance may also cover the cost of real property acquisition, site improvement, conversion, demolition, relocation, and other expenses that the Secretary determines are necessary to expand the supply of supportive housing for the elderly and persons with disabilities. (b) Assistance under this subpart may not be used for excess amenities, as stated in § 891.120(c), or for Section 202 “prohibited facilities,” as stated in § 891.220. Such amenities or Section 202 prohibited facilities may be included in a mixed-finance development only if: (1) The amenities or prohibited facilities are not financed, maintained, or operated with funds provided under the Section 202 or Section 811 program; (2) The amenities or prohibited facilities are designed with appropriate safeguards for the residents' health and safety; and (3) The assisted residents are not required to use, participate in, or pay a fee for the use or maintenance of the amenities or prohibited facilities, although they are permitted to do so voluntarily. Any fee charged for the use, maintenance, or access to amenities or prohibited facilities by residents must be reasonable and affordable for all residents of the development. (c) Notwithstanding any other provision of this section, § 891.315 on “prohibited facilities” shall apply to mixed-finance developments containing units assisted under Section 811. [70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013] § 891.815 Mixed-finance developer's fee. (a) Mixed-finance developer's fee. (b) Mixed-finance developer's fee cap. (c) Sources of mixed-finance developer's fee. § 891.818 Firm commitment application. The sponsor will submit the firm commitment application including the mixed-finance proposal in a form described by HUD. § 891.820 Civil rights requirements. The mixed-finance development must comply with the following: all fair housing and accessibility requirements, including the design and construction requirements of the Fair Housing Act; the requirements of section 504 of the Rehabilitation Act of 1973; accessibility requirements, project standards, and site and neighborhood standards under 24 CFR 891.120, 891.125, 891.210, 891.310, and 891.320, as applicable; and 24 CFR 8.4(b)(5), which prohibits the selection of a site or location which has the purpose or effect of excluding persons with disabilities from federally assisted programs or activities. § 891.823 HUD review and approval. HUD will review and may approve or disapprove the firm commitment application and mixed finance proposal. § 891.825 Mixed-finance closing documents. The mixed-finance owner must submit the mixed-finance closing documents in the form prescribed by HUD. The materials shall be submitted after the firm commitment has been issued and prior to capital advance closing. § 891.830 Drawdown. (a) Upon its approval of the executed mixed-finance closing documents and other documents submitted and upon determining that such documents are satisfactory, and after the capital advance closing, HUD may approve the drawdown of capital advance funds in accordance with the HUD-approved drawdown schedule. (b) Non-capital advance funds may be disbursed before capital advance proceeds or the capital advance funds may be drawn down in an approved ratio to other funds, in accordance with a drawdown schedule approved by HUD. (c) Each drawdown of funds constitutes a certification by the mixed-finance owner that: (1) All the representations and warranties submitted in accordance with this subpart continue to be valid, true, and in full force and effect; (2) All parties are in compliance with their obligations pursuant to this subpart, which, by their terms, are applicable at the time of the drawdown of funds; (3) All conditions precedent to the drawdown of the funds by the mixed-finance owner have been satisfied; (4) The capital advance funds drawn down will be used only for eligible costs actually incurred in accordance with the provisions of this subpart and the approved mixed-finance project, which include costs stated in 12 U.S.C. 1701q(h) and 42 U.S.C. 8013(h). Capital advance funds may be used for paying off bridge or construction financing, or repaying or collateralizing bonds, but only for the portion of such financing or bonds that was used for capital advance units; and (5) The amount of the drawdown is consistent with the ratio of 202 or 811 supportive housing units to other units. [70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013] § 891.832 Prohibited relationships. (a) Paragraph (a) of § 891.130, describing conflicts of interest, applies to mixed finance developments. (b) Paragraph (b) of § 891.130, describing identity of interest, does not apply to mixed-finance developments. [78 FR 37114, June 20, 2013] § 891.833 Monitoring and review. HUD shall monitor and review the development during the construction and operational phases in accordance with the requirements that HUD prescribes. In order for units assisted under the 202 and 811 programs to continue to receive project rental assistance, they must be operated in accordance with all contractual agreements among the parties and other HUD regulations and requirements. It is the responsibility of the mixed-finance owner and Nonprofit Organization to ensure compliance with the preceding sentence. § 891.835 Eligible uses of project rental assistance. (a) Section 202 or 811 project rental assistance may be used to pay the necessary and reasonable operating costs, as defined in 24 CFR 891.105 and approved by HUD, not met from project income and attributed to Section 202 or 811 supportive housing units. Operating cost standards under 24 CFR 891.150 apply to developments under this part. (b) Section 202 or 811 project rental assistance may not be used to pay for: (1) Debt service on construction or permanent financing, or any refinancing thereof, for any units in the development, including the 202 or 811 supportive housing units; (2) Cash flow distributions to owners; or (3) Creation of reserves for non-202 or -811 units. (c) HUD-approved operating costs attributable to common areas or to the development as a whole, such as groundskeeping costs and general administrative costs, may be paid from project rental assistance on a pro-rata basis according to the percentage of 202 or 811 supportive housing units as compared to the total number of units. § 891.840 Site and neighborhood standards. For section 202 or 811 mixed-finance developments, the site and neighborhood standards described at § 891.125 and § 891.320 apply to the entire mixed-finance development. § 891.848 Project design and cost standards. (a) The project design and cost standards at § 891.120 apply to mixed-finance developments under this subpart, with the exception of § 891.120(c), subject to the provisions of § 891.813(b). (b) For Section 202 mixed-finance developments, the prohibited facilities requirements described at § 891.220 shall apply to only the capital advance-funded portion of the Section 202 mixed-finance developments under this subpart, subject to the provisions of § 891.813(b). (c) For Section 811 mixed-finance developments, the prohibited facilities requirements described at § 891.315 shall apply to the entire mixed-finance development. [78 FR 37114, June 20, 2013] § 891.853 Development cost limits. The Development Cost Limits for development activities, as established at § 891.140, apply to Section 202 or 811 supportive housing units in mixed-finance developments under this subpart. § 891.855 Replacement reserves. (a) The mixed-finance owner shall establish and maintain a replacement reserve account for Section 202 or 811 supportive housing units. This account must meet all the requirements of 24 CFR 891.405. (b) The mixed-finance owner may obtain a disbursement from the reserve only if the funds will be used to pay for capital replacement costs for the Section 202 or 811 supportive housing units in the mixed-finance development and in accordance with the terms of the regulatory and operating agreement. In the case of repairs to common elements, the Section 202/811 replacement reserve can be used on a pro rata basis based on the percentage of Section 202 or 811 units in the building whose common elements are being repaired. In the event of a disposition of the mixed-finance development, or the dissolution of the owner, any Section 202 or 811 funds remaining in the replacement reserve account must remain dedicated to the Section 202 or 811 supportive housing units to ensure their long-term viability, or as otherwise agreed by HUD. (c) Subject to HUD's approval, reserves may be used to reduce the number of Section 202 or 811 dwelling units in the development for the purpose of retrofitting units that are obsolete or unmarketable. § 891.860 Operating reserves. (a) The mixed-finance owner shall maintain an operating reserve account in an amount sufficient to cover the operating expenses of the development for at least a three-month period. (b) Project income, project rental assistance, tenant rents, and tax credit equity may be used to fund the operating reserve account. (c) Amounts derived from Section 202 or 811 ( e.g. § 891.863 Maintenance as supportive housing units for elderly persons and persons with disabilities. (a) The mixed-finance owner must develop and continue to operate the same number of supportive housing units for elderly persons or persons with disabilities, as stated in the use agreement or other document establishing the number of assisted units, for a 40-year period. (b) If a mixed-finance development proposal provides that the Section 202 or 811 supportive housing units will be floating units, the mixed-finance owner must operate the HUD-approved percentage of Section 202 or 811 supportive housing units, and maintain the percentage distribution of bedroom sizes of Section 202 or 811 supportive housing units for the entire term of the very low-income use restrictions on the development. Any foreclosure, sale, or other transfer of the development must be subject to a covenant running with the land requiring the continued adherence to the very low-income use restrictions for the Section 202 or 811 supportive housing units. (c) The owner must ensure that Section 202 or 811 supportive housing units in the development are and continue to be comparable to unassisted units in terms of location, size, appearance, and amenities. If due to a change in the partnership structure it becomes necessary to establish a new owner partnership or to transfer the supportive housing project, the new or revised owner must be a single-purpose entity and the use restrictions must remain in effect as provided above. § 891.865 Sanctions. In the event that Section 202 or 811 supportive housing units are not developed and operated in accordance with all applicable federal requirements, HUD may impose sanctions on the participating parties and seek legal or equitable relief in enforcing all requirements under Section 202, the Housing Act of 1959, or Section 811 of the National Affordable Housing Act, all implementing regulations and requirements and contractual obligations under the mixed-finance documents.

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