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Tuesday,

September 13, 2005

Part IV

Department of
Housing and Urban
Development
24 CFR Part 891
Mixed-Finance Development for
Supportive Housing for the Elderly or
Persons With Disabilities and Other
Changes to 24 CFR Part 891; Final Rule

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54200 Federal Register / Vol. 70, No. 176 / Tuesday, September 13, 2005 / Rules and Regulations

DEPARTMENT OF HOUSING AND amended both the Section 202 hospitals, and other nonprofit
URBAN DEVELOPMENT Supportive Housing program (Section organizations. Section 84.2 of these
202 program) for the elderly and the regulations, in accordance with Office of
24 CFR Part 891 Section 811 Supportive Housing Management and Budget’s (OMB’s)
[Docket No. FR–4725–F–02] program (Section 811 program) for governmentwide circular A–110,
persons with disabilities. These ‘‘Uniform Administrative Requirements
RIN 2502–AH83 amendments allow the participation of for Grants and Agreements with
for-profit limited partnerships and the Institutions of Higher Education,
Mixed-Finance Development for use of mixed-finance development Hospitals, and Other Non-Profit
Supportive Housing for the Elderly or methods. Section 831 of the AHEO Act Organizations’’ on which 24 CFR part 84
Persons With Disabilities and Other further amended section 202(k)(4) of the is based (59 FR 47010, 47012), defines
Changes to 24 CFR Part 891 Housing Act of 1959 (12 U.S.C ‘‘award’’ as ‘‘financial assistance that
AGENCY: Office of the Assistant 1701q(k)(4)), to add a for-profit limited provides support or stimulation to
Secretary for Housing-Federal Housing partnership to the existing statutory accomplish a public purpose. Awards
Commissioner, HUD. definition of ‘‘private nonprofit include grants and other agreements in
ACTION: Final rule. organization,’’ by stipulating that the the form of money or property in lieu
sole general partner of one is a nonprofit of money, by HUD to an eligible
SUMMARY: This final rule implements organization meeting the requirements recipient * * * the term does not
statutory changes that enable the use of under 12 U.S.C. 1701q(k)(4)(A)–(C). include * * * capital advances under
mixed-finance and for-profit Section 841 of the AHEO Act amended the Sections 202 and 811 programs.’’
participation in the Section 202 section 811(k)(6) of the National Additionally, ‘‘recipient’’ is defined as
Supportive Housing program for the Affordable Housing Act (42 U.S.C. ‘‘an organization receiving financial
elderly and the Section 811 Supportive 8013(k)(6)) to add a for-profit limited assistance directly from HUD to carry
Housing program for persons with partnership to the definition of out a project or program,’’ also in
disabilities, as well as makes other ‘‘nonprofit organization,’’ by stipulating accordance with OMB’s circular (see 59
changes to those programs. The rule that the sole general partner of one is a FR 47013). However, consistent with
uses the mixed-finance development nonprofit organization meeting the HUD’s treatment of capital advances,
model to leverage the capital and requirements of 42 U.S.C. the term ‘‘recipient’’ in 24 CFR 84.2 is
expertise of the private developer 8013(k)(6)(A)–(D). The statutory and/or specifically defined to exclude project
community to create attractive and regulatory requirements for the owners that receive capital advances
affordable supportive housing nonprofit organization include a under the Section 202 and 811
developments for the elderly and for nonprofit organizational structure, a programs. Therefore, in its part 84 rule
persons with disabilities. In addition, governing board that includes the governing grants, HUD has
the rule provides for the leveraging of representation of the views of the distinguished capital advances from the
low-income housing tax credits as well community and is responsible for grants covered by that part, and has
as other sources of funding. The rule operating the development, and treated capital advances in the same
sets standards for the participation of approval as to financial responsibility manner as mortgages insured or held by
limited partner investors (who may be by HUD (see 12 U.S.C. 1701q(k)(4) and HUD. The added statutory language
for-profit entities) in partnership with a 42 U.S.C. 8013(k)(6), as amended). supports HUD’s treatment of capital
sole-purpose nonprofit general partner; Sections 832 and 842 of the AHEO Act advances.
describes eligible fees and expenses; Sections 834 and 844 of the AHEO
(12 U.S.C. 1701q(h)(6) and 42 U.S.C.
lays out the use of capital advances in Act, 114 Stat. 3021–22 and 3023
8011(h)(5), respectively) broadened the
the mixed-finance context; and covers amended, respectively, 12 U.S.C.
funding sources that may be used for
other matters relevant to mixed-finance 1701q(j) and 42 U.S.C. 8013(j), by
amenities for, and the design and
development of these projects. This adding a new paragraph to each statute
construction suitable for supportive
relating to the use of project reserve
final rule follows an interim rule housing for the elderly or persons with
accounts under the existing supportive
published on December 1, 2003, and disabilities. Excess amenities may not
housing for the elderly and persons with
takes into consideration public be funded with the capital advance disabilities programs. Under these new
comments on the interim rule. under either program, and, if other sections, project reserves may be used to
DATES: Effective Date: October 13, 2005. funds are used, the cost of such reduce the number of units by
FOR FURTHER INFORMATION CONTACT: amenities is not taken into account in combining and retrofitting units that are
Willie Spearmon, Director, Office of determining the amount of Federal obsolete or unmarketable, subject to
Housing Assistance and Grant assistance or the rent contribution of HUD approval.
Administration, Department of Housing tenants. Sections 835 and 845 of the AHEO
and Urban Development, 451 Seventh These sections also added language Act amended section 202(h)(1) of the
Street, SW., Washington, DC 20410– stating that ‘‘[N]otwithstanding any Housing Act of 1959 (12 U.S.C.
8000; telephone (202) 708–3000 (this is other provision of law, assistance 1701q(h)(1)), and section 811(h)(1) of
not a toll-free number). Hearing- or amounts provided under this section the National Affordable Housing Act (42
speech-impaired individuals may access may be treated as amounts not derived U.S.C. 8031(h)(1)), respectively, by
this number through TTY by calling the from a Federal grant.’’ (12 U.S.C. clarifying that commercial facilities for
toll-free Federal Information Relay 1701q(h)(6) and 42 U.S.C. 8013(h)(5)). the benefit of residents of the project
Service at (800) 877–8339. ‘‘Assistance amounts provided under and the community in which the project
SUPPLEMENTARY INFORMATION: this section’’ include capital advances. is located, may be located and operated
HUD does not consider capital advance in a supportive housing project for the
I. Background funds to be grant funds. Significantly, elderly or persons with disabilities.
The American Homeownership and 24 CFR part 84 of HUD’s regulations Such commercial facilities cannot be
Economic Opportunity Act of 2000, codifies HUD’s uniform rules for grants subsidized with Section 202 or Section
Public Law 106–569 (AHEO Act), to institutions of higher education, 811 funds.

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Federal Register / Vol. 70, No. 176 / Tuesday, September 13, 2005 / Rules and Regulations 54201

Section 833 of the AHEO Act replacement costs allowed by the tax clarifying that this is a minimum, not a
amended sections 202(b) and 202(h)(2) credit allocating agency in the state ceiling, by adding the words ‘‘at least’’
of the Housing Act of 1959 (12 U.S.C. where the development is sited, up to a in this final rule.
1701q(b) and 1701q(h)(2)), by removing ceiling of 15 percent. The final rule Discussion of the public comments
the limitation in the Section 202 removes the list of approved uses of the received on the December 1, 2003,
program that existing housing be fee. The fee may be paid upfront or on interim rule follows.
acquired only from the Resolution Trust a deferred basis, and may not be paid
Corporation (RTC). Section 202 owners from capital advances or project rental III. Discussion of Public Comments
may now acquire property from other assistance under the Section 202 or The comment period for the interim
sources without the need for Section 811 program or tenant rents. rule closed on January 30, 2004.
rehabilitation for use in supportive A major change from the interim rule Seventeen commenters submitted
housing. In the case of Section 811, the is that detailed firm commitment comments during the comment period
statute does not limit acquisition to RTC application, mixed-finance proposal, on a wide variety of issues related to the
properties (see 42 U.S.C. 8013(b)(2)). and evidentiary material submission interim rule. The commenters included
requirements are being removed from a variety of entities, including public
II. Changes Made at the Final Rule the rule in response to comments that
Stage housing authorities, housing finance
these sections were overly detailed and agencies, and professional associations.
In response to public comments, HUD restrictive. Instead, HUD will provide A summary of the issues raised by the
has made some substantive changes to separate program guidance on these commenters follows, organized by
the December 1, 2003, interim rule (68 requirements. Specifically, § 891.818 is regulatory section.
FR 67316) in this final rule. simplified to a single sentence stating
A number of commenters opined that that the sponsor will submit the firm Section-by-Section Summary of Public
the interim rule was overly specific in commitment application in a form Comments
its provisions in § 891.808 regarding the required by HUD. Interim § 891.820 on Definition of Replacement Reserve
loan of the capital advance from the the mixed-finance proposal is deleted Account (24 CFR 891.105)
nonprofit organization to the from the rule in its entirety (elements of
partnership that functions as the mixed- the mixed-finance proposal will be Comment: There is a conflict between
finance owner, and that these included along with the firm the definition of replacement reserve
requirements could interfere with the commitment application process in account, which states that the funds in
ability of mixed-finance developments forthcoming program guidance). Interim the account may be used for repairs,
to qualify for favorable treatment for § 891.823 on HUD review and approval replacements, or capital improvements
Low Income Housing Tax Credit of the firm commitment application is to the project, and another section,
(LIHTC) purposes. In response, HUD has simplified to state that HUD will review interim rule § 891.855, which limits the
revised this section to merely provide and may approve or disapprove the firm use of replacement reserves to Section
that the sponsor may transfer the fund commitment application and the mixed- 202 or 811 units. The commenter would
reservation directly to the mixed- finance proposal. The provisions of prefer to be able to use the replacement
finance owner. The parties are free, § 891.825 on submission of evidentiary reserve for the general needs of the
subject to compliance with legal materials are replaced by the more project, not just the Section 202 or 811
requirements and HUD review, to specific term ‘‘mixed-finance closing units.
structure this transaction in the way documents,’’ and the details in the HUD Response: Section 891.105 of the
most appropriate for the development. interim rule will be moved to regulations requires that a replacement
In accordance with this less specific, forthcoming program guidance. The reserve account be established for the
more flexible approach, this final rule final rule will specify that the mixed- Section 202 or 811 units. Repairs to the
also removes § 891.828 of the interim finance closing documents must be Section 202 and 811 units are to be
rule, entitled ‘‘loan of capital advance submitted before the capital advance. funded from this reserve account.
funds to mixed-finance owner.’’ In In response to comments that the Repairs to non-Section 202 or 811 units
addition, in accordance with the goal of conflict and identity-of-interest would be funded with other monies
offering participants increased provisions in the interim rule could according to the financing and
flexibility, the definition of ‘‘mixed- cause problems for mixed-finance management structure for those units.
finance owner’’ in § 891.805 is revised development, this final rule modifies Repairs to common elements would be
to state that the sponsor may also, as those provisions. Where there is no prorated based on the percentage of
long as it meets the statutory and FHA-insured or risk-sharing project, the Section 202 or 811 units. For example,
regulatory criteria, be the general conflict and identity-of-interest if a building needed roof repairs
partner of the owner, and § 891.808 is provisions in 24 CFR 891.130 will (assuming the roof is a common
revised to take this possibility into apply. However, where an FHA-insured element), and half the units were
account. or risk-sharing project is provided, the Section 202 or 811 units, half the repair
A number of commenters stated that conflict and identity-of-interest policies money could be taken from the Section
the cap on the amount of the that are used in the FHA program 202 or 811 replacement reserve. The
developer’s fee in the interim rule (a involved will instead apply, with the owner could then set up a separate
maximum of nine percent of the total exception that the nonprofit general repair or reserve for replacement
project replacement cost, with no more partner must continue to adhere to the account for the non-HUD units; the rule
than eight percent of the capital advance provisions of § 891.130. The conflict-of- only requires a replacement reserve
payable toward the fee) was too strict, interest provision is at § 891.832 of the account for the HUD-funded units.
and that the interim rule was overly final rule, along with a new cross-
specific as to the costs that could be Definitions of Mixed-Finance Owner
reference that has been added in a new
paid from the developer’s fee. In and Nonprofit Organization (24 CFR
§ 891.130(c).
response, HUD is revising § 891.815 in The interim rule provided for a three- 891.805)
this final rule to allow for developer’s month operating reserve at § 891.860. In Comment: A commenter asked
fees up to the percentage of total project response to comments, HUD is whether the statutory inclusion of for-

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profit limited partnerships with a of the community in which the housing Mixed-Finance Loan Terms (24 CFR
nonprofit general partner (see 12 U.S.C. is located. The commenter stated that it 891.808)
1701q(k)(4) and 42 U.S.C. 8013(k)(6)) is not practical to meet this test at the Comment: The rule is overly specific
allows for limited liability companies level of the parent organization or in its direction with respect to loan
(LLCs) in which the sole managing sponsor. HUD should clarify that the terms for the capital advance, and
member is an eligible nonprofit community representation requirements should be more flexible. A commenter
corporation. This commenter states that can be satisfied by the general partner stated that the parties to the mixed-
in the HOPE VI program, LLCs and of the project owner. finance transaction should define the
partnerships are treated equally. This HUD Response: As the preamble of loan terms for the capital advance rather
commenter states that the statutory the rule states, and the definition of than the rule, and recommended that
provision would appear to allow for an eligible nonprofit and nonprofit the rule be redrafted to permit each
interpretation that an LLC is an eligible organizations reference, the statutorily transaction to be structured to meet tax
for-profit organization in its use of the required requirement of representation credit requirements as well as the
phrase ‘‘or a corporation wholly owned of the views of the community in the requirements of that transaction, with
and controlled by’’ an eligible nonprofit Section 202 program (12 U.S.C. HUD retaining the right to review,
organization as part of the definition of 1701q(k)(4)(B)) can be fulfilled by the approve, or disapprove the financial
‘‘private nonprofit organization.’’ general partner. No further clarification structure. Another commenter stated
Another commenter stated that an LLC is required. (See § 891.805 of this final that the requirement that the general
should be included as a possible mixed- rule, and §§ 891.205 and 891.305 of the partner be the party that loans the funds
finance owner, and that more than one 202/811 program rules.) The governing
nonprofit general partner should be to the mixed-finance owner could
body of the general partner must be adversely impact the allocation of
allowed within the definition of private
selected in such a manner as to assure LIHTCs to the investors. The rule
nonprofit organization. Another
that there is significant representation of should provide that the funds can be
commenter stated that the rule should
the community in which the housing is provided to the mixed-finance owner in
allow LLCs as ownership entities, as the
located, as required by §§ 891.205 and accordance with the terms of the HUD-
statute already permits LLCs, and that
891.305. approved mixed-finance proposal.
depending on state law and the
preference of investors, LLCs are This commenter also stated that in its Another commenter stated that the rule
becoming more popular as the experience, the IRS has on policy should permit the funds to go directly
ownership entity in LIHTC projects. grounds refused to confer tax-exempt to the sponsor, which would then lend
Another commenter stated that LLCs are status under section 501(c)(3) of the them to the mixed-finance owner.
often preferable for reasons of state law. Internal Revenue Code for any entity HUD Response: HUD has revised this
Some commenters stated that the serving as the general partner in a tax section to provide that the sponsor may
definition of ‘‘mixed-finance owner’’ credit limited partnership. As a result, transfer the fund reservation directly to
should be expanded to include a for- it will not be possible for the general the mixed-finance owner. The parties
profit limited partnership in which a partner entity to obtain its own section are free, subject to compliance with
for-profit affiliate of a private nonprofit 501(c)(3) tax exemption. legal requirements and HUD review, to
organization is the sole general partner. structure this transaction in the way
HUD Response: The nature of the
These commenters stated that this is the most appropriate for the development.
partnership structure is determined by
preferred structure to comply with some Comment: A number of commenters
the governing statute. HUD suggests that
states’ corporation laws and may be stated that the loan to the mixed-finance
partnerships work with the IRS to
necessary to comply with local law and owner should be at the applicable
determine how to structure their
meet Internal Revenue Service (IRS) federal rate (AFR), consistent with IRS
partnerships, within the statute and
rules for LIHTC projects. tax credit law, rather than the Section
regulations, to obtain the maximum tax
HUD Response: The regulatory 202/811 rate.
benefits available.
definition of ‘‘mixed-finance owner’’ HUD Response: HUD has removed the
follows the statutory requirements of the Recipient of Fund Reservation specific interest rate provisions from
AHEO Act of 2001, including that there (Preamble at 68 FR 67317 and 24 CFR this final rule. The parties are free,
be a sole general partner meeting 891.808(a)) subject to compliance with legal
specified requirements, specifically, requirements and HUD review, to
requirements related to being a Comment: The requirement that the structure this transaction in a way most
nonprofit organization, and that the nonprofit general partner be created by appropriate for the development.
mixed-finance owner be a limited a sponsor that has received a Section Comment: The interim rule’s
partnership. HUD believes that the 202 or 811 fund reservation is not based characterization of the loan from the
statutory definition precludes the use of on the statute. As long as the nonprofit general partner to the mixed-finance
LLCs as the ownership entity or the general partner meets the statutory owner as non-repayable will jeopardize
general partner or the use of more than criteria for a private nonprofit the treatment of the loan in an LIHTC
one general partner (see 12 U.S.C. organization, or nonprofit organization, transaction because it may not be
1701q(k)(3) and (4) and 42 U.S.C. as applicable, that should be sufficient considered a true debt. HUD should
8013(k)(5) and (6)) . assurance that the mixed-finance owner clarify whether the loan must be
Comment: A commenter stated that is eligible. forgiven after 40 years of operation in
the definition of ‘‘nonprofit HUD Response: In accordance with compliance with HUD’s rules, and
organization’’ stated in the rule creates this comment, HUD is revising this final whether it must be non-amortizing. A
difficulties for regional and national rule to include the possibility that a possible solution might be interest-only
nonprofit Section 202 and Section 811 sponsor that meets the statutory and payments for 40 years with a balloon
developers. The definitions require that regulatory requirements may either form payment of principal at the end. For
the nonprofit have a governing board an entity to act as the general partner of similar reasons, two commenters stated
selected in a manner to ensure that there the single-purpose mixed finance that any ‘‘pass through’’ of HUD funds
is significant representation of the views owner, or itself be the general partner. runs the risk of negative consequences

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in an LIHTC transaction. A commenter regarding project rental assistance is 811 units so that it can be used to pay
stated that the repayment requirement ‘‘critical to prevent reductions in LIHTC the deferred portion of the developer’s
in § 891.808(a) appears to be in conflict eligible basis with respect to such fee. Some commenters stated that any
with preamble language stating that assistance.’’ portion of the developer’s fee not
repayment is not required so long as the HUD Response: HUD believes that required to cover the eligible uses of the
project remains available in accordance project rental assistance should not be fee should be made available to the
with the use restrictions (68 FR 67318). treated as a Federal grant. Whether or nonprofit developer once the project has
HUD Response: The interim rule not project rental assistance is to be been completed, reasoning that the
stated that the loan from the general treated as a Federal grant for LIHTC developer should not be penalized for
partner to the mixed-finance owner is a purposes is a determination that the IRS any cost savings it achieves and that
non-amortizing loan to be repaid within must make. HUD is in the process of reserve accounts can still be adequately
40 years. The non-repayment provision discussing this matter with the IRS. funded. Another commenter stated that,
is a statutory provision that applies to in order to maximize eligible basis and
Developer’s Fee (24 CFR 891.815)
the capital advance from HUD and resulting LIHTC equity, there should be
repayment to HUD, and applies only so Comment: Some commenters objected a developer’s fee higher than the interim
long as the use restrictions remain in to the limitation on the developer’s fee rule allows, but within the higher limit
effect for the entire period required. of nine percent of the total project of the LIHTC program.
Comment: A commenter stated that replacement cost. A number of HUD Response: After consideration of
the sentence reading ‘‘however, the commenters suggested that the rule these comments, HUD is amending the
number of section 202 or 811 units in adopt HUD’s public housing mixed- final rule to lift the cap on developer’s
the development funded with the finance cost control and safe harbor fees in Section 202 and 811 mixed-
capital advance must be not less than standards, which the commenter states finance projects to the amount allowed
the number of units that could have provide for a safe harbor developer’s fee by the state tax credit allocating agency
been developed with the capital of nine percent of the project costs of the state in which the project is sited,
advance without the use of mixed subject to a maximum developer’s fee up to a ceiling of 15 percent of the total
funding sources.’’ The commenter stated up to 12 percent of the project costs. A project replacement cost, payable from
that it is unlikely that capital advance commenter also stated: ‘‘We think that project sources other than capital
funds will be ‘‘diluted’’ when combined HUD should establish a maximum advances, project rental assistance, or
with other financing. developer fee that can be paid from the tenant rents.
HUD Response: This language ensures Section 202/811 capital advance to be Comment: A commenter stated that
that the capital advance is used for the used for developer overhead and profit, the rule should explicitly allow the
number of units upon which the award but also provide for some flexibility and project sponsor to receive the
was based. While, in most cases, HUD deference to state housing finance developer’s fee.
funds are used appropriately, HUD agencies in LIHTC transactions with HUD Response: The developer’s fee
believes that this regulatory control is respect to the amount of the developer would usually be paid to the project
necessary to ensure the appropriate use fee and the uses to which such fees can owner, and HUD plans to follow this
of limited federal funds in all cases. be put when paid from other sources practice in the mixed-finance program.
such as LIHTC equity.’’
Project Rental Assistance (891.810) Four commenters objected to limiting Eligible Uses of Developer’s Fee (24 CFR
Comment: Four commenters stated profit and overhead to six percent of 891.815(c))
that project rental assistance should be construction cost. Two commenters Comment: A commenter stated that
characterized as rental assistance stated that HUD could limit the amount the limitation on eligible uses of the
payments rather than as a federal grant. of the fee paid from HUD funds, but developer’s fee may not work well in
One commenter stated that few or no should not limit the portion of the fee situations where there are LIHTCs and
financings will be feasible unless and paid from other sources. Three other sources of funding. Another
until the IRS makes a specific ruling commenters stated that because a commenter stated that the eligible uses
that project rental assistance payments mixed-finance developer will have to of the developer’s fee differ from the
related to the Section 202 program are invest more equity and other guarantees definition of developer’s fee in the
not federal grants with respect to a to make projects feasible, ‘‘this arbitrary LIHTC program, and stated that the rule
building or its operation, and asked that limitation on the amount of developer ‘‘should acknowledge the validity of a
the IRS expedite such a ruling. One fees that are ordinarily available from fee for development efforts and also
commenter stated that HUD should other financing programs * * * should allow flexibility in use of other funding
work with the IRS to clarify that project be removed from the rule.’’ sources for these items.’’ Another
rental assistance will not be treated as Three commenters agreed, suggesting commenter stated that ‘‘we are unclear
federal grants to mixed-finance Section that the developer’s fee be in any as to why the description of eligible
202 projects for tax credit purposes. amount allowed by the state tax credit uses are considered to be part of the
This commenter stated that in the allocating agency (which can be up to developer’s fee.’’ This commenter stated
absence of such a clarification, rental approximately 15 percent of the project that most of these uses would be funded
assistance payments may cause a dollar- cost), provided that no more than eight with the capital advance as part of the
for-dollar reduction in the projects percent of the capital advance funds be development budget. This is
eligible basis for LIHTC purposes, with used toward the fee. A commenter problematic for two reasons. First, the
a resulting reduction in the amount of stated that the fee should be able to ability of the sponsor to recoup its
available tax credits. Also, without this exceed 12 percent with the approval of overhead and costs is essential to its
clarification, project rental assistance the state housing finance agency, financial viability. Second, a
payments may cause the rent due on the provided that the increased fee is developer’s fee is generally includable
unit to exceed the IRS limitation on justified by increased developer’s risk. in the eligible basis of the project for
gross rent so that the unit will fail to These commenters also stated that there LIHTC purposes, generating additional
qualify as a rent-restricted unit. This should be no limitations on the use of tax credit equity. To the extent that the
commenter also stated that such a ruling cash flow from the non-Section 202 or fee be used for expenses already

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included in the budget, and further relevant design standards stated in 24 contractor’s cost breakdown and
requiring that any portion of the fee not CFR 891.120, 891.210, and 891.310. analysis (§ 891.818(a)(18)), and the fact
so spent be placed in the replacement that it is impossible to secure a
Specific Comments on the Firm
reserve account, the interim rule contractor’s bid for an unlimited period
Commitment Application (§ 891.818)
decreases the eligible tax basis. Two of time, there should be a time limit on
commenters stated that the local tax Comment: A commenter stated that HUD’s review of the firm commitment
credit agency’s rules should apply to the § 891.818(a)(2), requiring submission of application, from submission to initial
uses of the fee. One commenter stated the organizational documents of the closing, such as 60 days.
that the prescribed uses of the nonprofit organization and the mixed- HUD Response: Pursuant to
developer’s fee are ‘‘not realistic for finance owner, should be part of the comments, HUD is removing from the
mixed finance transactions.’’ Another evidentiary submission, since the final rule the various elements that
commenter stated that more flexibility is investor limited partner, which is commenters cited. HUD will be issuing
needed on the allowed uses of the usually highly involved in the program guidance that will deal with
developer’s fee. Another commenter organizational documents of the mixed- these issues, and will consider these
stated that the following items under finance owner, will probably not be comments in issuing this guidance.
§ 891.815(c)(1) of the interim rule are selected until after there is a firm Regarding the issue of a time limit on
common development costs that should commitment. Two other commenters HUD’s review of the firm commitment
be paid out of the capital advance rather similarly stated that the details of the application, HUD will endeavor to
than the developer’s fee: partnership might not be finished before process these applications in a timely
§ 891.815(c)(1)(B), (F), (H), (I), (J), (K), there is a firm commitment. Another manner but, because of the likely
(L), (M), and (N). commenter stated that the rule should complexity and uniqueness of mixed-
make clear that it is the initial finance projects, HUD declines to adopt
A commenter questioned the
partnership agreement that is required, a time limit on its review.
prohibition on using the developer’s fee
not the agreement that is subject to
to pay attorney’s and architect’s fees Mixed-Finance Proposal (§ 891.820)
negotiation with the investor.
‘‘above those contractually agreed to,’’ Comment: A commenter stated
Alternatively, these documents could be
and stated that limits on these fees from generally that the requirement of a full
submitted with the mixed-finance
the Section 202 program are quite mixed-finance proposal is not
closing documents.
restrictive and should be reviewed and One commenter stated, as to necessary, and the firm commitment
potentially increased to reflect the § 891.818(a)(4), requiring a balance application should serve in lieu of a
greater complexity involved in a mixed- sheet showing that the mixed finance mixed-finance proposal. More thorough
finance transaction, which may involve owner is adequately capitalized, that review of documents should be handled
re-capitalization and reconfiguration of HUD should provide some guidance on at the evidentiary stage.
residential and commercial spaces. how it will determine that the owner is A commenter stated that experience
HUD Response: In accordance with adequately capitalized. Another in the public housing mixed-finance
the comments and to increase program commenter stated that HUD should program shows that submission of all
flexibility, HUD is removing the specific accept a demand note as a means of financing documents at the proposal
list of eligible uses from this final rule. establishing adequate capitalization. A stage (§ 891.820(b)) is not really
General Comments on the Firm commenter stated that, since most tax practical. HUD should be provided with
Commitment Application (24 CFR credit investors will not disburse tax enough information about the financing
891.818) credit equity until HUD has approved a to determine that the proposal is
drawdown of capital advance funds, the practical; however, the actual
Comment: Commenters stated that the paragraph should be modified, perhaps documentation of the financing should
regulation is not the best place for a long to require a pro forma balance sheet as be part of the evidentiary package
list of submission requirements and of the day of closing. One commenter submission and not part of the proposal.
suggested that these requirements be stated that the capitalization Another commenter stated that such
placed in a handbook or other program requirement of § 891.818(a)(4) should be financing documents are duplicative of
guidance. Two commenters stated deleted because prior to outside evidentiary requirements and also may
generally that HUD should develop investment, it is unlikely that the not be available at the time of
streamlined submission requirements mixed-finance owner will be capitalized submission of the proposal.
for mixed-finance transactions. to any significant extent. A commenter stated that the
HUD Response: In accordance with A commenter stated that certifications and assurances of legal
the comment, HUD is removing the § 891.818(a)(8) should state the form authority to enter into the mixed-
detailed submission requirements and that the evidence of compliance with finance arrangement required by
will provide separate program guidance fair housing and accessibility standards § 891.820(n) are not necessary with
on the particulars of these requirements. should take. respect to the mixed-finance owner. The
Although the language of § 891.818(a)(8) A commenter stated that the commenter stated that ‘‘it is unlikely
is being removed from the rule, owners requirement for obtaining zoning that at the proposal stage, the mixed-
are still obligated to comply with the approvals at the time of the firm finance owner will be formed and there
design and construction requirements of commitment application is no need for a certification that the
the Fair Housing Act, and the (§ 891.818(a)(7)) may not be feasible in mixed-finance owner has authority
accessibility requirements of section 504 all cases. under state and local law to develop the
of the Rehabilitation Act of 1973. The A commenter stated that a life cycle housing.’’ Another commenter stated
architecture and engineering review cost analysis (§ 891.818(a)(15)) is no that these certifications and assurances
includes an analysis of the project longer required for HOPE VI projects, should be part of a streamlined process.
design to determine if it meets the and stated that HUD should reconsider A commenter stated that in
design and construction standards of the its utility for Section 202/811 projects. § 891.820(b), the next-to-last sentence,
Fair Housing Act and the accessibility A commenter stated that because of which requires official confirmation of
requirements of section 504, as well as the requirement to have a final the award of tax credits from the state

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allocating agency if tax credits are being may need to determine that the controls or directs the partnership in the
used, should be modified. The nonprofit organization has the legal manner intended by the regulation
commenter stated that, with respect to capacity to participate in the would be impossible to determine
a nine percent tax credit project, the transaction, there is no reason for this * * *. In addition, to the extent the
rule should clarify that a copy of the determination with respect to the developer is permitted a profit, and the
allocating agency’s executed credit mixed-finance owner. There are developer is the general partner, this
reservation contract will meet this numerous checks in the closing process, requirement would also not be
requirement. For a four percent tax including owner counsel opinions, that satisfied.’’ This commenter states that
credit project using tax-exempt bonds, a should provide sufficient assurance to there is no similar requirement in the
credit reservation contract is not used. HUD. HOPE VI program, and HUD’s review of
This commenter and one other stated This commenter also stated as to the proposal and mixed-finance closing
that for these projects, the rule should § 891.823(b)(6) and (7) that these items documents should give sufficient
clarify that a copy of the allocating (covenants and use restrictions, and assurance.
agency’s executed IRC Section 42(m) state, local, and federal approvals and A commenter stated as to
letter will meet this requirement. zoning changes or variances) should be § 891.825(a)(3), requiring a deed or
A commenter stated that, because four submitted as part of the evidentiary ground lease, that in some cases the
percent credits can be derived from an review process and not the proposal mixed-finance owner may have already
issuance of tax-exempt bonds, rather process. Another commenter stated that obtained a fee or leasehold interest in
than an award of tax credits, the rule be the covenants and use restrictions are the property. This commenter stated
revised to add language reflecting that more appropriately part of the mixed- that ‘‘it may be more helpful to delete
possibility, adding at the end of the finance closing documents. any reference to a conveyance
current sentence the following: HUD Response: Rather than document.’’
‘‘* * * or evidence of the issuance or attempting to provide every detail about Five commenters stated as to
intention to issue bonds on behalf of the HUD review and approval, the final rule § 891.825(a)(12), requiring a legal
project by the agency which will issue such states that HUD has the authority to opinion that counsel has examined the
bonds accompanied by a schedule review and approve or disapprove firm financing and that such financing has
illustrating the amount of credits that the commitment applications. been irrevocably committed for use in
project is expected to yield as a result of such carrying out the project, that the rule
bonds.’’ Mixed-Finance Closing Documents
should not require such a legal opinion.
(§ 891.825) (‘‘Evidentiary Materials’’ in
A commenter stated that the rule Three of these commenters stated that
the Interim Rule)
should clarify what constitutes a ‘‘firm attorneys would not be able to opine
and irrevocable financing commitment,’’ Comment: One commenter that funds are ‘‘irrevocably committed’’
as most financing commitments have recommended streamlined evidentiary to the project. Another commenter
some contingencies, such as final material requirements. Three similarly stated that the legal opinion
review of due diligence, appraisal, and commenters objected to the conflict-of- should only address customary legal
environmental studies, and final interest provisions in § 891.825(a)(1)(ii), issues such as the legal existence of
approval by the lender’s loan particularly the provision that the entities, execution of documents, and
committee. Another commenter stated mixed-finance owner not be under the the enforceability of agreements, rather
that HUD should accept funding control of the persons or firms seeking than financing and irrevocability of
commitments that are conditioned upon to derive profit or gain from the mixed- commitments. Another commenter
the actual certification of basis eligible finance owner. One of the commenters agreed and further stated that ‘‘* * *
costs per accepted four percent tax stated that this provision is at odds with many law firms do not permit their
credit procedure. Another commenter the basic purpose of the mixed-finance attorneys to give opinions regarding the
similarly stated that conditions on rule, to bring for-profit entities into the priority of recorded documents. HUD
financing commitments, including Section 202/811 program to expand the should rely on the title policy to
review of final plan specifications, affordable housing choices of the elderly confirm the priority of the * * *
review of environmental testing, and and persons with disabilities. This Restrictive Covenants.’’
other typical due diligence items, broad prohibition on profit or gain by Two commenters stated that the no-
typically are not satisfied at the stage participants and investors is not a assignment clause in § 891.825(a)(13)
when a firm commitment package is realistic position. This provision relates could cause problems with the project,
submitted to HUD. back to when the Section 202/811 such as in the areas of enforceability of
HUD Response: The rule is being program was limited to nonprofit contract provisions and assurance of
streamlined so that these elements are entities. HUD will have sufficient continued funding in the event of a
being removed in favor of forthcoming opportunity to review financing default by the mixed-finance owner.
program guidance that will combine proposals and evidentiary documents to A commenter objected to
elements of the firm commitment assure itself that the financing structure § 891.825(a)(15)(ii), which requires the
application and the mixed-finance is reasonable. As to the same provision, owner to comply with all deed
proposal. HUD will consider the another of these commenters stated that restrictions, including an agreement not
comments received in response to the the rule should clarify that the limited to dispose of the development without
interim rule in formulating its program partner will not be deemed to be HUD’s prior written approval during the
guidance. controlling or directing the mixed- entire period that the assisted housing
finance owner so long as the general use restrictions remain in effect. The
HUD Review and Approval (§ 891.823) partner has day-to-day decision-making commenter states that this will preclude
Comment: One commenter stated as authority and the limited partner’s a lender from foreclosing on the project
to § 891.823(b)(1) that there is no reason control is limited to approval rights over and thus effectively eliminate the ability
for HUD to make a determination that major decisions. Another of these to obtain private financing. The
the mixed-finance owner has the legal commenters stated that ‘‘the investor commenter suggests that the rule be
capacity to enter into all necessary intends to derive profit from the clarified so that this restriction does not
contracts and agreements. While HUD transaction, and whether the investor apply to lenders whose loans are

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secured by the property and the ability advance agreement and loan the capital One commenter states that HUD should
to transfer the property upon advance funds to the mixed-finance provide more flexibility in drawing
foreclosure, as long as the property owner. This commenter also stated that down funds. For example, in some
remains subject to the use restrictions. the Project Rental Assistance Contract cases, it may be advantageous to draw
The regulations should also permit (PRAC) should be executed by the down ‘‘soft’’ money first to minimize
transfer of the property to a single-asset mixed-finance owner, rather than the costs. Also, if faster drawdown of the
nonprofit entity upon expiration of the nonprofit organization, because the capital advance allows deferral of some
initial 15-year tax credit compliance nonprofit organization is not technically portion of the equity pay-in until 50
period. the owner of the project. percent completion, the transaction may
Another commenter stated that the HUD Response: HUD has determined benefit from increased equity. HUD has
lender’s deed of trust securing bond that the fund reservation may be shown some flexibility in early pay-in of
financing (for a four percent LIHTC transferred directly from the sponsor to HOPE VI funds and should do the same
project) must be in a superior position the mixed-finance owner, and that the here. Another commenter stated that
to all other monetary liens on the detailed loan or pass-through language HUD should permit delaying, into the
property’s title. A commenter stated that should no longer be part of this rule. calendar year following substantial
the length of the use restrictions could Regarding whether the loan is a ‘‘true completion, the drawdown of the HUD
cause serious underwriting issues for debt obligation,’’ the rule leaves the funds required to take out that portion
potential tax credit investors because it parties free to structure the transaction of tax-exempt bonds used only for
restricts the tenants to whom the units in a manner that is beneficial to the construction financing as required to
can be rented even if the necessary project subject to HUD review and meet the (IRS) 50 percent test (for four
subsidies are not secured. This severely approval of the firm commitment percent tax credit projects).
limits the investors’ ability to application. HUD agrees that the mixed- HUD Response: The rule requires
underwrite alternate scenarios. This finance owner will execute the capital capital advance funds to be used for
commenter asked that HUD consider advance agreement and the PRAC. eligible costs actually incurred. Eligible
language that at least allows an owner However, the particulars of these costs are generally those referenced in
out of this requirement if the rental elements will be outlined in separate the statutory sections on development
assistance is not renewed. program guidance rather than this rule cost limitations (12 U.S.C. 1701q(h) and
HUD Response: HUD plans to address in accordance with other comments, 42 U.S.C. 8013(h)). Capital advance
the details of the mixed-finance closing and so § 891.828 is being removed in funds may not be used to pay for a
documents (referred to as ‘‘evidentiary this final rule. portion of bond funding, bridge
materials’’ in the interim rule) in Comment: A commenter commented financing, or as debt service for
separate program guidance. HUD will on the requirement in this section that financing. While HUD generally expects
consider these comments in formulating the mixed-finance owner provide a note the capital advance funds to be drawn
that guidance. evidencing a non-amortizing loan of the down in a one-to-one ratio for eligible
Regarding the comments on the use capital advance funds for a period of not costs actually incurred, HUD may
restrictions, use restrictions are required less than 40 years. The commenter permit, on a case-by-case basis, some
by statute (12 U.S.C. 1701q(d)) and stated that the loan should not be from variance from the drawdown
cannot be eliminated. Regarding the the nonprofit organization serving as requirement as needed for the success of
comment on control by the limited general partner to the mixed-finance the project. Further clarification of the
partners, HUD is adding modified owner, or from any party that is related uses of the capital advance funds will be
conflict and identity-of-interest to the nonprofit organization under IRS provided in forthcoming program
provisions in § 891.832 of the final rule. rules. This commenter also suggested guidance.
Where a mixed-finance project has an that there be a definition for the term Comment: A commenter stated that in
FHA-insured or risk-sharing mortgage, ‘‘note.’’ certain bond-financed four percent
rather than following the conflict and HUD Response: The final rule is LIHTC projects, bond proceeds are
identity-of-interest provisions of amended to be more flexible regarding expended prior to other financing so
§ 891.130, the conflict and identity-of- the transfer of the capital advance funds that bond proceeds can be spent on the
interest provisions of the insured or to the mixed-finance owner and no capitalized costs for the purpose of
risk-sharing housing program shall longer contains the language to which meeting certain legal requirements.
apply, except that the provisions of the commenter is referring. As to the There exists nothing in the interim rule
§ 891.130 shall continue to apply to the relationship between the general partner that would preclude the use of the
nonprofit general partner. A new and the owner, HUD recommends that capital advance funds from being held
§ 891.130(c) has been added to contain program participants work within the and drawn down following the project’s
a clarifying cross-reference to § 891.832. regulations to obtain the maximum tax completion to pay off a portion of the
benefits available, including favorable bonds. This commenter suggested
Loan of Capital Advance Funds to clarification that capital advance funds
treatment for LIHTC purposes. HUD
Mixed-Finance Owner (§ 891.828) may be used to pay bridge or
suggests that program participants
Comment: One commenter stated that consult with their attorneys and the IRS construction financing. Another
the language from § 891.808 regarding regarding how best to maximize these commenter stated that the rule should
the loan or pass-through of capital benefits. allow capital advance funds to be used
advance funds from the general partner The term ‘‘note’’ is no longer being to collateralize tax-exempt bonds.
to the mixed-finance owner should be used in this context in this final rule, so HUD Response: Capital advance funds
repeated in this section. In addition, the a definition is not necessary. may be used only for eligible expenses
loan on a mixed-finance project using actually incurred. Eligible expenses are
nine percent LIHTC should be ‘‘allowed Drawdown (§ 891.830) expenses of the types stated in 12 U.S.C.
as a true debt obligation.’’ Comment: This section requires that 1701q(h) and 42 U.S.C. 8013(h), and do
One commenter stated that rather the capital advance be drawn down in not include paying off bridge or
than the nonprofit organization, the an approved ratio to other funds, in construction financing, or repaying or
sponsor should execute the capital accordance with a drawdown schedule. collateralizing bonds.

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Comment: Capital advances should be a pro rata basis based on the percentage this rule requires an operating reserve,
usable to pay construction debt used to of Section 202 or 811 units in the the commenter stated that it wants
finance costs actually incurred, and that building whose common elements are clarification that project income usable
the rule should add a clause to that being repaired. for this purpose includes income from
effect at the end of § 891.830(c)(4). Comment: HUD should provide the Section 202 or 811 units. This
HUD Response: Capital advance funds additional guidance to field offices so commenter stated that such operating
must be used for eligible costs actually that the authority to retrofit obsolete reserves should be available for the
incurred, and may not be used to pay units can be implemented. entire development, and § 891.835(b)(3),
debt financing for costs actually HUD Response: HUD does not believe disallowing the use of project rental
incurred. The types of expenses that are additional formal guidance for field assistance for the creation of reserves for
eligible are the costs enumerated in 12 offices on using replacement reserves non-Section 202 or 811 units, should be
U.S.C. 1701q(h) and 42 U.S.C. 8013(h). for retrofitting is needed at this time. removed.
Comment: Construction lenders HUD will address issues that arise in HUD Response: The rule permits the
should have the right to exercise this regard on a case-by-case basis. If it operating reserve to be funded with
remedies to complete the project and to should appear in the future that such project income and tax credit equity, but
force the sponsor to use capital guidance may be advisable, HUD may imposes no limitation on other funds
advances to repay loan advances made consider it at that time. that may be used for the reserve. As to
by the lender. The rule should also Comment: Interim § 891.405(d) the issue of the usage of operating
address the lien priority which may be should recognize that in some cases reserve, the Section 202 or 811 reserve
required by housing finance agencies or retrofitting an obsolete unit may not be account may be used only for the 202
private lenders that advance funds in possible, and that conversion of an or 811 units. Project rental assistance is
excess of the capital advance. HOPE VI unmarketable unit to some other form of limited to payment for the costs of the
may provide some examples. amenity would also be permitted. Section 202 or 811 units.
HUD Response: It would not be HUD Response: The idea behind this
legally permissible to permit the requirement is to use retrofitting to Maintenance as Supportive Housing
construction lender to advance funds increase the supply of marketable units, Units for Elderly Persons or Persons
that would be repayable from the capital such as by combining two unmarketable With Disabilities (§ 891.863)
advance or PRAC funds. Capital efficiencies into one, one-bedroom unit. Comment: One commenter stated that
advance funds may be used for eligible Removing units entirely from the the requirement that the use restrictions
expenses actually incurred. housing stock for other uses is not for Section 202 and 811 projects be
Furthermore, the use of capital advance contemplated by this provision. superior to any foreclosure will reduce
or PRAC funds in the event of default the likelihood that conventional lenders
Operating Reserve (§ 891.860)
is subject to statutory and regulatory will provide financing. This commenter
limitations on the use of such funds and Comment: The proposed three-month states that, upon foreclosure, the use
compliance with the capital advance operating reserve should be a minimum restriction should allow for higher
agreement. and that if the parties agree to establish income levels, such as moderate
a larger reserve out of tax credit equity income. Another commenter stated that
Eligible Uses of Project Rental or other sources they are free to do so. the nonprofit organization or other
Assistance (§ 891.835) The mixed-finance owner should have qualified nonprofit approved by HUD
Comment: Interim § 891.835(b)(1) the discretion to increase the operating and others providing funding to the
would prohibit project rental assistance reserve beyond three months. project should have the right of first
from being used to pay debt service. HUD Response: If there are funds refusal and option to purchase the
One commenter stated that it would be available, the operating reserve may be property from the partnership, so long
beneficial if Section 202 rental larger than a three-month reserve. This as the use restrictions remain in effect
assistance could be used to support provision has been revised in this final as required by this section.
debt. rule to provide in § 891.860 that the HUD Response: The use limitations
HUD Response: The statute requires operating reserve must be sufficient for are statutory, and hence required (12
project rental assistance to be used to ‘‘at least’’ three months. U.S.C. 1701q(d)(1) and 42 U.S.C.
pay the costs of units occupied by Comment: Income from the HUD 8013(e)(1)). According to statute, if the
eligible families that are not met from units should be used to meet the use restrictions do not remain in place
project income (12 U.S.C. 1701q(c)(2)). operating reserve requirement. for the full statutory period of 40 years,
The limitations on project rental HUD Response: 24 CFR 891.860(b) the capital advance becomes repayable
assistance in the rule are consistent with states that project income can be used to HUD. The final rule is revised to take
the statutory requirements. to fund the operating reserve account. into account the possibility of
However, as § 891.860(c) states, income ownership changes or transfers during
Replacement Reserves (§§ 891.855, derived from Section 202 or 811 units
891.405(d)) the 40-year use period.
may be used only for operating expenses
Comment: One commenter stated that of those units. General and Miscellaneous Comments
uses of the replacement reserves cannot Comment: One commenter requested Comment: HUD should remain
be limited to the Section 202/811 units. clarification as to why the rule limits faithful to the congressional intent of
There are many costs that will need to funding the reserve to profits and tax the AHEO Act, which is to provide
be incurred on a pro rata basis, such as credit equity. Although these are the additional development options to
roof repairs. Another commenter stated most common sources of reserve increase the supply of affordable
that income from the HUD units should funding, sponsors might find other housing for elderly and disabled
be used to meet the replacement reserve sources of funding. Another commenter families.
requirement. questioned the requirement of an HUD Response: HUD believes that
HUD Response: In the case of repairs operating reserve, stating that one is not this final rule fulfills these objectives.
to common elements, the Section 202/ required in the regular Section 202/811 Comment: The rule should have
811 replacement reserve can be used on program; however, given the fact that sufficient flexibility to accommodate the

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real-world complexities of layered- federal funds still have to be treated in points are awarded for the number of
subsidy development deals. Because accordance with Federal requirements. additional units to be provided through
these transactions are likely to be Comment: One commenter states that mixed finance, failure to proceed with
extremely complicated, this commenter there have been historic problems with the mixed finance proposal will result
stated that HUD should appoint a combining other funding sources with in loss of the 202 or 811 funds
contact person at Headquarters who Section 202 projects because of the long reservation. Any deviation from the
would be responsible for providing field history of the Section 202 program being Section 202 or 811 NOFA requirements
staff and the general public ‘‘clear, a stand-alone program and the small in order to meet the LIHTC
consistent, and timely guidance’’ on staff at HUD field offices. This requirements would result in a violation
HUD’s mixed-finance development commenter states that the underwriting of the HUD Reform Act.
requirements. for this program should be delegated to Comment: One commenter states that
HUD Response: As explained the state agency that is underwriting the designation of the capital advance as a
elsewhere in this preamble, HUD has project for the tax credit program. This Federal grant is ‘‘likely,’’ which will
provided additional flexibility in this is similar to the HOME program. If this cause it to be excluded from the eligible
final rule. As to the issue of an agency is done, there should be agreement that basis for LIHTC purposes. This
contact, participants in the mixed- the LIHTC regulations should prevail in commenter states that the capital
finance program, as in the regular the case of conflict with the Section 202 advance should be specifically excluded
Section 202 or Section 811 program, regulations. from the definition of ‘‘Federal grant’’
should work with their local HUD office HUD Response: HUD intends to retain under Section 42. Another commenter
staff. Local HUD offices can forward the underwriting responsibilities for the states that the ability of a capital grant
inquiries to Headquarters if necessary. program at this time. HUD will be to be forgiven by compliance with the
competitively selecting proposals for use restrictions may result in it being
Comment: HUD should eliminate the
this program in accordance with the treated as a grant for tax credit purposes.
‘‘stand-alone bias’’ in the Section 202
Department of Housing and Urban HUD Response: Both Sections 202
program. The commenter stated that
Development Reform Act of 1989 and 811, as amended by the AHEO Act,
under the interim rule, HUD funds can
(Pub.L. 101–235, approved December contain a clause stating that amounts
be combined with other funds only if
15, 1989) (HUD Reform Act). Each year provided under these sections may be
the other funds are non-amortizing, and a notice of funding availability (NOFA) treated as amounts not derived from a
there is a condominium structure that is published in the Federal Register Federal grant.
provides a ‘‘firewall’’ for HUD funds. specifying in detail all of the Comment: The Section 202 program
The commentator said this creates requirements that must be met by currently requires the sponsor to receive
serious problems with developing applicants for funding, in order to be a property tax exemption from the local
mixed-use projects. Eliminating this selected for funding. These jurisdiction where the property is
bias would affect two kinds of projects: requirements include statutory and located. For mixed finance projects, the
ones where the capital advance has not regulatory and program requirements owners are for-profit entities in a legal
kept pace with the cost of development; that must be satisfied by all applicants, sense, and therefore, in most cases, will
and ones which are too small to be if selected for funding. Failure on HUD’s not qualify for an exemption. In
viable, or which propose to meet a part to require compliance with all of addition, contributions to local taxes
greater need than the HUD subsidy these requirements would be a violation may help combat negative perceptions
allows. This commenter suggests that of the HUD Reform Act. Since requiring of affordable housing. HUD should
the rule allow HUD financing to be such compliance is HUD’s eliminate this requirement.
blended with other financing, and that responsibility and within HUD’s HUD Response: If available, the
HUD permit its capital advance funding expertise, HUD will retain the sponsor should seek such an exemption;
to be subordinate to a bank or housing underwriting functions. however, HUD will not refuse to enter
finance agency mortgage on the In any case of conflict between LIHTC into a firm commitment if the
property. Similarly, three commenters regulations and Section 202 regulations, exemption cannot be obtained.
stated that the rule assumes ‘‘that the the Section 202 regulations would Comment: Two-bedroom units should
funding sources for mixed-finance prevail. Applicants desiring to develop be allowed in elderly projects to expand
projects will be neatly divided between Section 202 or 811 mixed finance the marketability and community
dwelling units funded by the Section projects must describe in their feeling of elderly projects.
202 Capital Advance and those dwelling applications in general terms that they HUD Response: Two-bedroom units
units funded through other plan to develop a mixed finance project. will be permitted in mixed finance
sources.* * *’’ However, according to It is the sole responsibility of the projects that propose additional units as
the commenters, it is likely that the applicants to develop mixed finance long as the number of two-bedroom
underwriting structure of certain projects that will be consistent both units comprise no more than 10 percent
projects will require the combining of with their obligations under the 202 or of the total units in the project and are
several sources. This should be 811 NOFAs and the LIHTC regulations limited to the additional units. Under 24
acceptable to HUD as long as the units and requirements. Prior to developing CFR 891.210, the Section 202 units for
in such a project are subject to the their mixed finance proposals, the residents are required to be no larger
regulatory agreement for the entire 40- applicants will have been competitively than one-bedroom units.
year period, and therefore regulations selected for 202 or 811 funding and will Comment: Section 202 units and tax
should make this explicit. have accepted a letter obligating these credit units should target different
HUD Response: HUD financing comes funds and specifying conditions that income groups. This commenter states
with statutory restrictions and hence must be satisfied. Under a prior year’s that the rule should limit Section 202
regulatory ones designed to ensure the NOFAs, applicants unable to develop a units to those with incomes under 30
appropriate use of the funds according mixed finance project were able to percent of the area median income, and
to statute and conflict of interest. The proceed with the 202 or 811 project, tax credit units to those earning 30 to 60
mixed-finance program allows the use since no rating points were affected. In percent of the area median income.
of mixed funding sources; however, the the FY 2004 and 2005 NOFAs, since However, this commenter stated that

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this distinction is not necessary for the by calling the Regulations Division at an appointment to review the docket file
Section 811 program because the market (202) 708–3055 (this is not a toll-free by calling the Regulations Division at
is different. number). (202) 708–3055 (this is not a toll-free
HUD Response: All statutorily eligible number).
Impact on Small Entities
applicants are legally entitled to apply
The Secretary, in accordance with the List of Subjects in 24 CFR Part 891
and participate equally in the program.
Comment: One commenter stated that Regulatory Flexibility Act (5 U.S.C. Aged, Civil rights, Grant programs—
the interim rule allows LIHTCs to be 605(b)), has reviewed and approved this housing and community development,
used only for additional units and not rule and in so doing certifies that this Individuals with disabilities, Loan
to provide gap financing. ‘‘This ruling rule would not have a significant programs—housing and community
clearly does not aid in the development economic impact on a substantial development, Low and moderate
of more housing for the elderly, the sole number of small entities. The program income housing, Mental health
purpose of the ruling when 202 program will provide capital advances to private programs, Rent subsidies, Reporting and
funds are not adequate to bring a nonprofit organizations and nonprofit recordkeeping requirements.
development to completion. Why would consumer cooperatives to expand the The catalogue of Federal domestic
a developer choose to build more units supply of supportive housing for the assistance numbers for the programs in
when the fund reservation for the initial elderly and to nonprofit organizations to this rule are: 14.157 and 14.181.
units is not adequate?’’ This commenter expand the supply of supportive
housing for persons with disabilities. ■ For the reasons discussed in this
stated that due to shortfalls in the preamble, HUD amends 24 CFR part 891
existing programs, it is necessary to use Private for-profit entities may also
participate in the mixed-finance aspect as follows:
LIHTCs for gap financing to complete
projects. of producing such housing. Although
PART 891—SUPPORTIVE HOUSING
Another commenter read the interim small and private entities may
participate in the program, the rule does FOR THE ELDERLY AND PERSONS
rule as allowing LIHTCs to be used for WITH DISABILITIES
gap financing and wrote in support of not impose any legal requirement or
that approach. mandate upon them and, accordingly, ■ 1. The authority citation for part 891
HUD Response: As long as the will not have a significant impact on continues to read as follows:
number of assisted units is consistent them. Authority: 12 U.S.C. 1701q; 42 U.S.C.
with the capital advance, equity from Federalism Impact 1437f, 3535(d), and 8013.
tax credits in a mixed-finance project
Executive Order 13132 (entitled Subpart A—General Program
may be used to provide additional units,
‘‘Federalism’’) prohibits, to the extent Requirements
gap financing, or a mix of additional
practicable and permitted by law, an
units and financing.
agency from promulgating a regulation ■ 2. Amend 24 CFR 891.105 by revising
IV. Findings and Certifications that has federalism implications and the definition of ‘‘Replacement reserve
either imposes substantial direct account’’ to read as follows:
Unfunded Mandates Reform Act
compliance costs on state and local
Title II of the Unfunded Mandates governments and is not required by § 891.105 Definitions.
Reform Act of 1995 (2 U.S.C. 1531– statute, or preempts state law, unless the * * * * *
1538) (UMRA) establishes requirements relevant requirements of section 6 of the Replacement reserve account means a
for federal agencies to assess the effects Executive Order are met. This rule does project account into which funds are
of their regulatory actions on state, not have federalism implications and deposited, which may be used only with
local, and tribal governments and the does not impose substantial direct the approval of the Secretary for repairs,
private sector. This rule does not compliance costs on state and local replacement, capital improvements to
impose any federal mandate on any governments or preempt state law the section 202 or section 811 units, and
state, local, or tribal government or the within the meaning of the Executive retrofitting to reduce the number of
private sector within the meaning of Order. units as provided by 24 CFR 891.405(d).
UMRA. * * * * *
Executive Order 12866, Regulatory
Environmental Impact Planning and Review ■ 3. Amend 24 CFR 891.130 to add a
new paragraph (c) to read as follows:
A Finding of No Significant Impact The Office of Management and Budget
with respect to the environment was (OMB) reviewed this rule under § 891.130 Prohibited relationships.
made at the interim rule stage in Executive Order 12866 (entitled * * * * *
accordance with HUD regulations at 24 ‘‘Regulatory Planning and Review’’). (c) Mixed-finance projects. Section
CFR part 50, which implement section OMB determined that this rule is a 891.832 of this part applies to mixed-
102(2)(C) of the National Environmental ‘‘significant regulatory action,’’ as finance projects for the elderly and for
Policy Act of 1969 (42 U.S.C. 4332). defined in section 3(f) of the Order persons with disabilities.
That Finding of No Significant Impact (although not economically significant, ■ 4. Amend 24 CFR 891.170 by revising
remains applicable to this rule and is as provided in section 3(f)(1) of the paragraph (b) to read as follows:
available for public inspection between Order). Any changes made to the rule
the hours of 8 a.m. and 5 p.m. weekdays subsequent to its submission to OMB § 891.170 Repayment of capital advance.
in the Regulations Division, Office of are identified in the docket file, which * * * * *
General Counsel, Room 10276, is available for public inspection in the (b) The transfer of physical and
Department of Housing and Urban Regulations Division, Room 10276, financial assets of any project under this
Development, 451 Seventh Street, SW., Department of Housing and Urban part is prohibited, unless HUD gives
Washington, DC 20410–0500. Due to Development, 451 Seventh Street, SW., prior written approval. Approval for
security measures at the HUD Washington, DC 20410–0500. Due to transfer will not be granted unless HUD
Headquarters building, please schedule security measures at the HUD determines that the transfer to a private
an appointment to review the docket file Headquarters building, please schedule nonprofit corporation, consumer

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54210 Federal Register / Vol. 70, No. 176 / Tuesday, September 13, 2005 / Rules and Regulations

cooperative (under the Section 202 891.848 Project design and cost standards. controlled by an organization meeting
Program), a nonprofit organization 891.853 Development cost limits. the requirements of this section):
(under the Section 811 Program), or an 891.855 Replacement reserves.
891.860 Operating reserves. (1) In the case of supportive housing
organization meeting the definition of for the elderly, that meets the
891.863 Maintenance as supportive housing
‘‘mixed-finance owner’’ in § 891.805 of units for elderly persons and persons requirements of the definition of
this part, is part of a transaction that with disabilities. ‘‘private nonprofit organization’’ found
will ensure the continued operation of 891.865 Sanctions. in § 891.205 of this title; or
the project for not less than 40 years
(from the date of original closing) in a Subpart F—For-Profit Limited (2) In the case of supportive housing
manner that will provide rental housing Partnerships and Mixed-Finance for persons with disabilities, that meets
for very low-income elderly persons or Development for Supportive Housing the requirements of the definition of
persons with disabilities, as applicable, for the Elderly or Persons with ‘‘nonprofit organization’’ in § 891.305 of
on terms at least as advantageous to Disabilities this title; and that
existing and future tenants as the terms (3) Is the general partner of a for-profit
required by the original capital advance. § 891.800 Purpose.
limited partnership, if the Nonprofit
The purpose of this subpart is to
Organization meets the requirements of
Subpart B—202 Supportive Housing establish rules allowing for, and
regulating the participation of, for-profit this definition and owns at least one-
for the Elderly
limited partnerships, of which the sole hundredth of one percent of the
■ 5. Amend 24 CFR 891.205 by revising general partner is a Nonprofit partnership assets. If the project will
the definition of ‘‘acquisition’’ to read as Organization meeting the requirements include units financed with the use of
follows: of 12 U.S.C. 1701q(k)(4) or 42 U.S.C. federal Low-Income Housing Tax
8032(k)(6), in the development of Credits and the organization is a limited
§ 891.205 Definitions. partnership, the limited partnership
housing for the elderly and persons with
* * * * * disabilities using mixed-finance must meet the requirements of section
Acquisition means the purchase of (or 42 of the IRS code, including the
development methods. These rules are
otherwise obtaining title to) existing requirements of section 42(h)(5). The
intended to develop more supportive
housing and related facilities to be used general partner may also be the sponsor
housing for the elderly and persons with
as supportive housing for the elderly. so long as it meets the requirements of
disabilities by allowing the use of
Subpart C—Section 811 Supportive federal assistance, private capital and this rule for sponsors and general
Housing for Persons with Disabilities expertise, and low-income housing tax partners.
credits.
§ 891.808 Capital advance funds.
■ 6. Amend 24 CFR 891.305 by revising
§ 891.802 Applicability of other provisions.
the definition of ‘‘acquisition’’ to read as (a) HUD is authorized to provide
follows: The provisions of 24 CFR part 891, capital advance funds to expand the
subparts A through D, apply to this
§ 891.305 Definitions.
supply of supportive housing for the
subpart F unless otherwise stated.
elderly and persons with disabilities in
* * * * * accordance with the rules and
§ 891.805 Definitions.
Acquisition means the purchase of (or
In addition to the definitions at regulations of the Section 202 and
otherwise obtaining title to) existing
§ 891.105, the following definitions Section 811 supportive housing
housing and related facilities to be used
as supportive housing for persons with apply to this subpart: programs. For mixed-finance projects,
disabilities. Mixed-finance owner, for the purpose HUD provides a capital advance funds
of the mixed-finance development of reservation to the sponsor, which
* * * * *
housing under this subpart, means a transfers the fund reservation to the
■ 7. Revise subpart F to read as follows: single-purpose, for-profit limited mixed-finance owner meeting the
Subpart F—For-Profit Limited Partnerships partnership of which a Private requirements of this subpart. The
and Mixed-Finance Development for Nonprofit Organization with a 501(c)(3) sponsor may transfer the fund
Supportive Housing for the Elderly or or 501(c)(4) tax exemption (in the case reservation directly to the owner or to
Persons with Disabilities of supportive housing for the elderly), or the general partner of the owner, or the
Sec. a Nonprofit Organization with a sponsor may be the general partner of
891.800 Purpose. 501(c)(3) tax exemption (in the case of the mixed-finance owner if the sponsor
891.802 Applicability of other provisions. supportive housing for the disabled) is
891.805 Definitions.
meets the applicable statutory and
the sole general partner. The purpose of regulatory requirements.
891.808 Capital advance funds.
the mixed-finance owner must include
891.809 Limitations on capital advance (b) Developments built with mixed-
funds. the promotion of the welfare of the
elderly or persons with disabilities, as finance funds may combine Section 202
891.810 Project rental assistance. or Section 811 units with other units,
891.813 Eligible uses for assistance appropriate.
provided under this subpart. Private Nonprofit Organization (in the which may or may not benefit from
891.815 Mixed-finance developer’s fee. case of supportive housing for the federal assistance. The number of
891.818 Firm commitment application. elderly) or Nonprofit Organization (in Section 202 or Section 811 supportive
891.820 Civil rights requirements. the case of supportive housing for housing units must not be less than the
891.823 HUD review and approval. persons with disabilities) (for the number specified in the agreement letter
891.825 Mixed-finance closing documents. purposes of this subpart, both types of for a capital advance. In the case of a
891.830 Drawdown. Section 811 mixed-finance project, the
891.832 Prohibited relationships.
organizations are referred to as
891.833 Monitoring and review. ‘‘Nonprofit Organization’’), for the additional units cannot cause the
891.835 Eligible uses of project rental purpose of this subpart, means any project to exceed the applicable Section
assistance. institution or foundation (and includes 811 project size limit if they will also
891.840 Site and neighborhood standards. a corporation wholly owned and house persons with disabilities.

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Federal Register / Vol. 70, No. 176 / Tuesday, September 13, 2005 / Rules and Regulations 54211

§ 891.809 Limitations on capital advance (3) The amenities are designed with § 891.823 HUD review and approval.
funds. appropriate safeguards for the residents’ HUD will review and may approve or
Capital advances are not available in health and safety; and disapprove the firm commitment
connection with: (4) The assisted residents are not application and mixed finance proposal.
(a) Acquisition of facilities currently required to use, participate in, or pay a § 891.825 Mixed-finance closing
owned and operated by the sponsor as fee for the use or maintenance of the documents.
housing for the elderly, except with amenities, although they are permitted
rehabilitation as defined in 24 CFR The mixed-finance owner must
to do so voluntarily. Any fee charged for submit the mixed-finance closing
891.105; the use, maintenance, or access to documents in the form prescribed by
(b) The financing or refinancing of amenities by residents must be HUD. The materials shall be submitted
federally assisted or insured projects; reasonable and affordable for all after the firm commitment has been
(c) Facilities currently owned and residents of the development. issued and prior to capital advance
operated by the sponsor as housing for closing.
(c) Notwithstanding any other
persons with disabilities, except with
provision of this section, §§ 891.220 and
rehabilitation as defined in 24 CFR § 891.830 Drawdown.
891.315 on ‘‘prohibited facilities’’ apply
891.105; or (a) Upon its approval of the executed
to mixed-finance projects containing
(d) Units in Section 202 direct loan units assisted under section 202 or 811. mixed-finance closing documents and
projects previously refinanced under the other documents submitted and upon
provisions of section 811 of the § 891.815 Mixed-finance developer’s fee. determining that such documents are
American Homeownership and satisfactory, and after the capital
Economic Opportunity Act of 2000, 12 (a) Mixed-finance developer’s fee. A
advance closing, HUD may approve the
U.S.C. 1701q note. mixed-finance developer may include,
drawdown of capital advance funds in
on an up-front or deferral basis, or a
accordance with the HUD-approved
§ 891.810 Project rental assistance. combination of both, a fee to cover
drawdown schedule.
Project Rental Assistance is defined in reasonable profit and overhead costs. (b) The capital advance funds may be
§ 891.105. Project Rental Assistance is (b) Mixed-finance developer’s fee cap. drawn down only in an approved ratio
provided for operating costs, not No mixed-finance developer’s fee may to other funds, in accordance with a
covered by tenant contributions, be a greater percentage of the total drawdown schedule approved by HUD.
attributable to the number of units project replacement costs than the The mixed-finance owner shall certify,
funded by capital advances under the percentage allowed by the state housing in a form prescribed by HUD, prior to
Section 202 and Section 811 supportive finance agency or other tax credit the initial drawdown of capital advance
housing programs, subject to the allocating agency in the state in which funds, that they will not draw down
provisions of 24 CFR 891.445. The the mixed-finance development is sited. more capital advance funds than
sponsor of a mixed-finance In no event may the mixed-finance necessary to meet the pro rata share of
development must obtain the necessary developer’s fee exceed 15 percent of the the development costs for the 202 or 811
funds from a source other than project total project replacement cost. supportive housing units. The mixed-
rental assistance funds for operating finance owner shall draw down capital
(c) Sources of mixed-finance
costs related to non-202 or -811 units. advance funds only when payment is
developer’s fee. The mixed-finance
§ 891.813 Eligible uses for assistance developer’s fee may be paid from project due and after inspection and acceptance
provided under this subpart. income or project sources of funding of work covered by the drawdown.
other than Section 202 or 811 capital (c) Each drawdown of funds
(a) Assistance under this subpart may constitutes a certification by the mixed-
be used to finance the construction, advances, project rental assistance, or
tenant rents. finance owner that:
reconstruction, or rehabilitation of a (1) All the representations and
structure or a portion of a structure; or warranties submitted in accordance
§ 891.818 Firm commitment application.
the acquisition of a structure to be used with this subpart continue to be valid,
as supportive housing for the elderly; or The sponsor will submit the firm true, and in full force and effect;
the acquisition of housing to be used as commitment application including the (2) All parties are in compliance with
supportive housing for persons with mixed-finance proposal in a form their obligations pursuant to this
disabilities. Such assistance may also described by HUD. subpart, which, by their terms, are
cover the cost of real property applicable at the time of the drawdown
acquisition, site improvement, § 891.820 Civil rights requirements.
of funds;
conversion, demolition, relocation, and The mixed-finance development must (3) All conditions precedent to the
other expenses that the Secretary comply with the following: all fair drawdown of the funds by the mixed-
determines are necessary to expand the housing and accessibility requirements, finance owner have been satisfied;
supply of supportive housing for the including the design and construction (4) The capital advance funds drawn
elderly and persons with disabilities. requirements of the Fair Housing Act; down will be used only for eligible costs
(b) Assistance under this subpart may the requirements of section 504 of the actually incurred in accordance with the
not be used for excess amenities, as Rehabilitation Act of 1973; accessibility provisions of this subpart and the
stated in 24 CFR 891.120(c). Such requirements, project standards, and site approved mixed-finance project, which
amenities may be included in a mixed- and neighborhood standards under 24 include the types of costs stated in 12
finance development only if: CFR 891.120, 891.125, 891.210, 891.310, U.S.C. 1701q(h), and 42 U.S.C. 8013(h),
(1) The amenities are not financed and 891.320, as applicable; and 24 CFR and do not include paying off bridge or
with funds provided under the Section 8.4(b)(5), which prohibits the selection construction financing, or repaying or
202 or Section 811 program; of a site or location which has the collateralizing bonds; and
(2) The amenities are not maintained purpose or effect of excluding persons (5) The amount of the drawdown is
and operated with Section 202 or 811 with disabilities from federally assisted consistent with the ratio of 202 or 811
funds; programs or activities. supportive housing units to other units.

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54212 Federal Register / Vol. 70, No. 176 / Tuesday, September 13, 2005 / Rules and Regulations

§ 891.832 Prohibited relationships. § 891.848 Project design and cost § 891.863 Maintenance as supportive
standards. housing units for elderly persons and
Section 891.130 applies, except that
The project design and cost standards persons with disabilities.
in the mixed-finance program only, in
FHA-insured or risk-sharing projects at § 891.120 apply to mixed-finance (a) The mixed-finance owner must
under this rule, the conflict-of-interest developments under this subpart. develop and continue to operate the
and identity-of-interest rules applicable Sections 891.220 and 891.315 on
same number of supportive housing
to the FHA program apply. In the case prohibited facilities shall apply to
mixed-finance developments under this units for elderly persons or persons with
of FHA insured or risk-sharing projects, disabilities, as stated in the use
the nonprofit general partner must subpart.
agreement or other document
continue to adhere to the provisions of § 891.853 Development cost limits. establishing the number of assisted
§ 891.130. The Development Cost Limits for units, for a 40-year period.
§ 891.833 Monitoring and review. development activities, as established at (b) If a mixed-finance development
§ 891.140, apply to Section 202 or 811 proposal provides that the Section 202
HUD shall monitor and review the supportive housing units in mixed-
development during the construction or 811 supportive housing units will be
finance developments under this
and operational phases in accordance floating units, the mixed-finance owner
subpart.
with the requirements that HUD must operate the HUD-approved
prescribes. In order for units assisted § 891.855 Replacement reserves. percentage of Section 202 or 811
under the 202 and 811 programs to (a) The mixed-finance owner shall supportive housing units, and maintain
continue to receive project rental establish and maintain a replacement the percentage distribution of bedroom
assistance, they must be operated in reserve account for Section 202 or 811 sizes of Section 202 or 811 supportive
accordance with all contractual supportive housing units. This account housing units for the entire term of the
agreements among the parties and other must meet all the requirements of 24 very low-income use restrictions on the
HUD regulations and requirements. It is CFR 891.405. development. Any foreclosure, sale, or
the responsibility of the mixed-finance (b) The mixed-finance owner may other transfer of the development must
owner and Nonprofit Organization to obtain a disbursement from the reserve be subject to a covenant running with
ensure compliance with the preceding only if the funds will be used to pay for the land requiring the continued
sentence. capital replacement costs for the Section
adherence to the very low-income use
202 or 811 supportive housing units in
§ 891.835 Eligible uses of project rental restrictions for the Section 202 or 811
the mixed-finance development and in
assistance.
accordance with the terms of the supportive housing units.
(a) Section 202 or 811 project rental regulatory and operating agreement. In (c) The owner must ensure that
assistance may be used to pay the the case of repairs to common elements, Section 202 or 811 supportive housing
necessary and reasonable operating the Section 202/811 replacement reserve units in the development are and
costs, as defined in 24 CFR 891.105 and can be used on a pro rata basis based on continue to be comparable to unassisted
approved by HUD, not met from project the percentage of Section 202 or 811 units in terms of location, size,
income and attributed to Section 202 or units in the building whose common appearance, and amenities. If due to a
811 supportive housing units. Operating elements are being repaired. In the event change in the partnership structure it
cost standards under 24 CFR 891.150 of a disposition of the mixed-finance becomes necessary to establish a new
apply to developments under this part. development, or the dissolution of the owner partnership or to transfer the
(b) Section 202 or 811 project rental owner, any Section 202 or 811 funds supportive housing project, the new or
assistance may not be used to pay for: remaining in the replacement reserve revised owner must be a single-purpose
(1) Debt service on construction or account must remain dedicated to the entity and the use restrictions must
permanent financing, or any refinancing Section 202 or 811 supportive housing
remain in effect as provided above.
thereof, for any units in the units to ensure their long-term viability,
development, including the 202 or 811 or as otherwise agreed by HUD. § 891.865 Sanctions.
supportive housing units; (c) Subject to HUD’s approval,
reserves may be used to reduce the In the event that Section 202 or 811
(2) Cash flow distributions to owners; supportive housing units are not
or number of Section 202 or 811 dwelling
units in the development for the developed and operated in accordance
(3) Creation of reserves for non-202 or purpose of retrofitting units that are with all applicable federal requirements,
-811 units. obsolete or unmarketable. HUD may impose sanctions on the
(c) HUD-approved operating costs participating parties and seek legal or
attributable to common areas or to the § 891.860 Operating reserves.
equitable relief in enforcing all
development as a whole, such as (a) The mixed-finance owner shall requirements under Section 202, the
groundskeeping costs and general maintain an operating reserve account
Housing Act of 1959, or Section 811 of
administrative costs, may be paid from in an amount sufficient to cover the
the National Affordable Housing Act, all
project rental assistance on a pro-rata operating expenses of the development
basis according to the percentage of 202 for at least a three-month period. implementing regulations and
or 811 supportive housing units as (b) Project income, project rental requirements and contractual
compared to the total number of units. assistance, tenant rents, and tax credit obligations under the mixed-finance
equity may be used to fund the documents.
§ 891.840 Site and neighborhood operating reserve account. Dated: August 22, 2005.
standards. (c) Amounts derived from Section 202
Brian D. Montgomery,
For section 202 or 811 mixed-finance or 811 (e.g., project income, project
developments, the site and rental assistance, and tenant rents) in Assistant Secretary for Housing-Federal
Housing Commissioner.
neighborhood standards described at operating reserve accounts may only be
§ 891.125 and § 891.320 apply to the used for the operating expenses of the [FR Doc. 05–18036 Filed 9–12–05; 8:45 am]
entire mixed-finance development. 202 or 811 units. BILLING CODE 4210–27–P

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