Section 983.157 - Rehabilitated housing: option for development activity after HAP contract execution(a)PHA discretion.(1) The PHA may allow an owner of a rehabilitated housing project to conduct some or all of the development activity during the term of the HAP contract, as provided in this section. Under this option, the PHA and owner place all proposed PBV units under the HAP contract at the time provided in paragraph (c) of this section and before the owner completes development activity. During the period of development activity, the PHA makes assistance payments to the owner for the contract units that are occupied and meet HQS.(2) In its Administrative Plan, the PHA must explain the circumstances (if any) under which the PHA will enter a PBV HAP contract for rehabilitated housing that allows for development activity on contract units. The Administrative Plan may provide for execution of HAP contracts in accordance with this section prior to commencement of development activity, following commencement of development activity, or both. When the PHA uses the competitive selection method at § 983.51(b)(1) , the PHA's policy must be disclosed in the request for proposals.(b)Projects that have commenced rehabilitation. If the PHA allows for execution of a HAP contract following commencement of development activity, the following requirements apply to the development activity that occurs before HAP contract execution: (1) For rehabilitation undertaken under an Agreement, the development activity must have complied with the Agreement executed pursuant to § 983.154 , including completion of any work items and completion and acceptance of any units which were to be completed under the Agreement under §§ 983.155 and 983.156 ; or(2) For rehabilitation undertaken without an Agreement pursuant to § 983.154(f) : (i) The owner of the project must be able to document its compliance with all applicable requirements of § 983.153 from the date of proposal submission (for housing subject to competitive selection) or from the date of the PHA's board resolution approving the project-basing of assistance at the project (for housing excepted from competitive selection); and(ii) For housing subject to competitive selection, the PHA must confirm prior to the proposal selection date that the owner has complied with all applicable requirements of § 983.153 from the date of proposal submission. For housing excepted from competitive selection, the PHA must confirm prior to executing the HAP contract that the owner has complied with all applicable requirements of § 983.153 from the date of the PHA's board resolution approving the project-basing of assistance at the project.(c)Timing of HAP contract execution. The PHA may execute the HAP contract for a project covered by this section after all of the following have occurred:(1) The applicable requirement of § 983.56(d) (environmental review) has been met;(2) If applicable, the subsidy layering review has been completed, in accordance with § 983.153(b)(2) ;(3) If applicable, the PHA has determined that development activity that has commenced met the requirements of paragraph (b) of this section;(4) The PHA has conducted an inspection (see § 983.103(b)(2) ) of all units that the owner proposes to make available for occupancy by an assisted family at the beginning of the HAP contract term and the PHA has determined that at least one of those proposed contract units, including items and components within the primary and secondary means of egress, common features, and systems equipment as described by 24 CFR 5.703(a)(2) , fully complies with HQS. The PHA may make the determination of compliance with HQS regardless of whether the HQS-compliant unit is expected to undergo rehabilitation. The owner may make repairs to correct HQS deficiencies identified during the PHA inspection as part of the development activity that occurs prior to HAP contract execution (see paragraph (b) of this section) to make the unit available for occupancy at the beginning of the HAP contract term. The PHA must establish in its Administrative Plan the amount of time that may elapse between the inspection and the execution of the HAP contract; and(5) Occupants (if any) of proposed PBV units that were not inspected pursuant to paragraph (c)(4) of this section or that do not fully comply with HQS have moved and such units are vacant. These units must be identified as unavailable for occupancy in accordance with paragraph (e)(5)(ii) of this section. Any inspected unit that does not fully comply with HQS must undergo development activity, followed by inspection under § 983.156(a) , prior to being designated for occupancy under paragraph (f)(1)(ii) of this section.(6) Occupants (if any) who do not accept PBV assistance have moved and such units are vacant.(7) The PHA may decline to place proposed PBV units that do not meet the criteria in paragraphs (c)(5) or (6) of this section on the HAP contract in order to execute the HAP contract before the units have been vacated. The PHA may add the units to the HAP contract once the units are vacant in accordance with § 983.207 , except that the inspection requirement of § 983.207 does not apply if the unit will initially be categorized as unavailable for occupancy as provided in paragraph (e)(5)(ii) of this section.(d)HAP contract requirements. The PHA and owner must execute the HAP contract (see § 983.204(c) ) with a rider to the HAP contract that will govern development activity occurring during the term of the HAP contract. The contents of the HAP contract apply and are supplemented by the additional terms and conditions provided in the rider during the period the rider is in effect. When executing the HAP contract and rider, the PHA and owner complete the information in the HAP contract as provided in § 983.203 in addition to the information in the rider as provided in paragraph (e) of this section. The rider must be in the form required by HUD (see 24 CFR 982.162(b) ). In the rider, the owner agrees to develop the contract units to comply with HQS, and the PHA agrees that, upon timely completion of such development activity in accordance with the terms of the rider, the rider will terminate and the HAP contract will remain in effect. The PHA determination that development activity has been completed and the rider may be terminated is made when all work has been completed in accordance with the applicable requirements at § 983.155 and all contract units fully comply with HQS, as provided in § 983.156(b)(3) .(e)Contents of HAP contract rider. At a minimum, the rider must describe the following features of the housing to be rehabilitated and assisted under the PBV program and development activity to be performed: (1) A description of any required work item necessary to comply with the accessibility requirements of § 983.153(e) ;(2) A description of any required work item if the requirement at § 983.153(f) to install broadband infrastructure applies;(3) A description of the work to be performed under the rider, including the rehabilitation work write-up and, where determined necessary by the PHA, specifications and plans;(4) Any requirements the PHA elects to establish in addition to HQS for design, architecture, or quality. The PHA must specify the conditions under which it will require additional housing quality requirements in the Administrative Plan.(5) The development status of each specific contract unit. Specifically:(i) The rider must list each unit that is available for occupancy by an assisted family at the time the unit is placed on the HAP contract. Each contract unit that fully complies with HQS in accordance with the PHA determination under paragraph (c)(4) of this section and that the owner will make available for occupancy by an assisted family must be initially categorized as available for occupancy. For each unit that is available for occupancy, the rider must specify whether the owner will undertake development activity in the unit after it is occupied by an assisted family. The owner may initiate the development activity in the unit while it is occupied, subject to paragraph (g)(6) of this section, or when it becomes vacant, which may change the status of the unit for purposes of this paragraph. The owner must promptly notify the PHA of any change in the status of each unit throughout the period of development activity, in the form and manner required by the PHA's Administrative Plan;(ii) The rider must list each unit that is unavailable for occupancy at the time the unit is placed on the HAP contract. Each contract unit that has not been inspected in accordance with paragraph (c)(4) of this section or that has been inspected and did not fully comply with HQS must be initially categorized as unavailable for occupancy. The owner must promptly notify the PHA of any change in the status of each unit throughout the period of development activity, in the form and manner required by the PHA's Administrative Plan; and(6) The deadline for completion of the work to be performed under the rider, which must be no more than five years from the date the HAP contract is effective (the five-year maximum includes any extensions granted by the PHA).(f)Contract and rider amendment. In general, the PHA and owner may agree to amend the contents of the rider described in paragraph (e) of this section by executing an addendum to the rider, so long as such amendments are consistent with all requirements of this part 983. However, the following requirements apply: (1) In the case of additions or substitutions of units, the provisions of § 983.207 apply, except: (i) The PHA and owner must also amend the rider to update the information described in paragraph (e)(5) of this section;(ii) The units to be added must not undergo repairs or renovation prior to amending the PBV HAP contract to add the unit; and(iii) Addition of a unit is prohibited while the rider is in effect if such addition will increase the number of contract units from eight or fewer units to nine or more units.(2) The PHA and owner may only execute an addendum amending the items in paragraphs (e)(1)-(4) of this section affecting a unit prior to the PHA accepting the completed unit.(g)Occupancy of units during rehabilitation period. The following requirements apply with respect to contract units that are available for occupancy at the time that the HAP contract is executed and during the period of development activity covered by the rider in accordance with paragraph (d) of this section:(1) The PHA must select families as provided in § 983.251 for PBV assistance in a contract unit that is available for occupancy. Upon PHA acceptance of a completed unit (see § 983.156(b)(3) ) that is vacant, the PHA may either select a family from the waiting list for PBV assistance in the newly completed unit or offer to transfer a family assisted in a different contract unit to the newly completed unit as described in paragraph (g)(6)(iii) of this section.(2) The PHA may refer a family for occupancy of a contract unit only if the unit fully complies with HQS as determined by the PHA inspection.(3) The PHA must provide a notice to the family upon selection explaining: (i) The expected nature and duration of the development activity at the project;(ii) That if the family accepts the unit and the owner fails to complete the development activity in accordance with applicable requirements, the PHA may terminate the HAP contract, in which case the family will be issued a tenant-based voucher and may be able to remain in the project with tenant-based assistance (see § 983.206(b) );(iii) If development activity is expected to occur in the family's unit per paragraph (e)(5) of this section, that the family may be required to vacate the unit temporarily or with continued voucher assistance;(iv) That the family may choose to decline the unit and remain on the waiting list; and(v) If applicable, in the case of an eligible in-place family, that the family may choose not to accept PBV assistance in the unit.(4) The PHA must conduct periodic and other inspections on occupied contract units in accordance with the requirements of § 983.103(e) and (f) and must vigorously enforce the owner's obligation to maintain contract units occupied by an assisted family in accordance with the requirements of § 983.208 .(5) The PHA makes payments to the owner for occupied units as provided in § 983.351 .(6) When an owner will undertake development activity in a unit currently occupied by an assisted family as provided in paragraph (e)(5) of this section, the requirements of this paragraph (g)(6) govern where the family will live during the rehabilitation. For purposes of this paragraph, all references to the HQS applicable to the unit include items and components within the primary and secondary means of egress, common features, and systems equipment as described by 24 CFR 5.703(a)(2) . (i) The owner must complete the development activity without the family vacating the unit if the PHA reasonably expects that the owner can complete the development activity in a manner that: (A) Does not result in life-threatening deficiencies;(B) Does not result in any other deficiencies under the HQS that are not corrected within 30 days; and(C) Is mutually agreeable to the owner and the family;(ii) If the conditions for in-place development activity in paragraph (g)(6)(i) of this section cannot be achieved, the owner must temporarily relocate the family to complete the development activity if:(A) The PHA reasonably expects that the owner can complete the relocation and development activity within a single calendar month (beginning no sooner than the first day of a month and ending no later than the last day of the same month); and(B) The family can be relocated to a location and in a manner mutually agreeable to the owner and the family; and(iii) If the conditions for in-place development activity in paragraph (g)(6)(i) of this section and temporary relocation in paragraph (g)(6)(ii) of this section cannot be achieved, the following protocol for lease termination and relocation applies: (A) If there are contract units within the project that are designated as available for occupancy and that are vacant or expected to become vacant at the time of the planned lease termination, the PHA must refer the family to the owner for occupancy of an appropriate-size contract unit. If the family accepts the offered unit, the owner must provide the family with a reasonable time to move to the offered unit, must pay the family's reasonable moving expenses, must execute a lease with the family for the offered unit to be effective at the time of the family's move, and must terminate the lease for the family's original unit at the time of the family's move. The owner must terminate the family's lease if the family rejects the offered unit; however, the PHA must first offer the family a different unit or tenant-based assistance under paragraph (g)(6)(iii)(B) of this section if needed as a reasonable accommodation under Section 504, the Fair Housing Act, or the Americans with Disabilities Act (ADA), for a household member who is a person with disabilities. The PHA must consider other family requests for a different unit or tenant-based assistance under paragraph (g)(6)(iii)(B) of this section;(B) If no other contract unit within the project is available for the family to lease during the period of development activity, the PHA must issue the family a tenant-based voucher. However, the PHA is not required to issue the family a voucher if the PHA has offered the family an alternative housing option (e.g., an assisted unit in another PBV project), and the family chooses to accept the alternative housing option instead of the voucher. The PHA may also issue the family a tenant-based voucher to accommodate the family's need or request as provided in paragraph (g)(6)(iii)(A) of this section. The PHA must issue the voucher no fewer than 90 calendar days prior to the planned lease termination. If the family is eligible and willing to request a voucher to move in accordance with § 983.261 , the PHA must issue the family the voucher to move under that section. If the family is not eligible or is unwilling to request a voucher to move under § 983.261 , the PHA must remove the family's unit from the PBV HAP contract and issue the family its voucher to move with tenant-based assistance and subsequently add a unit back to the PBV HAP contract at the earlier of the time that the PHA has an authorized voucher unit available or the time that the unit is ready for occupancy. The PHA must extend the voucher term until the family either leases a unit with the tenant-based voucher or accepts a contract unit, whichever occurs first;(C) If the family moves from the project in order for the owner to undertake development activity in the family's unit, the PHA must offer the family the option to return to the project with PBV assistance, if the family is eligible for PBV assistance, following completion of development activity at the project. The PHA, or owner in the case of an owner-maintained waiting list, must place the family on the PBV waiting list with an absolute selection preference for occupancy in the project; and(D) If the family moves from the project in order for the owner to undertake development activity in the family's unit, the PHA must not refer any family for occupancy of the unit until after rehabilitation of the unit and PHA acceptance of the completed unit (see § 983.156(b)(3) ).(h)Owner breach. The owner's failure to complete the development activity as provided in the rider is a breach of the HAP contract and may result in the termination of the HAP contract, in accordance with the following requirements: (1) If the owner has not completed the development activity by the deadline specified in the rider, which includes any extensions granted by the PHA, (see paragraph (e)(6) of this section), the PHA may grant an additional period for compliance to allow the owner more time to complete the development activity. The granting of any such period must be consistent with the PHA's Administrative Plan and must not exceed 180 days. If the owner has not completed the development activity following the period for compliance, the PHA must terminate the contract. In addition to termination, the PHA may exercise any of its other rights or remedies under the HAP contract. At HUD's sole discretion, HUD may approve a PHA's request for an extension of the period for compliance beyond 180 days. In determining whether to approve the PHA request, HUD will consider appropriate factors, including any extenuating circumstances that contributed to the delay.(2) The owner's failure to comply with the development requirements of § 983.153 constitutes a breach of the HAP contract (see § 983.206(c)(2) ). In the event that the owner's failure constituted only a de minimis error in the owner's compliance with the development requirements of § 983.153 , the PHA may decide to take an action other than termination of the HAP contract. In all other cases, the PHA must terminate the HAP contract, in addition to any other rights and remedies the PHA chooses to exercise under the HAP contract.(i)PHA-owned units. For PHA-owned units, the independent entity must perform the inspections required under paragraphs (b)(1) and (g) of this section and make the determinations in paragraphs (g)(6)(i) and (g)(6)(ii)(A) when the owner will undertake development activity in a unit currently occupied by an assisted family, as applicable.81 FR 92639, Dec. 20, 2016 81 FR 92639, 12/20/2016; 89 FR 38321, effective date to be determined