ulations, and requirements issued pursuant thereto.

(0) Davis-Bacon Wage Rates. Not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act (49 Stat. 1011), shall be paid to all laborers and mechanics employed in the development of any substantial rehabilitation project with nine or more assisted units.

(p) Types of financing. Any type of financing may be utilized, including, but not limited to, the types listed below.

(1) Conventional loans from commercial banks, savings banks, savings and loan associations, pension funds, insurance companies or other financial institutions.

(2) Mortgage insurance programs under the National Housing Act (see Sec. 1277.207). (With respect to any obligation secured by a mortgage insured under section 221(d) (3) of the National Housing Act and issued by a public agency as mortgagor in connection with the financing of a project assisted under Section 8, the interest paid on such obligation shall be included in gross income for purposes of Chapter I of the Internal Revenue Code of 1954.)

(3) Home Improvement Loans under Title I of the National Housing Act.

(4) Section 202 of the Housing Act of 1959.

(5) Title V of the Housing Act of 1949. (6) Financing by tax-exempt bonds or other obligations. Where the financing is by a non-profit corporation which is an agency or instrumentality of a PHA, the project will be considered a PHA-Owner Project.

(q) Use of contract as security for financing. (1) An Owner may pledge, or offer as security for any loan or obligation, an Agreement or Contract entered into pursuant to this Part; provided, however, that such security is in connection with a project rehabilitated pursuant to this Part, and the terms of the financing or any refinancing have been approved by HUD. It is the Owner's responsibility to request such approval in sufficient time before he needs the financing to permit review of the method and terms of the financing and the instrument of pledge, offer or other assignment that HUD is requested to approve. Where the methods and terms of financing require, the Contract Rents may be reduced in accordance with Sec. 1277.103(f) (2).

(2) Any pledge of the Agreement, Contract, or ACC, or payments thereunder, shall be limited to the amounts payable under the Contract or ACC in accordance with its terms.

(3) In the event of foreclosure, including foreclosure by HUD, and in the event of assignment or sale agreed to by HUD or made to HUD, housing assistance payments shall continue in accordance with the terms of the Contract.

(r) Security and utility deposits. (1) An Owner may require Families to pay a security deposit in an amount equal to one month's Gross Family Contribution. If a Family vacates the unit, the Owner may utilize the deposit as reimbursement for any unpaid rent or damage caused by the Family. If the Family has provided a security deposit, and it is insufficient for such reimbursement, the Owner may claim reimbursement from HUD or the PHA, as appropriate, not to exceed an amount equal to the remainder of one month's Contract Rent. If a Family vacates the unit owing no rent and causing no damage to the unit or if the amount of unpaid rent and/or damage is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance, as the case may be, to the Family.

(2) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include such interest. All security deposit funds shall be deposited by the Owner in a segregated bank account, and the balance of this account, at all times, shall be equal to the total amount collected from tenants then in occupancy, plus any accrued interest. The Owner must comply with all State and local laws regarding interest payments on security deposits.

(3) Families shall be expected to obtain the funds to pay security and utility deposits, if required, from their own resources and/or other private or public

sources.

(s) Establishment of income limit schedules; 30 percent occupancy by very low-income families. (1) HUD will establish schedules of income limits for defining Lower-Income Families and Very

Low-Income Families.

(2) In the initial renting of Contract units, the Owner shall lease at least 30 percent to Very Low-Income Families and shall thereafter exercise his best efforts to maintain at least 30 percent oc

cupancy of Contract units by Very LowIncome Families, provided that if this requirement cannot be met because of Families already residing in the property to be rehabilitated, HUD may adjust the percentage of Very Low-Income Families to the extent that it is compensated for by higher than 30 percent provision for such Families in other projects.

(t) Establishment of amount of housing assistance payments. The amount of housing assistance payment on behalf of an Eligible Family, to be determined in accordance with schedules and criteria established by HUD, will equal the difference between (1) not less than 15 percent nor more than 25 percent of the Family's gross income and (2) the Gross Rent, taking into consideration the income of the Family, the number of minor children in the household, and the extent of medical or other unusual expenses incurred by the Family, except that, in the case of a large (6 or more minors) Very Low-Income Family of a very large (8 or more minors) Lower-Income Family or a Family with exceptional medical or other expenses, the amount of the housing assistance payment shall be the difference between 15 percent of the Family's gross income and the Gross Rent.

(u) Responsibilities of the Owner. The Owner shall be responsible (subject to post-review or audit by HUD or the PHA, as the case may be) for management and maintenance of the project. These responsibilities shall include but not be limited to:

(1) Payment for utilities and services (unless paid directly by the Family), insurance and taxes;

(2) Performance of all ordinary and extraordinary maintenance;

(3) Performance of all management functions including the taking of applications, selection of Families including verification of income and other pertinent requirements, and determination of eligibility and amount of Family contribution in accordance with HUD-established

schedules and criteria;

(4) Collection of Family rents; (5) Termination of tenancies, including evictions;

(6) Preparation and furnishing of information required under the Contract;

(7) Reexaminations of Family income, composition, and extent of exceptional medical or other unusual expenses, and redeterminations, as appropriate, of the amount of Family contribution and

amount of housing assistance payment in accordance with HUD-established schedules and criteria;

(8) Redeterminations of amount of Family contribution and amount of housing assistance payment as a result of an adjustment by HUD of any applicable Allowance for Utilities and Other Services in accordance with HUD-established schedules and criteria; and

(9) Compliance with equal opportunity requirements.

Subject to HUD approval, any private Owner may contract with any private or public entity to perform such services for a prescribed fee, provided that such contract shall not shift any of the Owner's responsibilities or obligations. However, no entity which is responsible for administration of the Contract (for example, a PHA in the case of a PrivateOwner/PHA Project) may contract to perform management and maintenance of the project. (See, however, Sec. 1277.103 (y) which permits conversion of a Private-Owner/PHA Project to a Private-Owner Project.)

(v) Responsibility for Administration of Contract. (1) In the case of a PrivateOwner Project or a PHA-Owner Project, HUD is responsible for administration of the Contract. HUD may contract with another entity for the performance of some or all of its Contract administration functions.

(2) In the case of a Private-Owner/ PHA Project, the PHA is primarily responsible for administration of the Contract. However, if the PHA is the lender, the following shall apply:

(i) HUD shall have the right to make independent audits, reviews, and determinations as to compliance by the Owner with any or all of his obligations under the Contract; and

(ii) In the event HUD determines that the Owner is in default with respect to any or all of his obligations, HUD shall have the right to take direct action (as if HUD were the party to the Contract primarily responsible for its administration) to enforce any or all available remedies, including, but not limited to, abatement of housing assistance payments, collection of payments previously made in violation of the Contract, and termination of the Contract in whole or in part.

(w) Separate project requirement. (1) In the case of a Private-Owner Project or a PHA-Owner Project, each Agree

ment and Contract shall constitute a separate project.

(2) In the case of a Private-Owner/ PHA Project, such project may not include any other type of Section 8 assistance, shall be processed with a separate ACC List and ACC Part I and shall be assigned a separate project number. All substantial rehabilitation units to be placed under a single Contract shall comprise a separate project. However, the field office director may designate as a single project the units to be covered by two or more such Contracts for substantial rehabilitation projects where:

(i) The units are placed under ACC on the same date; and

(ii) Such consolidation is necessary in the interest of administrative efficiency.

(x) Conversion of Private-Owner Project to Private-Owner/PHA Project. HUD may request the Owner of a PrivateOwner Project and an appropriate PHA to agree, if they are willing, to a conversion of any such project to a PrivateOwner/PHA Project if HUD determines that such conversion would promote efficient project administration.

(y) Conversion of Private-Owner/PHA Project to Private-Owner Project. The private Owner and the PHA, in the case of a Private-Owner/PHA Project, may request HUD to agree to a conversion of any such project to a Private-Owner Project. HUD shall agree to such conversion if it determines it to be in the best interest of the project.

Subpart B-Project Development and
Operation

§ 1277.201 Allocations of contract authority to field offices.

HUD will allocate to field offices contract authority for the section 8 Housing Assistance Payments Program for metropolitan areas and for non-metropolitan areas in conformance with section 213 (d) of the HCD Act.

habilitation, and to be made available for existing housing. The field office will also determine an appropriate schedule for advertising for Preliminary Proposals Substantial Rehabilitation. § 1277.203 Invitations for preliminary proposals.

(a) Publication. The HUD field office shall initiate implementation of its program with respect to substantial rehabilitation by publishing Invitations for Preliminary Proposals-Substantial Rehabilitation in accordance with the schedule established by the field office. Such publications shall be at least once a week on the same day or days of each of two consecutive weeks in a newspaper(s) of general circulation serving the area(s) for which proposals are desired. As promptly as possible, HUD will also notify minority media, business concerns included in HUD's registry of section 3 businesses for the applicable political jurisdictions, minority organizations involved in housing and community development and fair housing groups. In addition, to the extent feasible, HUD will notify appropriate PHA's, the chief executive officer of the appropriate unit(s) of general local government, trade journals, and other non-minority media. Copies of each Invitation shall be available in the HUD field office.

(b) Contents of invitation. The Invitation shall state the geographic area or areas in which the housing is to be rehabilitated; the number of units in each area; the deadline for receipt of Preliminary Proposals by HUD; such other basic information as the field office may wish to specify; and the fact that detailed information, guidelines, standards and procedures are contained in a Rehabilitation Program Packet which may be obtained by interested parties from the field office. The Invitation shall also state that Preliminary Proposals may be submitted by private Owners or PHA Owners for direct contracting with HUD, or by PHAs on behalf of private Owners with whom the PHA proposes to contract pursuant to an ACC with HUD.

(c) Deadline for receipt of preliminary proposals. The deadline (date and time) for receipt of Preliminary Proposals by HUD shall allow a reasonable time but, in any event, no less than 35 calendar days after the date of the first publication in a newspaper of general circulation.

§ 1277.204

Contents of rehabilitation program packet.

The Rehabilitation Program Packet shall:

(a) Include a copy of the applicable regulations, required HUD forms, and HUD standards.

(b) Include the following information for each geographic area specified in the Invitation.

(1) The number of units for elderly and nonelderly occupancy and the number to be specially designed for elderly (including handicapped) occupancy.

(2) The number of units by unit size (bedrooms per unit) and the fact that a proposal may be for any number of units up to that amount.

(3) The type of housing, if any, which is unacceptable (e.g., high-rise elevator structures for Families with children, where HUD has determined that such housing is inappropriate).

(4) Special requirements, if any, as to location and density; and as to New Communities were substantial rehabilitation is involved.

(5) Any special requirements for housing for the elderly (including the handicapped) pursuant to section 209 of the HCD Act, and any special requirements for the handicapped pursuant to the standards established by HUD under Public Law 90-480.

(6) Any special requirements or restrictions that may be necessary for compliance with provisions of the Local Housing Assistance Plan, if any, and the name, address, and title of the official of the unit of general local government to whom inquiries may be made concerning such Plan.

(7) The specific management and maintenance services required to be provided by the Owner. Such services shall include all services typically provided in the area for the type of housing contemplated.

(8) The Fair Market Rents and the fact that rents requested by the Owner must be determined by HUD to be reasonable in accordance with sec. 1277.103(f).

(9) The maximum initial term of the Contract and the fact that the maximum approvable term, including renewals, will be determined in accordance with sec. 1277.103(g).

(c) Include statements as to:

(1) Equal opportunity requirements, which include the submission of an Af

firmative Fair Housing Marketing Plan (if the proposal is for five or more units); an assurance of compliance with Title VI of the Civil Rights Act of 1964; compliance with Executive Order 11063 and Title VIII of the Civil Rights Act of 1968, including regulations and guidelines pursuant thereto; and certifications required pursuant to Executive Order 11246.

(2) HUD regulations and other requirements implementing section 3 of the Housing and Urban Development Act of 1968, requiring that, to the greatest extent feasible, opportunities for training and employment be given to lowerincome residents of the project area and contracts for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in, the area of the project.

(3) HUD relocation requirements.

(4) HUD requirements implementing the National Environmental Policy Act.

(5) Governmental requirements implementing the Clean Air Act and the Federal Water Pollution Control Act.

(6) HUD requirements implementing the Flood Disaster Protection Act of 1973.

(7) The requirement, if a project will contain nine or more Contract units, that all laborers and mechanics employed in the development of the project shall be paid not less than the wages prevailing in the locality as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act.

(8) The prescribed HUD form showing the identity of the Owner, the rehabilitator, the architect (if any), and the managing agent (if any); the qualifications and experience of each; and the names of officials and principal members, shareholders and investors, and other parties having substantial interest.

(9) The requirement that the Owner submit evidence of capability to provide the required management and maintenance services or, if the proposal is for 15 or more units, evidence of management capability and a proposed management plan and a certification by the Owner and the management agent, if any, in a format acceptable to HUD.

(10) The fact that if the Owner intends to pledge, or offer as security for any loan or obligation, an Agreement or Contract, he is responsible for submitting to HUD a request for such approval in sufficient time before he needs the

financing to permit review of the method and terms of the financing and the instrument of pledge, offer or other assignment; and that if the request is made after approval of the Final Proposal, the Contract Rents may be reduced where the methods and terms of anancing require. (See § 1277.103 (q).)

(11) Other requirements which the HUD field Office determines to be necessary.

(12) Where copies of HUD Minimum Design Standards for Rehabilitation for Residential Properties and any other applicable standards, guidelines and criteria may be obtained.

(13) The number of copies of the Preliminary Proposal to be submitted to HUD.

(14) The fact that HUD may determine not to select or approve any or all Preliminary Proposals submitted.

§ 1277.205 Contents of preliminary proposal.

Each Preliminary Proposal shall include or indicate the following:

(a) The address(es) of the housing proposed to be rehabilitated and a neighborhood map showing the location(s) of the housing and the racial composition of the neighborhoods (s).

(b) A copy of the option agreement(s), contract(s) of sale, or other document(s) which evidence (s) the proposer's effective control of the property to be rehabilitated (however, only the proposed price is required for a New Communities project).

(c) A description of the housing as is, including number and type of structures, number of stories, structural system, exterior finish, heating-air conditioning system, number of units by size (number of bedrooms), living area and composition for each size of unit, and special amenities or features, if any; exterior and interior photos; and sketches of the interior showing dimensions.

(d) A description of the proposed rehabilitation covering each basic element (e.g., roof, exterior walls, porches and steps; interior walls, ceilings and floors; kitchen and bathroom facilities and equipment; plumbing, heating and electrical equipment; landscaping; etc.) indicating the nature of the work to be done on each element. If alteration, renovation or remodeling is indicated, a description of such work and sketches showing layout after completion of rehabilitation.

(e) A statement as to whether or not the services of a registered architect will be utilized for preparation of final working drawings and specifications.

(f) The Contract Rent per unit, by size and structure type.

(g) The equipment to be included in the Contract Rent.

(h) The utilities and services to be inIcluded in the Contract Rent and those utilities and services not so included. For each utility and service not included in the Contract Rent, an estimate of the average monthly cost (for the first year of occupancy) to the occupants by unit size and structure type.

(i) The proposed term of the Contract (including all renewals) and justification for such term in accordance with Sec. 1277.103(g).

(j) A showing that the proposal meets any special requirements or restrictions necessary for compliance with the provisions of the Local Housing Assistance Plan, if any.

(k) Whether the proposed rehabilitation will displace site occupants. If so, the proposal shall state the number of families, individuals, and business concerns to be displaced (identified by race or minority group status, and whether they are owners or renters), and shall show that there is a feasible plan for relocation and how necessary relocation payments, if any, will be funded.

(1) Equal Employment Opportunity Certification using the prescribed form.

(m) The identity of the Owner, rehabilitator (if known) and architect (if applicable and identity is known; the qualifications and experiences of each; and the names of officials and principal members, shareholders and investors, and other parties having substantial interest, and the prior participation of each in HUD programs, using the prescribed form.

(n) Whether the Owner intends to provide management services or to contract with a managing agent. In the latter case, provide the identity of the managing agent, if known, and the other information as specified in paragraph (m) of this section.

(0) The proposed method of financing and whether the Owner intends to pledge or offer the Agreement and/or Contract as security for any loan or obligation (see Sec. 1277.103 (q)). If the Owner proposes to utilize FHA mortgage insurance, the prescribed FHA form should be com