Rehabilitation, 24 CFR Part 881, and Housing Finance and Development Agencies, 24 CFR Part 883. (See 24 CFR 880.102, 881.102, and 24 CFR 883.202, respectively, for the definition of "Fair Market Rent".)

(b) Categories. (1) These Fair Market Rents are established by unit size (number of bedrooms) and basic structure type (e.g., detached, semi-detached/row houses, walk-up apartments, elevator apartments; mobile homes; housing designed for the elderly or handicapped is a separate type for this purpose). These Fair Market Rents are based on the levels of rental paid for recently constructed dwelling units of modest design within each market area. They include a trend adjustment to allow time for processing and construction. These rents are estimates of the rentals that prospective tenants who have incomes above 80 percent of median income would be willing and able to pay for newly constructed living units of modest design. They may or may not represent rents needed to support construction and operating costs.

(2) Fair Market Rents for mobile homes will be established on an area by area basis upon application to any HUD field office demonstrating that there is a need therefor in the geographic area under the jurisdiction of that HUD field office.

§ 888.102 Fair market rents for existing housing. [Reserved]

§ 888.103 Manner of publication.

Schedule A and Schedule B Fair Market Rents will be published in the FEDERAL REGISTER at least annually. Interim revisions for one or more market areas may be initiated by a field office at any time and may be published as market conditions dictate. Interested parties may submit information concerning need for interim revisions to these Fair Market Rents to the appropriate field office. SCHEDULE A1

FAIR MARKET RENTS FOR NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION (INCLUDING HOUSING FINANCE AND DEVELOPMENT AGENCIES PROGRAM)

1 Filed as part of original document.

SCHEDULE B

FAIR MARKET RENTS FOR EXISTING HOUSING
(INCLUDING HOUSING FINANCE AND DE-
VELOPMENT AGENCIES PROGRAM)
[Schedule B Fair Market Rents will be
published at a later date.]

Subpart B-Contract Rent Automatic
Annual Adjustment Factors

§ 888.201 Purpose and applicability.
Schedule C of this Part sets forth the
Automatic Annual Adjustment Factors
as determined by HUD for the Section 8
Housing Assistance Payments Program-
New Construction, Substantial Rehabili-
tation, and Housing Finance and De-
velopment Agencies (see 24 CFR 880, 881,
and 883, respectively).
§ 888.202

Manner of publication.

Schedule C Adjustment Factors will be published in the FEDERAL REGISTER at least annually. Interim revisions may be published as market conditions dictate. SCHEDULE C

CONTRACT RENT AUTOMATIC ANNUAL RENT

ADJUSTMENT FACTORS

1270.301 1270.302

1270.303

1270.304

Membership.

Organizing the HBA.

Functions of the HBA.

1270.305 Funding of HBA. 1270.306

Performing Management Services. 1270.307 Alternative to HBA.

1270.308 Relationship with Homeowners Association.

1270.309 Use of Appendices. 1270.310 Waivers.

Appendix I-Articles of Incorporation and

By-Laws of Homebuyers Association

Appendix II-Recognition Agreement Between Local Housing Authority and Homebuyers Association

AUTHORITY: Sec. 7(d), 79 Stat. 670; 42 U.S.C. 3535 (d).

SOURCE: 39 FR 10966, Mar. 22, 1974, unless otherwise noted.

Subpart A-Introduction

to Low-Rent

Housing Howeownership Opportunity
Program [Reserved]

Subpart B-Turnkey III Program
Description

ments, including those under development or in operation on the effective date of this subpart, as follows:

(1) With respect to any development to be operated as Turnkey III, the Annual Contributions Contract (ACC) shall contain the "Special Provisions for Turnkey III Homeownership Opportunity Project" as set forth in Appendix I. A Turnkey III development may include only units which are to be operated as such under Homebuyers Ownership Opportunity Agreements. If for any reason it is determined that certain units should be operated as conventional rental units, such units must comprise or be made part of a conventional rental project.

(2) With respect to Turnkey III developments pursuant to an executed ACC where no Agreements with Homebuyers have been signed, the ACC shall be amended (i) to include the "Special Provisions" set forth in Appendix I, (ii) to extend its term to 30 years, and (iii) to reduce its Maximum Contribution Percentage to a rate that will amortize the debt in 30 years at the minimum Loan Interest Rate specified in the ACC for the specific Turnkey III project involved. Further development and operation shall be in accordance with this subpart including use of the form of Homebuyers Ownership Opportunity Agreement set forth in Appendix II.

(3) With respect to developments where Agreements with homebuyers have been signed, the following steps shall be taken:

(i) The ACC shall be amended to include the Special Provisions" set forth in Appendix I; further development and operation of the Project shall be in accordance with this subpart.

(ii) The LHA shall offer all qualified homebuyers in the development a new Homebuyers Ownership Opportunity Agreement as set forth in Appendix II with an amendment to section 16a to refer to "the latest approved Development Cost Budget, or Actual Development Cost Certificate if issued," in lieu of "the Development Cost Budget in effect upon award of the Main Construction Contract or execution of the Contract of Sale," and, if the ACC for the Project has a term of 25 years, an amendment to section 16 (b) to refer to a term

of 25 years, instead of 30, for the Purchase Price Schedule. Each Purchase Price Schedule shall commence with the first day of the month following the effective date of the initial Agreement. No other modification in the new Agreement may be made. In the event the homebuyer refuses to accept the new Agreement, no modifications may be made in the old Agreement and the matter shall be referred to HUD.

(4) With respect to Projects which were under ACC on the effective date of this subpart, the Total Development Cost Budget shall be revised, if financially feasible, to include the cost of the appraisals which are necessary for computation of the initial purchase prices pursuant to § 1270.113. In the event this is not financially feasible, the matter shall be referred to HUD, which may, if necessary, authorize a different method for computation of such initial purchase prices on an equitable basis.

(5) With respect to all developments which were completed by the effective date of this subpart, the appraisals which are necessary for computation of the initial purchase prices pursuant to § 1270.113 shall be made as of the date of completion of the development. § 1270.102 Definitions.

(a) The term "common property" means the nondwelling structures and equipment, common areas, community facilities, and in some cases certain component parts of dwelling structures, which are contained in the development: Provided, however, That in the case of a development that is organized as a condominium or a planned unit development (PUD), the term "common property" shall have the meaning established by the condominium or PUD documents and the State law pursuant to which the condominium or PUD is organized, under the terms "common areas," "common facilities," "common elements," "common estate," or other similar terms.

(b) The term "development" means the entire undertaking including all real and personal property, funds and reserves, rights, interests and obligations, and activities related thereto.

(c) The term "EHPA" means the Earned Home Payments Account established and maintained pursuant to § 1270.110.

(d) The term "homebuyer" means the member or members of a low-income family who have executed a Homebuyers Ownership Opportunity Agreement with the LHA.

(e) The term "homebuyers association" (HBA) means an organization as defined in § 1270.106.

(f) The term "homeowner" means a homebuyer who has acquired title to his home.

(g) The term "homeowners association" means an association comprised of homeowners, including condominium associations, having responsibilities with respect to common property.

(h) The term "HUD" means the Department of Housing and Urban Development which provides the LHAS with financial assistance through loans and annual contributions and technical assistance in development and operation.

(i) The term "LHA" means the local housing authority which acquires or develops a low-rent housing development with financial assistance from HUD, owns the homes until title is transferred to the homebuyers, and is responsible for the management of the homeownership opportunity program.

(j) The term "NRMR" means the Nonroutine Maintenance Reserve established and maintained pursuant to § 1270.111.

(k) The term "Project" is used to refer to the development in relation to matters specifically related to the Annual Contributions Contract.

(a) Financial framework. The LHA shall finance development or acquisition by sale of its notes (bond financing shall not be used) in the amount of the Minimum Development Cost. Payment of the debt service on the notes is assured by the HUD commitment to provide annual contributions.

(b) Contractual framework. There are three basic contracts:

(1) An Annual Contributions Contract containing "Special Provisions For Turnkey III Homeownership Opportunity Project," Form HUD-53010C (see Appendix I);

(2) A Homebuyers Ownership Opportunity Agreement (see Appendix II) which sets forth the respective rights and obligations of the low-income occupants and the LHA, including conditions for achieving homeownership; and

(3) A Recognition Agreement (see Appendix II of Subpart D of this part) between the LHA and the HBA under which the LHA agrees to recognize the HBA as the established representative of the homebuyers.

(c) Community Participation Committee (CPC). In the necessary development of citizens' participation in and understanding of the Turnkey III program, the LHA should consider formation and use of a CPC to assist the community and the LHA in the development and support of the Turnkey III program. The CPC shall be a voluntary group comprised of representatives of the low-income population primarily and may also include representatives of community service organizations.

§ 1270.104 Eligibility and selection of homebuyers.

(a) Announcement of availability of housing; fair housing marketing. (1) The availability of housing under Turnkey III shall be announced to the community at large. Families on the waiting list for LHA conventional rental housing who wish to be considered for Turnkey III must apply specifically for that program (see paragraph (d) of this section).

(2) The LHA shall submit to HUD an Affirmative Fair Housing Marketing Plan and shall otherwise comply with the provisions of the Affirmative Fair Housing Marketing Regulations, 24 CFR Part 200, subpart M, as if the LHA were an applicant for participation in an FHA housing program. This Plan shall be submitted with the development program, and no development program may be approved without prior approval of the Plan pursuant to HUD procedures under said Affirmative Fair Housing Marketing Regulations. If the development program has been approved, but the Annual Contributions Contract has not been executed, prior to the effective date of this subpart, an Affirmative Fair Housing Marketing Plan must be approved prior to execution of said contract.

(b) Eligibility and standards for admission. (1) Homebuyers shall be lowincome families as determined in accordance with the income definitions and limits established by the LHA and approved by HUD (see paragraph (b) (2) of this section). The HUD-approved standards for admission to low-rent housing, including the LHA's established priorities

and preferences and the requirements for administration of low-rent housing under Title VI of the Civil Rights Act of 1964 (Public Law 88-352, 78 Stat. 241, 42 U.S.C. 2000d), shall be applicable except that the procedures used for homebuyer selection under Turnkey III shall be those set forth in this section. In carrying out these procedures the aim shall be to provide for equal housing opportunity in such a way as to prevent segregation or other discrimination on the basis of race, creed, color or national origin in accordance with the Civil Rights Acts of 1964 (Public Law 88-352, 78 Stat. 241, 42 U.S.C. 2000d) and 1968 (Public Law 90-284, 82 Stat. 73, 42 U.S.C. 3601).

(2) An LHA may establish income limits for Turnkey III which are different from those for its conventional rental program, provided that those limits are in accord with all applicable statutory and administrative requirements and are approved by HUD.

(c) Determination of eligibility and preparation of list. The LHA, without participation of a recommending committee (see paragraph (e) (1) of this section), shall determine the eligibility of each applicant family in respect to the income limits for the development and shall then assign each eligible applicant his appropriate place on a waiting list for the development, in sequence based upon the date of the application, suitable type or size of unit and factors affecting preference or priority established by the LHA's regulations.

(d) List of applicants. A separate list of applicants for Turnkey III shall be maintained, consisting of families who specifically apply and are eligible for admission to such housing.

(1) Dating of applications. All applications for Turnkey III shall be dated as received.

(2) Effect on applicant status. The filing of an application for Turnkey III by a family which is an applicant for LHA conventional rental housing or is an occupant of such housing shall in no way affect its status with regard to such rental housing. Such an applicant shall not lose his place on the rental housing waiting list until his application is accepted for Turnkey III and shall not receive any different treatment or consideration with respect to conventional rental housing because of having applied for Turnkey III.

(e) Determination of potential for homeownership. (1) Recommending committee. The LHA should consider use of a recommending committee to assist in the establishment of objective criteria for the determination of potential for homeownership and in the selection of homebuyers from the families determined to have such potential. If a recommending committee is used, it should be composed of representatives of the CPC (if any), the LHA and the HBA. The LHA shall submit to the committee prompt written justification of any rejection of a committee recommendation, stating grounds, the reasonableness of which shall be in accord with applicable LHA and HUD regulations. Each member of such a committee, at the time of appointment, shall be required to furnish the LHA with a signed statement that the member will (1) follow selection procedures and policies that do not automatically deny admission to a particular class, that insure selection on a nondiscriminatory and nonsegregated basis, and that facilitate achievement of the anticipated results for occupancy stated in the approved Affirmative Fair Housing Marketing Plan, and (ii) maintain strict confidentiality by not divulging any information concerning applicants or the deliberations of the committee to any person except to the LHA as necessary for purposes of the official business of the committee.

(2) Potential for homeownership. In order to be considered for selection, a family must be determined to meet at least all of the following standards of potential for homeownership:

(i) Income sufficient to result in a required monthly payment which is not less than the sum of the amounts necessary to pay the EHPA, the NRMR, and the estimated average monthly cost of utilities attributable to the home;

(ii) Ability to meet all the obligations of a homebuyer under the Homebuyers Ownership Opportunity Agreement;

(iii) At least one member gainfully employed, or having an established source of continuing income.

(f) Selection of homebuyers. Homebuyers shall be selected from those families determined to have potential for homeownership. Such selection shall be made in sequence from the waiting list established in accordance with this sec

tion, provided that the following shall be assured:

(1) Selection procedures that do not automatically deny admission to a particular class; that insure selection on a nondiscriminatory and nonsegregated basis; and that facilitate achievement of the anticipated results for occupancy stated in the approved Affirmative Fair Housing Marketing Plan.

(2) Achievement of an average monthly payment for the Project, including consideration of the availability of the Special Family Subsidy, which is at least 10 percent more than the breakeven amount for the Project (see § 1270.108). This standard shall be complied with both in the initial selection of homebuyers and in the subsequent filling of vacancies at all times during the life of the Project. If there is an applicant who has potential for homeownership but whose required monthly payment under the LHA's Rent Schedule would be less than the break-even amount for the suitable size and type of unit, such applicant may be selected as a homebuyer, provided that the incomes of all selected homebuyers shall result in the required average monthly payment of at least 10 percent more than the break-even amount for the Project. Such an average monthly payment for the Project may be achieved by selecting other low-income families who can afford to make required monthly payments substantially above the break-even amounts for their suitable sizes and types of units.

(g) Notification to applicants. (1) Once a sufficient number of applicants have been selected to assure that the provisions of paragraph (f) (2) of this section are met, the selected applicant shall be notified of the approximate date of occupancy insofar as such date can reasonably be determined.

(2) Applicants who are not selected for a specific Turnkey III development shall be so notified in accordance with HUD-approved procedure. The notice shall state the reason for the applicant's rejection (including a nonrecommendation by the recommending committee unless the applicant has previously been so notified by the committee) and the notice shall state that the applicant will be given an informal hearing on such determination, regardless of the reason for the rejection, if he makes a request for such a hearing within a reasonable time (to be specified in the notice) from the date of the notice.