National Housing Law Project Housing Law Bulletin

Public Housing Demolition/Disposition Regs Are Final

New regulations were recently published in the Federal Register that are intended to implement changes to the public housing statute concerning demolition and disposition.¹ The changes made by these regulations include implementation of statutory criteria for HUD approval of plans to demolish public housing units, expanded rules on relocation, the one-for-one replacement plan for units lost, and the sale of projects to residents. The major changes are highlighted below.

Criteria for Approval of Demolition Requests

HUD claims that it will provide some guidance on what is meant by the statutory standard for approval of a partial demolition, which is to "help assure the useful life of the remaining portion of the project," in revisions to the Demolition Disposition and Conversion Handbook, 7486.1.⁶ Whether or when that will happen is unknown because that handbook has been canceled.⁷

Applicability of the Regulations

Relocation

No action may be taken to demolish or dispose of any unit until the tenant is relocated.¹¹ This prohibition is based upon the statute which has a similar provision.¹² The regulations continue to provide that tenants may be relocated to other public housing units and that Section 8 certificates and vouchers may be used for relocation.

The explanation for when vouchers may be used has been expanded to protect displaced tenants. Vouchers may be used if the PHA has referred the tenant to comparable units that rent at an amount not to exceed the payment standard and where the landlord is willing to rent to a voucher holder. A family may elect to pay more for rent only if the PHA has made referrals to such comparable units.¹³ The introductory comments note that the regulations continue to provide counseling and advisory services to assure that choice and opportunities exist for the displacees.¹⁴ According to the introductory comments, this obligation presumes that the tenants must be given full and fair information about all relocation options, including the use of rental vouchers and a duty of good faith and diligence on the part of the PHA.¹⁵

The new demolition/disposition regulations now provide that anyone displaced is subject to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA)¹⁶ or the relocation provisions spelled out in the regulations which include notice, referrals to suitable and affordable units, and payment for actual moving expenses.¹⁷ Minority families must be given referrals, if possible, to units outside areas of minority concentration.

The regulations now mention the minimum requirements for a temporary relocation.¹⁸ They also set forth an appeal process to HUD in the event a tenant disagrees with the PHA's determination regarding a "displaced person" or the amount of relocation benefits.¹⁹

Replacement Units

The regulations implement the statutory one-for-one replacement requirement.²⁰ The statute provides that the replacement housing may be project-based²¹ or tenant-based. Initially the statute provided that the replacement tenant based housing had to have a term of 15 years. Section 116(b) of the 1992 Act altered that requirement in the case of a demolition or disposition of 200 or more units. In that situation, Section 8 tenant-based assistance having a term of no less than five years may be used,²² but in no event may vouchers be used as replacement housing.²³

The statute provides that the PHA may use tenant-based assistance for the replacement units only if HUD can determine that the project-based assistance is not feasible and that private market units are available in sufficient numbers to absorb the tenant-based assistance for 15 years.²⁴ Without explanation or basis, HUD has concluded that a PHA proposing to demolish or dispose of 200 or more units, and having a plan which provides that tenant-based assistance will replace no more than 50 percent of those units, need not comply with this statutory requirement.²⁵

The introductory comments point out that "[t]here is no statutory or regulatory requirement that the relocated residents be placed in the replacement housing."²⁶ With this statement HUD claims to be reacting to the reality that the replacement units often do not serve as a resource for relocating current tenants, but it ignores the difference between relocation and replacement. Fairness and equity should dictate that the displaced tenants should have a right to return. Many might return if the offer were made and provisions devised to keep track of the displaced families and to notify them of the availability of the units. HUD also rejected the suggestion that the demolition of units await development of the replacement units. The rationale given for this position is that the replacement units may take too long to produce, that units may need to be demolished because they are a blight on the neighborhood, and that in some cases the public housing units must be sold to pay for the replacement units.²⁷ These rationales obviously do not fit all situations that arise. HUD should have required replacement before demolition and made exceptions in those cases where it is not feasible.

The new regulations provide that if the replacement housing is located outside the political boundaries of the PHA, the tenants who would have been eligible for the units if they had been replaced within the PHA's jurisdiction must be eligible for the replacement housing.²⁸ This section should also have stated that the tenants should be entitled to have the same preference in the new jurisdiction as they had for housing located within the boundaries of the original PHA. This is necessary because many tenants are eligible for public housing, and it is only the few with preferences who actually obtain the housing.

The replacement units must comply with site and neighborhood standards. If the units are to be rebuilt on site, compliance with these standards is required at the time the demolition and disposition plan is submitted. If the site is not determined for the replacement units at the time of the plan's submission, compliance with site and neighborhood requirements will be required at a later date.

Replacement units may be of different sizes to reflect changes in local priority needs. But at least the same total number of individuals and families must be accommodated.²⁹

HUD approval of the application for demolition or disposition requires a commitment of funds from HUD, subject to the availability of future appropriations, or written documentation of the commitment of state or local funding for the replacement units.

Replacement Housing Plan

Section 121 of the Housing Act of 1987 spells out requirements for a replacement housing plan.³⁰ The schedule for completing the plan may not exceed six years.³¹ The final regulations interpret that requirement to mean only that conventional replacement units must have reached the stage of notice to proceed, and the contract-of-sale stage for Turnkey units.³² HUD is quite clear that the six-year replacement limit does not mean the obvious: that the replacement housing must be built or rehabilitated within that time frame.

The requirement that the chief executive officer of the jurisdiction certify that the proposed activity is consistent with the Housing Assistance Plan (HAP) or Comprehensive Housing Affordability Strategy (CHAS) is now deleted. HUD justifies the change because all public housing programs except one are excluded from the CHAS requirements.³³ But this change ignores the fact that the CHAS, as a planning document, encompasses more that mere funding determinations and should also be referenced or complied with when housing stock is being diminished. The replacement plan may now be approved by just the mayor or the county executive. City council approval is no longer required. This change in the regulations may create problems for those resident groups that have strong support within the city council but less support or no support from the mayor's office.³⁴

Consultation with Tenants

As dictated by the statute, the regulations still provide that the PHA must consult with the tenants.³⁵ Consultation with the tenants is explained in the Introductory Comments as "a requirement for the PHA to give full and serious consideration to tenant comments and recommendations before making a decision."³⁶

Required and Permitted Actions Prior to Approval

This section of the regulations prohibits PHAs from taking any action to demolish or dispose of public housing units without prior HUD approval.³⁷ HUD announces that this section has not been revised and that it will issue a separate proposed rulemaking on the issue of "required and permitted actions prior to an approval of an application for demolition or disposition."³⁸ Until the final rule is issued, the provision on HUD approval remains unchanged.

Resident Organization's Opportunity to Purchase the Building

According to the statute, residents are eligible to purchase property slated for demolition or disposition.³⁹ The regulations, however, provide that this opportunity is not available if the property falls into certain categories, including where it is a threat to the health and safety of the residents, where the property has been condemned, or where the demolition involves selected portions of the development in order to reduce density and ensure the long-term viability of the development or the PHA.⁴⁰ These exclusions from resident purchase are not authorized by the statute, which provides that residents be offered the right to purchase any project "or portion of the project covered by the application."⁴¹ These exclusions may create a tremendous loophole for some projects. HUD apparently agrees and has made a distinction in training seminars between projects that are being thinned to reduce the size of the development and those that are being thinned to reduce their density. In the former case, tenant organizations must be offered the right to purchase the building.

The regulations do not impose upon tenant organizations an obligation to use the units purchased by them for housing low-income families. Instead, HUD gives PHAs the authority to establish the terms of sale and to approve or disapprove the resident organization's proposal.⁴²

The opportunity to purchase a property proposed for demolition or disposition is limited to residents of the development. Where there is no resident organization, HUD requires the PHA to make a reasonable effort to inform the residents of the opportunity to organize and purchase the property. Examples of reasonable effort include sending letters to all residents, publishing an announcement in the residents' newsletter, or hiring a consultant to provide technical assistance to the residents. The regulations require that the PHA give tenants 45 days to organize.⁴³ If the tenants organize, then presumably the following timelines applicable to existing organizations are in effect.

In those cases where there is an established tenant group, the PHA must notify the group of the opportunity to purchase the development and give the group at least 30 days to respond. The group then has 60 days to develop and respond to the proposal and to obtain a firm financial commitment.⁴⁴ The PHA has 60 days to review the proposal. But if a proposal submitted to the PHA meets all the terms of sale, the PHA must notify the resident group as soon as possible, but no later than 14 days after it has made its final determination. The group may appeal any decision to HUD within 30 days.⁴⁵ Needless to say, these timelines are very short, and it is important for the tenant organization to anticipate them and be prepared to act quickly when officially notified.

1. 60 Fed. Reg. 3,706 (Jan. 18, 1995). However, there are pending before Congress appropriations bills that propose to rescind the one-for-one replacement requirement and make other changes regarding the rights of tenants to relocation benefits. These anticipated changes are not reflected in the new regulations.
2. Pub. L. No. 100-242, 101 Stat. 1837 (Feb. 5, 1988).
3. 42 U.S.C.A. § 1437p(a)(2) (West 1994).
4. 24 C.F.R. § 970.6 (1995).
5. 60 Fed. Reg. at 3,710.
6. Id. There are other references in the introductory comments and the regulations to HUD Handbook 7486.1. See, e.g., id. at 3,715; 24 C.F.R. § 970.2(a)(7) (1995).
7. HUD Transmittal to State/Area Coordinators, et al. from Joseph Shuldiner (Jan. 23, 1995) (on file at the National Housing Law Project).
8. 60 Fed. Reg. at 3,715.
9. Id. at 3,710.
10. Id. at 3,715.
11. 24 C.F.R. § 970.11(g) (1995).
12. 42 U.S.C.A. § 1437p(b)(3)(H) (West 1994).
13. 24 C.F.R. § 970.5(b) (1995).
14. Id. § 970.5(e).
15. 60 Fed. Reg. at 3,711.
16. 42 U.S.C.A. §§ 4601-4655 (West Supp. 1994).
17. 24 C.F.R. § 970.5(c) and (d) (1995).
18. Id. at § 970.5(f).
19. Id. at § 970.5(g).
20. 42 U.S.C.A. § 1437p(b)(3) (West 1994).
21. The replacement units may be public housing, 15-year project-based Section 8 or other state or federal project-based housing programs with a 15-year guarantee. Tax credit units may satisfy the replacement unit provision which means that units available to families at or below 80 percent of median area income may be used to satisfy the one-for-one replacement requirement. This type of requirement will do little to benefit public housing residents whose average income nationwide is below 20 percent of median area income. Fortunately HUD did recognize that tax credit units for units that already meet the housing needs of low-income families cannot be counted for replacement housing. Thus tax credit units with, for example, Section 236 or 221(d)(3), cannot be considered replacement units. But Section 8 tenant-based subsidies may be used with the tax credit units and those units will be eligible to meet the one-for-one replacement requirement. 24 C.F.R. § 970.11(a)(3) (1995).
22. 42 U.S.C.A. § 1437p(b)(3)(A)(v) (West 1994).
23. 60 Fed. Reg. at 3,708.
24. 42 U.S.C.A. § 1437p(b)(3)(C) (West 1994).
25. 24 C.F.R. § 970.11(a)(5)(ii) (1995).
26. See 60 Fed. Reg. at 3,711; compare Pub. L. No. 102-389, 106 Stat. 1579 (Oct. 6, 1992), which states that, for the HOPE VI Urban Revitalization Demonstration program, persons displaced by reconstruction activities shall be eligible for the replacement units.
27. 60 Fed. Reg. at 3,711.
28. 24 C.F.R. § 970.11(a) (1995).
29. Id. at § 970.11(e); see also 42 U.S.C.A. § 1437p(b)(3)(F) (West 1994).
30. Supra note 2.
31. 42 U.S.C.A. § 1437p(b)(3)(E) (West 1994).
32. 24 C.F.R. § 970.11(d)(2) (1995).
33. Id. at § 91.1(b)(3).
34. 60 Fed. Reg. at 3,713.
35. 24 C.F.R. § 970.4(a) (1994); 42 U.S.C.A. § 1437p(b)(1) (West 1994).
36. 60 Fed. Reg. at 3,710 (emphasis in original).
37. 24 C.F.R. § 970.12 (1994).
38. 60 Fed. Reg. at 3,713.
39. 42 U.S.C.A. § 1437p(b)(1) (West 1994).
40. 24 C.F.R. § 970.13(a)(2)(iv) (1995).
41. 42 U.S.C.A. § 1437p(b)(1) (West 1994).
42. 24 C.F.R. § 970.13(d) (1995).
43. Id. at § 970.13(b) and 60 Fed. Reg. at 3,714.
44. 24 C.F.R. § 970.13(d) (1995).
45. Id. at § 970.13(e).

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