HomeMy WebLinkAboutR09-Economic Development Agency
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DEVELOPMEBT DEPARTMEBT
01' TIlE CITY 01' SAN Rn.nnlllO
RBOUBST FOR CCMlISSIOB/cotJBCIL ACTIOB
From:
KENNETH J. HENDERSON
Executive Director
MAlB STREET IBB
SIBGLB ROOM OCCUPANCY
(SRO) JlO'1'BL
Subject:
Date:
October 30, 1991
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SvnoDsis of Previous Cn..fssion/Cnunri1/CftMMittee Action(s}:
On October 16, 1991, the Housing Committee considered four (4) deal point
scenarios and directed staff to develop an appropriate deal point
structure and submit same at its October 29, 1991 meeting.
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Recommended Motion(s}:
(C--t.tv Deve1o-....t Cn_fssion)
Housing Ccmm.ttee Rec~endation
MOTIOB A: That the Community Development Commission approve financial
assistance to Larcon Development Company Inc., as follows:
(i) Development Department to provide land free and clear and
pay all fees, with such acquiSition, demolition and fees
estimated to be $1,795,000; (ii) Development Department
assistance to take the form of a "silent" second deed of trust,
(iii) the project will set-aside thirty-percent (30X) of its
units for very low income households; (iv) the Department to
receive fifteen-percent (15X) of cashflow, plus fifteen-percent
(15X) of net sale or refinance proceeds; and (v) the
Development Department to guarantee the projected rent revenue
shortfall of $210,000 for the first three (3) years.
Administrator
~Il J. IlEBDERS B
Executive Directo
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Contact Person(s): Ken Henderson/Doris Daniels
Phone:
5081
Project Area(s): Central Citv North (CCN)
Ward(s):
Two (2)
Supporting Data Attached:
Staff ReDort
FUNDING REQUIREMENTS:
Amount: $1.795.000
20X Set Aside Fund
Source:
Budget Authority:
To be Established
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Commission/Council Bates:
KJH:DAD:lab:0224E
CCMlISSIOB MBBl'IBG AGBBDA
Meeting Date: 11/04/1991
Agenda It_ B1aber: ~
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DEVELOPMDT DBPAltnma1: RBQUBSr lOR COIMISSIOl'l/COtllfCIL ACTIOl'l
Main Street IDn Single RoOll Occupancy (SRO) Hotel
October 30, 1991
Page l'IUlDber -2-
SvnoDsis of Previous C~issionlCnnn~i1/C~fttee ActionsCs} Continued...
On October 29, 1991, the Housing Committee considered the deal point
scenario prepared by staff and took action recommending approval to the
Commission of same.
Reco_ended MotionCs} Continued...
(C.......ftv Deve10maent C....fssion)
Staff RecOBDendation
MOTIOl'l B:
That the Housing Committee recommendation be approved,
except that the fifteen-percent (15X) equity participation
by the Department be increased to eighteen-percent (18X).
KJH: DAD: lab: 0224E
COIIUSSIOl'l MBBTIl'IG AGBIIDA
Meeting Date: 11/04/1991
Agenda It.. l'Iumber:
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DBVBLOPIIB.r DBPARrIlB.r
OF TIIB CIn OF SAlt BBRlURDIlIO
STAFF REPORT
Main Street Inn Si_Ie Ro_ OCC111l8DCV (S2O) Hotel
On August 27, 1991 and on September 17, 1991, staff from Larcon
Development, Inc., made presentations to the Housing Committee regarding
a proposed single room occupancy (SRO) hotel to be located at the
northeast corner of Fifth and "E" Streets in the City of San Bernardino.
The proposed hotel, Main Street Inn, will contain four (4) stories with
two-hundred, sixty-four (264) individual rooms and a basement with a
thirty-nine (39) space parking garage.
The SRO Hotel will contain five (5) separate floor plans integrated
throughout the building. The rooms will range from one-hundred,
seventy-five (175) square feet minimum to two-hundred, forty-five (245)
maximum. The rents will range from $315.00 a month for the smallest unit
(forty (40) units available) to $550.00 a month for the largest
(twenty-six (26) units available). The remaining one-hundred,
ninety-eight (198) units will rent for $377.00, $441.00, and $504.00 per
month, respectively.
The proposed Main Street Inn design was developed to meet or exceed the
proposed San Bernardino SRO ordinance requirements. Major design
features of the building focus on privacy and security. The project will
exceed the required Twenty-Percent (20X) Set Aside and provide for
Thirty-Percent (30X) or approximately eighty (80) rooms for low to very
low income residents. The balance of the rooma will provide housing
opportunities for single City residents of varied income levels. The
projected development budget is approximately $9.1 million dollars.
On October 16, 1991, the Housing Committee considered four (4) separate
deal point scenarios without making a recommendation. Staff was directed
to meet with the developer to develop an appropriate deal point structure
and bring same back to the Committee at its October 29, 1991 meeting.
At the October 29, 1991 Housing Committee meeting, the Committee, after
lengthy discussion, unanimously recommended the following deal point
scenario:
1. Development Department to provide land free and clear and pay all
fees, with such acquisition, demolition and fees estimated to be
$1,795,000.
2. Development Department assistance to take the form of a "silent"
second deed of trust.
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KJH:DAD:lab:0224E
COMIIISSIO. MBBrIRG AGBlUlA
lIeetina Date: 11/04/1991
Agenda I tell IIuIIber:
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DEVELOPMERr DEPAR'Il'IAl'r.l STAlT REPORT
Main Street Iun SRO Project
October 30. 1991
Page NUllber -2-
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3. The project will set aside thirty-percent (30%) of the units for very
low income households.
4. The Department to receive fifteen-percent (15%) of the cashflow, plus
fifteen-percent (15%) of the net sale or refinancing proceeds.
5. The Development Department to guarantee the projected rent revenue
shortfall of approximately $210,000 for the first three (3) years of
operation.
Prior to the Housing Committee meeting, Larcon representatives met with
the Mayor. At this meeting, agreement was reached on all deal points
which included the City's fifteen percent (15%) equity position and did
not include the rent revenue shortfall deal Doint. The Mayor and Larcon
further agreed that should Larcon ask for additional financial
assistance, the City would revisit the equity participstion issue.
Subsequent to the Housing Committee meeting the Mayor requested, and
Larcon agreed, that the Department's equity participation position should
be increased from fifteen-percent (15%) to eighteen-percent (18%). This
last point was insisted upon by the Mayor because Larcon and the Mayor
had previously agreed that, if negotiations were reopened (reopened when
rent revenue deal point included), the City would require additional
equity.
Based upon the foregoing, staff recommends the Community Development
Commission approve the deal points as recommended by the Housing
Committee, except for the following provision:
1. That the Development Department's equity participation be increased
from fifteen-percent (15%) to eighteen-percent (18%) as a result of
reopened negotiations and the inclusion of the rent revenue shortfall
deal point.
The following revenues will be realized by the Department based upon the
above referenced equity participation rates:
Fifteen-Percent
(15%) ParticiDation
Eiahteen-Percent
(laX) ParticiDation
Sales Proceeds to
Department in
Year Seven
$1,164,442
$1,397,330
10 Year Cashflow
$ 348,551
$ 740,518
$ 418,262
$ 868,602
15 Year Cashflow
KJH:DAD:lab:0224E
COMMISSION MEETIBG AGEBJlA
Meeting Date: 11/04/1991
Agenda It_ BuIIIber:
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DEVELOPMBBr DBPAR1:IwI:r S1'AFF REPORT
Main Street Iun sao Project
October 30, 1991
Page l'I'umber -3-
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Based upon the foregoing, staff recommends adoption of the ~ form
motion.
II, EXecutive Director
Developaent Department
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KJH:DAD:lab:0224E
CO*ISSIOII IlBETIRG AGUllA
Meeting Date: 11/04/1991
A&eDda It_ ltlaber: __
10/30/'31
17: 14
LRRCOI.1 DE','ELOP. IHC 714 8846943
002
S,NT aY:San asrn County
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SO. OF SUP!RvtSOR5~
714 aa4 8943:. 2
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OJountg of eun 1i~marbtnu
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October 30. 1991
. Ilabrrt It Ifumllhtck
Sup.,III.or. Fifth District ..
GINOf" l, PlICE
l.tCiltl\" Aul.1.r;t
JO ANN' M. WILLIAMS
Admlni.'rlrlvl A..lltl"'!
PlAY CADfNA
Adminllt..V.. A..I,,"nl
CATM! \/!PlMOElliN
j,Clminf.tr.tI.... Alellta"t
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Mr. B. Gilbert lara, Jr.
Lareon DeVllopment Inc.
Pacific Savfngs Plaza
330 N. "0" Strut. Suite 110
San Bernardino. CA 92401
Dear Mr. Lara;
Thank you for the presentation made to Mr. Harry Mays. Mr. Tom Laurin
and myself with respect to your proposed "MAIti STREET INti (SRO)"
to be located adjacent to our County offices within Fifth Street
Place. I 1m supportive of proposals to create parking adjacent to
Our facility and a new facade for the County offfce building.
This Improvement wfll greatly improve the secUrity and appearance
for Our County employees while stimulating redevelopment wfthin this
vftal downtown block.
Accordingly, t have instructed Mr. Laurfn to assist in the financing
of the County bufldlng retrofft by security funding through a market
rate rental adjustment and our community development loan.
Please advise me of your actions by the Cfty of San Bernardino (RDA)
in order that we can proceed with our eooperative effort.
SIncerely,
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ROBERt L. HAMMOCK
SupervfsOr. Fifth DIstrict
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October 2, 1991
Mr. Joe Hirsch
Director of Development Housing Commission
BOOSIIlG AlII) 1JRBU DBVBLOPIlBIl'1'
1625 West Olympic Blvd., 10th Floor
Los Angeles, CA 90015-3801
SRO 1I0RTGAGB IBSOllUICB PROGlUUI UPLICATIOB
Dear Mr. Hirsch:
The City of San Bernardino has received a proposal from
Larcon Development Inc. for a new SRO facility to be located in
downtown San Bernardino.
We realize the SRO Mortgage Insurance Program is an essen-
tial element in order to secure the most competitive financing
and Larcon Development Inc. has requested we provide the follow-
ing certifications as required pursuant to the criteria outlined
in the Federal Register 24 CFR Part 221. Therefore, we certify
that:
1) Our Redevelopment Agency's Housing Committee approved
the project on September 17, 1991 and it is in staff financing
review. We anticipate our review to be completed by October 15,
1991 and will provide any necessry documents you require.
2) The city is currently developing our required "CHAS"
Comprehensive Housing Affordability Strategy which will be com-
plete October 31, 1991. Our preliminary reports document the
need for affordable housing for low income renters. Further
substantiated by the June 1988 "RHNA" Regional Housing Needs As-
sessment formulated by "SCAG" Southern California Association of
Governments. Of the lower income households overpaying for hous-
ing, 76' are renters. Upon completion of our CHAS we will pro-
vide any documentation you require.
3) The City of San Bernardino has developed our SRO Ordi-
nance which reflects our commitment by eliminating government
barriers for affordable housing projects and will ensure this
project's long term success.
4) This SRO project submitted by Larcon Development Inc.
is proposed for two adjoining sites currently vacant and which
will require demolition of the existing improvements. There is
no anticipated relocation requirements nor desplacement of exist-
ing tenants.
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Mr. Joe Hirsch
October 2, 1991
Page 2 of 2
This SRO facility will be a revitalizing stimulus to a block
area in downtown which we believe is a necessary affordable
housing proposal for San Bernardino. It is an "exciting" projet
and we look forward to the successful development of our "first"
SRO in San Bernardino.
We request your immediate review and approval of the impor-
tant "Affordable Housing Project" in San Bernardino. If there
are any questions, please contact me at (714) 384-5081.
Respectfully,
Kenneth J. Henderson
Executive Director
CITY OF SAN BERNARDINO
ECONOMIC DEVELOPMENT AGENCY
KJH:
cc: Mr. Michael Maudsley, Chairman, BOUSIRG COJOIITTBB
Mr. B. Gilbert Lara, Jr., LARCOR DBVBLOPKDI'1' IRC.
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Friday
. April 19, 1991
,
Part III
Department of
Housing and Urban
Development
Office of Assistant Secretary
24 CFR Part 221 .
Mortgage Insurance for Single Room
Occupancy Projects; Final Rule
16198
Federal Regisler I Vol. 56. No. 76 I Friday. April 19. 1991 Rules and Regulations
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
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Office of Assistant Secrelary for
Housln9-Federal Housln9
Commissioner
24 CFR Part 221
'[Docket No. R-91-1488; FR-2774 F-03J
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RIN 2502-AE95
Mortgage Insurance for Single Room
Occupancy Projects
AGENCY: Office oC the Assistant
Secretary Cor Housing-Federal Housing
Commissioner. HUD.
ACTION: Final rule.
SUMMARY: This rule establishes a new
mortgage insurance program for the new
construction and substantial
rehabilitation oC single room occupancy
Cacilities (SROs). The prosram is
designed to expand aCCordable housing
opportunities Cor single persons and to
help prevent homelessness. It will
enhance the provision oC much needed
housing Cor persons now living in
substandard or overcrowded conditions.
or at risk oC becoming homeless.
MultiCamily mortgage insurance
, would be made available under section
221(d) oC the National Housing Act. 12
U.S.C.17151(d). pursuant to the
authority in section 223(g) oC the
National Housing Act. 12 U.S.C.
1715n(g).
EFFECTIVE DATE: june 1. 1991. IC it is
necessary to delay this effective date.
HUD will publish a document in the
Federal Register prior to june 1. 1991
doing so.
FOR FURTHER INFORMATION CONTACT:
Linda Cheatham, Acting Director, Office
of Insured Multifamily Housing
Development. room 6134. Department oC
Housing and Urban Development. 451
Seventh Street SW.. Washington. DC
20410, voice: (202) 708-3000. (This is not
a toll-free number.)
SUPPLEMENTARY INFORMATION:
A. Background
In many localities. there exists a fairly
sizable population of persons. consisting
of low-income wage earners and others
who derive their income from some form
of public assistance. who cannot afford
market area rents for apartments that
typically consist of more than one room.
Many in this population. consisting
largely of single persons. are in jeopardy
of joining the ranks of the homeless.
while others pay a disproportionately
large portion of their incomes to reside
in substandard housing units.
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The Department believes that an
unassisted single room occupancy (SRO)
multifamily insurance program could
significantly assist this population, the
members of which are generally not
served by HUD's other insurance or rent
subsidy programs.
SRO projects have recently become
recognized by local governments and by
advocacy groups for the homeless and
affordable housing as a means of
helping to alleviate housing ills that
beset many urban centers. Efforts are
currently underway in such cities.as
New York. Los Angeles. San Diego. San
Francisco. Atlanta. Richmond and the
District of Columbia. These efCorts to
develop and convert SROs to long-term
affordable housing projects show
significant promise. New development
or substantial rehabilitation of SROs, at
times used in conjunction with local
government financial assistance or
federal tax credits. has resulted in an
increasing number oC affordable units
being made available to low-income
persons. Nonetheless. an inadequate
supply of SRO units continues to exist.
Persons who could obtain low-wage
employment in urban centers are often
unable to find affordable. decent
housing in proximity to the jobs that are
available.1n the absence oC an adequate
supply of SRO unils. some are required
to choose between employment and
decent housing. In order to expand the
supply of SRO units. and thereby assist
in meeting the needs of some of those
who are ill-housed or In need of housing
in proximity to employment. HUD is
establishing this new multifamily
mortgage insurance program, Federal
mortgage insurance will have the effect
of increasing the financial viabilily of
investment in this form of affordable
housing.
In reviewing the SRO issue. HUD has
focused a good deal of attention on the
program undertaken in the cily of San
Diego. San Diego is working with private
developers to generate w~at ultimately
will approximate 2500 new SRO units.
Developers have benefited from cily
financial support. assistance from local
housing authorities and Cederaltax
credits. In order to accommodate the
new program, San Diego has had to
enact a number oC changes to building
and zoning codes and requirements.
HUD has determined that a local
government. as opposed to the federal
government, is best situated to assess
how. wilhin the local jurisdiction. an
SRO program can best serve the
interests of those who are living in
substandard housing. Different
jurisdictions will arrive at different
decisions in relation to such matters as
what income groups need most to be
served within the community. Local
codes will vary among jurisdictions in
relation to such matters as permissible
room sizes. Because HUe recognizes
that local conditions may well vary. it
has designed the rule to provide local
governments with an opportunity to take
an active role in the implementation of
the SRO program.
This rule includes a requirement for
the submis.ion of a certification by the
local government with each application.
indicating that the local government has
reviewed the project. found that there is
a need for the project. and will ensure
its best efforts to provide municipal and
support services required for long-term
success of the project. This consultation
procedure will involve local government
In the SRO process, as well as provide
HUD with important information on
housing needs. Moreover. many cilie.
have a vested interest in SRO projects
which provide affordable housing for
service workers converdent to job
opportunities. Also. the certification
process will alert local governments to
the special service requirements of
specific SRO's Cor their long-term
viability, As noted above. many cities
are already taking steps to address the
needs of the population served by SROs
and have expressed interest in providing
such assistance as tax abatement. land
write-downs. and tax-exempt fmancing
for these projects.
When a SRO project is underwritten
for FHA mortgage insurance. it will not
be eligible for any, kind of project-based
Section 8 assistance. The Department
expects that project financial Ceasibility
in many areas will depend upon some
type of assistance from State and local
governments. This assistance may be in
the nature of tax abatement. tax-exempt
financing, tax credits or secondary
financing. or other forms.
8, Public Comment on Proposed Rule
On August 27, 1990 th. Department
published a proposed rule to establish a
mortgage insurance program for Single
Room Occupancy Projects (55 FR 34988).
A total of 31 written comments
concerning this proposed rule were
received. Commenters included private
organizations (for profit and nonprofit)
having an interest in SROs or the
'multifamily mortgage market generally.
trade associations, local public agencies
and private individuals. What follows is
a description of the major issues raised
by these commenters and HUD's
responses to them. Wherever feasible.
the description of each issue is provided
by directly quoting one or more of these
commenters.
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Federal Register / Vol. 56. No. 76 / Friday. April 19. 1991 /Rules and Regulations 16199
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1. More Stringent Loan to Replaced... ~ SRO projects Insured under the current. ( ..Jortgsse,. Other market-rate SROs were -
Cost Limitation section 221 loan to replacement cost built without IUbsidie.. The hurdle to SRO
bl h d I limitation. will represent an. .' development ha. been lack of debt finsncing
In the'Pream eta t e propose rue bl in . k Th' because SROs sre viewed a. a hybrid
(55 FR 34989). the Department had given unreasona e . surance rlS. ere. ore. product and becau.e mortgag.. for any type
notice that it was considering e more the ~In~1 rule WIll not Impose a more oC multifamily project are dimcultlo obtain in
stringent loan to replacement cost r.es!I'lc~lve loan to rep,lacement cost . the current financial environment. HUn
'limitation (80 rather than 90 percent) for lirrutabon. However. It ahould be noted morlgagein.urance can ecrectively addre.s
the program. Fifteen commenters that the Department will thoroughly this problem under the current 221(dl
addressed this issue. Typical of the evaluate the SRO program no later than requ~remenls. wilhout adding cumbersome
comments received is the folIowing. _ after two years of operation or 200 requirements for loc~l ~ovemment mortgage
" . ' , , million dollars of insurance has been guarante.. and .ubSld....
We do not..a any logical baSIS C~r ,a more underwritten (whichever occura first). ROO R . Th d rul '
stringent loan to replacement cost hmJtatlon .. . espbnse. e propose e
Cor SRO hou.ing (i.e. 80 percent rather than ~e Office o.f HOUSing, in co.n)unclloll emphasized the importance (if not
the 90 percent permitted under Section WIth H~ FIeld Offices haVIng insur~d necessity) of financial support for SRO
221(d)). U SRO hou.ing i. to be targeted to SRO projects under development or In developments by local governments.
limited inco!,,~ individual., lhereby manageme?~ will assess th~se SRO The Department considered whether or
ge~~raung !"ntted cash flow, the burden of projects Wlth respect to variOUs program not to require some form of local
r..smg equllY, mUd.thi~efredubced'IISection aspects. These include but are not government financial responsibility for
221(d) recogntze t ., act ya owlng9l! limited to tenant composition previous SRO b t d t ' , d th t h
percent mortgages. With proper undenvrltlng d . I I' . . ~I U e ermme a suc a.
.nd adequate review. SRO mortgages .hould residency an Income eve s, project reqUIrement would serve no pracllcal
be no more ri.ky than other projects. Th. rents: ~osts, and expenses and .physical purpose. As discussed above in
loan to replacement co.t limitation should condihon; local or Stata finanCing responding to issue (1). the economics of
not be reduced for SRO propertie.. ass!stance. if any. and financial stat,us of SRO projects will dictate the neod for'
HUll Response: The Department proJects; and any other areas of project additional resources. whether from local
considered a more stringent loan to development of management the governments or other sources.
replacement cost limitation for SRO ~epartment deems necessary, If. ~t that Consequently. there is not e need to
projects insured under section 221 lime. the program prove~ economtc!'lly expressly Impose such a requirement.
becawie of the unique physical unsound under the proVIslo~s of th..s This final rule does. however. contain
characteristics of SRO housing fin~1 rule. the Department eIther Wlll a requirement that the initial application
(compared to full-size rental apartment reVIse th~ ,program to remedy a~y for mortgage insurance include e
units) and the possibility that unde~tIng deficlencleS,ldenti~ed certification by the general unit of local
unsubsidized housing designed to serve through lis analysis. or WIll terminate government in which the project will be
low-income individuals could pose a the program altogether. located that (1) it is familiar with the
grealer insurance risk to the 2, Local Government (Financial) project proposal. (2) a documented need
Department. We have, however, decided Participation exists within the community for the
nolto prescribe such lower replacement .. , project. (3) it win ensure its best efforts
cost limitations for SRO housing in this A second Issue raIsed In the proposed to provide the municipal and support
final rule. Further analysis has led us to ,rule was whether. and 10 what ex!ent. . services required for the long-term
conclude that SRO projects. properly localgove,:","ents should be requIred. In_ success of the projec~ and (4) in cases
underwritten. will not pose an undue the regu.la.ll.on. to assume some financial involving displacement or relocation of
insurance risk to the Department. In responsIbIlIty for the mortgage ?r existing tenants that the sponsor'
most cases. an insured loan for a SRO oi!'erwise provide financial aSSlSta~Ce. developer has prepared a relocation
project will be limited by the income ~Ineteen commentera addressed this plan acceptabla to the local government.
factor (debt service crilerion) used to ..sue. T~ical wera th~ ~iews expre~sed This plan muslldentify alternative
calculate the maximum insurable loan by a nallonal homebUIldIng associatIon. affordable housing and indicate that
amount rather than by the replacement' We are concemad that tying eligibility adequate financial resources are
cost criterion.(HUD processing requires exclusively to availabillly of local available to carry out the plan.
that the insured loan amounl be the gove!""'ent sub.!dies and guaranleas will Relocation or displacement under the
I f I I' bl ., re.tr,ct the effectivene.a of the program. ,
o\V~st 0 s.evera ~pp ~ca e cnte.na... White local government assistancI IUch as mor,tgage insurance programs 18 not
TypIcally. In mulhfamlly processing. It tS tax abatemenL land write-downs and lax subJect to the requirements of the
the debt service criterion that controls exempt financing should be encouraged.ll Uniform Relocation Act. The local
the mortgage amount to be insured). should not be . required condition. Further. government is under no obligation to
HUD anticipates thallhe level of income the propo.allo require local governments to provide funds for relocation cas Is.
available to support project debt will a..um~ co-re.pon.ibility for ,the finanelal although it may elect to do so if It
result in loan to replacement cost ratios obltgahon oC L~e mortgage wtlt virtually wishes to provide such funds for SRO
at or below the 80 percent level unless assure that Cew units ara built under the projects
f d . program. A number of tha local govemments '
some type 0 evelopment cost Wrlte- \\ith tha grealest need Cor SRO hou,',n. aaa :3 n ' t 8 dR t IA 't
d ' b 'd ' .~ , ..roJec - ase en a SSlS once
own or operating cost su 81 Y IS transitional housing resource are 10 .
provided. financially strapped that they ara in no The Preamble to the proposed rule
The economics of SRO housing. po.ition to a..ume co-re.ponsibility for SRO also stated the Department's intention
especially lhe income factor. constrain mortgag... Thi. requirement would not not to provide project-based rentai
the loan to replacement cost ratio of permit significant u.a of thl. program In some assistance under the insured SRO
SRO project financing and. as noted in communities and totally preclude its u.ein program. Four commenlera addressed
the comments received on the proposed olhlte... Id b th h'l ! HUD I k ' this issue. Typical of the comments
I I I t h 'II wou a wor w .. or 0 eep III 'd' th . 11 .,.
ru e, oca govemmen save tYPlca Y mind that 8 number of the most successful receiVe 18 e.lo OWIng:
provided the additiona! fin~ci~l, SRO'. currenlly in operation were financed Project-ba.ed renlal."i.lance could ba .
support needed for project vlablhty. In u.ing thalow incoma hou.ing tax credit or valuable mechanl.m to .1I0w SRO housing to
light oC these factors. we do not feel thai flexible .ubsidies such as CODG a.cond provide a number 01 transitional hou.ing
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.16200 Federal Register I VoL 56. No. 76 I Friday, April 19. 1991 I Rules and Regulations
. uni" within a project for persons who U ,Guidelines. These Guidelines apply to (;~or the elderly that ofTer meals programs
homeless or are ai-risk of homeleslDess,The new censtruction of aU multifamily (especially project. developed under the
program could be stroctured so that when the housing with four or more units. They Retirement Service Center procedures
situation of such individuals slabili~es and provide technical guidance on recently proposed for tennination) has
they are able to assume rull responsibility ror compliance with specific requirements not been favorable. The financial
the rent on an SRO unit. the project-based
assistance could be made available for regarding certain accessible features difficulties experienced by many of
. another individual requiring 8 lran3itional . and accommodations in newly rthese projects Can be attributed. to some
period. If BRO housing is intended to pl'event constructed multifamily housinR degree. to congregate or mandatory
hom.l.ssn.... it appears unneces.arily available for fir.t occupancy after meal. programs that do not pay for
Ii.wling to prohibit the units in a pr.perty March 13. 1991. SRO hou.ing is a type of themselves.
from receiving project-based assistance. multifamily housing: that is subject to the . The costs of construction, equipment.
HUD Response: The Department'. Fair Housing Act and the Guidelines, No per.onnel. etc.. involved in providing
objective in initiating the HUD-insured legally sufficient basis exi.ts for food .ervice. in a project have a
SRO program is not to duplicate excluding SRO projecta from the .ignificant impact on the rents charged
programs already in existence (e,g" the Accessibility Guidelines, Under the Fair to residents. Quite often, congregate
Special Needs Assi.tance (Homeless) Housing Amendments Act of 1988. meal. programs do not generate enou.h
prcgram or the .ection 8 Moderate however, covered multifamily dwellings income to cover the costs of providing
Rehabilitation SRO program) but rather for first occupancy do not include food .ervices, Many projects with
to facilitate the development of rehabilitated. altered. or repaired units, mandatory meals program. have been
afT~rdable. unsub.idized hou.in~ for Thus. to the extent that SRO units are forced to .witch to an optional ba.is 10
low-income person. who. while not not newly constructed units for first attract new re.idents (or maintain
ho:neles.. reside in substandard housing occupancy. they would be exempt from occupancy levels) because re.idents
and who, absent access to SRO units, the coverage of the accessibility were unwilling or financia!1y unable to
may be in jeopardy of being homeless. guidelines. pay for food services provided by the
The provision of project-based rental 5, Program Termination Provision project. This is e.pecially true where
assistance could be a disincentive for other. rea.onably priced food services
local governments to provide financial One commenter. the National (restaurants. cafeteria., community
assistance to meet this objective. Association of Homebuilders. di.cus.ed meal. programs) are readily available.
1 this provi.ion in the proposed rule. The Department's primary reason for
4, Fair Housing Accessibility Guide ines stating: undertaking the SRO program initiative
The Preamble to the propo.ed rule Any program termination should not go is to expand the availability of
also invited comments that con.idered into effect for ISO days from publicaUoD of dfordable hou.ing, The cost of includlr.g
the Impact of proposed accessibility the t.rminaUon noUc.. This would pormlt central kitchen and dining facilities in
guidelines (55 FR 32321 published by the spon.ors of pip.lin. projeclll. for which an SRO project. in our view. would
Department to tmplement the Fair substanlial expenditure. have been Incurred, defeat this objective, Therefore. the final
Housing Amendments Act of 1988. to complete proce..ing and receive in.ursnc. rule provides. in I 221.265(e) of this rule
h h d' I vm f th C' 'I Cram this prosram.
w ie amen s ht e 0 e IV' that "A SRO project may not include
Right. Act of 1966. on the cost of SRO HUD Response: We ape that the central or shared kitchen or dining
con.truction. and upon rents in SRO Department should con.ider the impact facilities for providing food service. to
facilitie., Five commenters addre..ed of program termination on projects in tenants." This change from the policy
this i..ue. Typical of the comments the processing pipeline in any decision .et forth in lhe proposed rule of allo,^ing
received is the following: to invoke the termination provision of project'owners to require one meal per
With re.p.ct to the impact of the proposed I 221.565(f) of the proposed rule. When day as a condition of occupancy in
rair housinS accessibility auldelines 00 tho implementing major procedural or cases where congregate meal. are
cost of SRO construction and upon renlll in program changes. HUD', policy I. to provided i. necessitated for the reasons
SRO facilitie., NAHB. along with a coalition honor outstsnding conditional and firm cited above. It should be noted.
of dlssbility and other industry groups, commitments issued before the effective however. that I 221,565(a) of this final
snalyzod the pot.ntial.conomic impact of . date of such changes. rule expres.ly allow. individual unil. to
the proposed guidelines and concluded" that . I d . d f l' h
these guidelines will substantially increase 8. Elimination of Central Dilling mc u e 100 preparation aei ihes sue
development costs for every new multifamily FacHities as a microwave oven.
projec~ Inclodlns development costs for SRO One commenter ursed that dining 7, Mortgage Allowance for Unit
projec.., (Se. Commen.. on Preliminary . il't' d d t I b Furnishinons
Resulalory Impact Analy.is, October 9,1990. .ac' ,es an man a cry mea s e
Docket No, N-90-Z011: FR 2~'I-<l5J, Th.s. allowed in the regulation. Three commenter. rai.ed Litis i.sue.
- additional development cost. will be directly I currently serve 2 meals 8 day, breakfast Typical of the comments received is -the
reflected in rent increases for new SRO and dinner which are mandatory for my fonowing:
projects. Civen that SRO units are targeted tenants. ] can offer Z meals a dBY on an
for a Iow.income segment of the population economical basis as I own and operate a SRO units lire typically designed. to meet
that is least able to afford even incremental restaurant chain and have an extensive food the needs of penons who do not possess
rent increases. [ewer SRO units may be built service background and can purchase. their own furnishings at the Ume they move
becauue of the additional costs resulting from prepare and serve food" on a cost effective into the facility. If HUD', Intent is to uae
the new fair houlinB requilements. basis. My food service background thus successful existing SRO'I a. a mauel for the
HUD Response: The impact of the enhances the price value experience iny mortgage msurance program. a mortgage
Acce.sibility Guidelines on the costs of tenants anjoy, Therefore I slrongly believe allowance for basic unit furni.hings such as a
h ld k . thl I bed. desk. chair, .torage uniL microwave and
. develop;n. multifamily housing pro)'ect. you s ou ma e excephons 00 . propo.a
-... b' hid rvI b k nd f th small refrigerator should be permitted.
wa.. among other ,'..ues. the sub,'ect ofa '0 lect to t . 00 se ce ac grou 0 0 n
(Priv H t 1 Ow I Replacement reserve requirements can re..cct
separate review conducted by the opera ton. ate 0 e ner , these items. These items are an integral part
DepartmenL See 56 FR 9472, March 8. HUD Response: The Department's of SRO housing and tho need. or Ihe
1991. Final Fair Hou.ing Accessibility. 'experience with HUD-insured projects population such housing i. inlended to serv.,
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Federal Register I Vol. 56, No. 76 I Friday, April 19. 1991 I Rules and Regulations' 16201
SRO hous!ng Is not simply a smaller ~)on their constiluent groups in addition to '.,:) in their application procedures (e,g"
of an effiCIency or ~tudlo apartment, .t IS aFfordable SRO housing. However. the tighter screening. flexible security
special needs hOUSlOg. basic purpose of this program is more deposit end rent collection schedules) to
HUD Response: As stated in the inclusive. Therefore. a, provision In the main lain a stable. permanent rental
proposed rule. HUD does not want to proposed rule prohibiting such. housing environment. Although a lease
inciude in the mortgage amounl the cost preferences or restrictions is retained in of 30 days duration is required. rent
of items that are easily removed from this final rule. collections can be on a less frequent
the project and that typlcelly have a 9. Clarify Insurance Status of Other basis. i.e., weekly. Also. an owner is not
short economic life span. including Assistance Provided Project required to insist upon a security deposit
furnishings in individual living units. " even if the lease makes provisions for it.
The fIRai rule d~es pe:mit inclusion of O,ne .commenter raISed thIS Issue A SRO project is permanenl .
costs related to .tems In common.areas stating. . residential housing, but in some respects
that are employed for the benefit of the The rule should stele specllically that HUD 't ' I I d' tl 'h bl' .
.. . insurance caMol be obtained to cover any 1 l~ C ear y . IS ~gUIS ~ e Itom a
enhre pro)ec! a,;,d thai tYPically have non-mortgage inveatment in the project. such. typ.cal mulhfamliy proJect. Some
long, econom.~ hfe s~ans such as .lobby as donations. Also, HUD ahould speciFy prospective tenanls may not have a
furn.ture. Typ.cally. .n SRO hOUSing. whether or not mortgages provided by public sufficient track-record of previous
project owners do provide basic agencies, such aa CDBG ioans or housing tenancy. so lhat even excellent tenant
appliance~ and furnishings in order to !"'st Fund l,oans, can be i,:"ured. Our - screening is not necessarily fool-proof.
market un.ts regardless of the type of IOterpretallon ia th~t tha1Rlurancala to be Under these circumstances an owner
finane' used for loans received from private sector b I :.
mg. lending institutions. Perhaps lome- additional may e r~ uctant to rent umts to
8, Targeting of Resident Population clarity is needed on thisisaua aa many SRO prospective lenants who lack an
o .. sponson are lomewhat unlophisticated adequate past record of long-term
. EIghteen commenters falsed thIS about the wide variety of financing activitieJ. tenancy. In such an instance. persons
ISsue. All but o~e favor~d at least some (State Residential Finance Authority). who would not be problematic. and who
degree of targe~lng. TypIcal of the. HUD Response: SRO projects are are lhe persons this program is designed
co":men~s receIved are the follo~vl.ng. processed under the same general to s,erve. might be denied a~cess to SRO
. We beheva ~al HUn,ahould be wdhng 10 mortgage insurance procedures as other proJects. Nonetheless, the bteral
tnsure SRO proJects wh.ch propo~e support applications for section 221 multifamily language of section 513(a), applicable to
ae,,:.ces For lars~t,ed markel proVlded th~t,tha mortgage insurance. Section 221 of the multifamily housing with Insured
deSIgn of the Facdlty would allow the F~clllty N t' I H i A t d I . financing pursuant to section 221(d)(4)
to be converted to general market use If the a 10na ous oS C oes no gIve. .
larseted markel does not develop aa Hl1!J authority to insure secondary . re~~.res the use of a le~se having a
projected, Wa beUeve that tarseUng oocurs pro)ectloans that are made by pubhc mlR.mum 30-day duration.
primarily through the service. which are agencies using either housing trust funds 11 Applicability of SRO Program to
provided in aasociation with the or Community Development Block Grant R:u.al Areas
d.velopmen~ not by tha desill!' of the allocations. The Department Is limited to
deveiopmen~ An e~cepUon ~l1ghl be a, the insurance of first mortgage loans by
deveiopm~nl in wh.ch all urnla are de~.gned approved lenders. .
far acceSSibility by persons with phYSical
disabilities. However. persons without 10. Thirty Day Lease Requirement
disabilities can always occupy accessible' Th d I
unils, (State Residential Finance AuthoritYI. .e propose ru e contains a
The "tsrgeting"iasue in the regulaUonals reqUirement thatten~nts must execute a
conFusing. All housing projects are tarseted lease having a dural10n of at least 30
and/or marketed to apecific groups and days. Eight commenters addressed this
designed/managed accordingly. It may not be issue. Two endorsed the proposal noting
good judgemenl 10 make a project 1009& that at least it was not a one year
elderly-~>r 1009& anything-but i~" real good requirement The remaining four had
jud~ement to tarsel your population t? renect strong reservations concerning this
a mIX of occupants and c!anfy that mlX. For requirement because of concerns over a
example, the best SRO's In San Diego are .. I
about '4 eiderly. '4 working poor and ~ tenants abtlity to meet monthly rental
Fixed income/disabled. We targeted thi. amounts, and because landlords "!ay be
population bul never sel quotaa For their wary of admitting certain tenants .f
occupancy. There's nothing wrons with occupancy is subject to eviction laws
targets-perhapa it', quotas that are the that entail costly and timeeconsuming
problem. In any event, my advice is don't procedures.
buiid a project with ~OO9&?F any age group, HUD Response: The Department's
phYSical or mental d"ablhly, Bul 'argel who multifamily mortgage insurance
you want to serve and then serve them welU programs are designed to facilitate the
HUD Response: The primary purpose development of permanent housing. not
of the SRO program is to expand the. housing for transient or hotel purposes.
supply of affordable housing for low- A minimum 3o-day lease is required
income people in general-not just under section 513 of the National
specific categories of low-income Housing Act for use in HUD-insured
people. We recognize that potential multifamily housing projects. The
sponsors of SRO housing are often Department recognizes that there may
concerned with specific population be unique difficulties associated with
groups within the low-income the clientele to be served by SRO
population and thai these sponsors projects. and that owners of these
provide a variety of support services to projects may need a degree of flexibility
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One commenter had the following
comment on this question.
I have been involved with developing.
housing in New Hampshire where the scale is
much smaller. I am concerned about the
applicability of this program to rural areas.
Nonprofit sroups working in smaller
communities need to be able to use this
program for projects that may be as small as
six or eight units. In some areas scattered
sites make more sense both for the residents
and:ror the community. I would ask that the
regulations and the distribution of the
Mortgage Insurance Program be flexible so as
to include the need of the rural areas.
HUD Response: The eligibility
requirement of the multifamily mortgage
insurance programs require that a
project consist of live (5) or more units.
Proposals Involving noncontiguous -
(scattered) sites are acceptable provided
the building sites are in the same
immediate area: the sites can be
managed effectively; and the project as
a whole meets all financial and
programmatic standards for approval.
1Z. Lang-term AfforrfabiIity Restriction
Four commenters urged that provision
be made to ensure the continued low
and moderate use of SRO properties.
It is imperative that some method of
retaininglong.term affordability be used with
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16202 Federal Register I Vol. 56, No. 76 I Friday, April 19, 1991 I Rules and Regulations
.,~ . ~I
this program. It \a HUD', intent 10 hou:..... application ror substantial rehabilitatio.i' "time Ihe Initial application is submitted.
some of the mo.1 vulnerable members of our must exceed 15 percent of the property's More often than not. the feasibility of an
.ociety through this program. Withoul a value after completion of all repair.. SRO project depends on local governing
means to retain the"aITordabllity. the owners replacements and improvements: or body JUpport. Given the critical role
will be able to convert their projects a. they b. The repair program must Involve played by the local government, the
are now able to do with Section 238 and
Section 221(d)(3). only in this case Ibe the replacement of at least two major extent of ils support for a proposed
residents of the SRO's will be even poorer building components. The term "major project must be known as early as
and have greater problem.. HUD should not building component" Includes roof pos.ible in the development of the
let this situation recur. Stronger methods of structures; ceiling, wall. or floor projecL Therefore. the requirement for a
affordability retention should be used and structures; foundations; and plumbing. certification of support and description
there should be a priority for nonprofit heating. air conditioning or electrical of financial resources committed to an
owners. (Private Nonprofit Corporation). systems. SRO proposal by the local governing
Given thst the targel population to be The final rule is revised to set forth body must be submitted with the initial
served by this program includes those who
are homele... at-risk of becoming homeles. Ihese eligibility criteria for substantial application for mortgage insurance.
or otherwi.e rmanciany vulnerable. wa urge rehabilitation. 16. Definition of SRO
HUD to strengthen the mortgage prepayment 1:"' 'S'RO' U. d . S' .
regll'.ations at 24 CFR 221.524, and 24 CFR 14. rlnoncmg S n ergomg elsmlC A,'t SRO h . d I
Retro'it . prlva e ouslOg eve oper
Part 243 to protect tenants and preserve the I' based in Chicago had the following
long-term affordability of SRO units insured ., A San Francisco Development agency comment.
under this program. We csonot .fford to had the following comment. " .
allow SRO'. insured under the 221(d)(3) , Finally. If the Insurance program is
program to become the "expiring-use" ~other t~"Pe of lending th~t we would developed. we recommend changing the
problem of the future. . .. (Local specifically want to have eligible lor the. d.efinition of an SRO project 10 allow for
Government Agency) mo~a.g~ insurance p~gr~ .....ould be for buildings with lome, but. distinct minority
HUD Response: Loans insured under 8cqulslt~on an~ rehabilitation loanl for ~Os of, ooe-bedroom units, Of OUf l'tree projects
b undergOing seismic retro~t. Many SROs ID to d3te one buil~:"" has four one-bedroom
the SRO program would e insured San Franci.co .. well.. m lb. entire Bay .' f ~". th h
under section 221(d)(4) of the National Area are unreinforced masonry buildings units out 0 seventy umts total;, e other as
Housing Act, and therefore would not ba (UMB.). Retrofitting aod preserving this one-bedroom. out of 88 total unIts. The
subject to existing statutory or housing stock I. a major goal of our city', co~on camdon and shared baths in these
regulatory prepayment restrictions afforcfuble housing developmenl.trategy. bwlding. clearly mark Ibem.. SRO.. yet
. . neither would be qualified under the
designed to preserve low. and HUD Response: ProJects undergomg proposed definition. It is not uncommon to
moderate-income use. However. HUD (or needing) seismic retrofit would be nnd such a mixture, with at least one one-
agrees that .ince the SRO program is .eligible as substantial rehabilitation bedroom unil reserved for an on-sile
intended to provide a long-term solution applications under the section 221 SRO manager, We urge that Ibe definition be
to problems related to the lack of program provided the repair program extended to allow Ibis type of unit mixture.
affordable housing. it would be included in the application met criteria
appropriate to restrict the use SRO for substantial rehabilitation for SRO
projects for an extended period of time. projects described above.
Accordingly, the flOal rule provides that
the owner must execute a use agreement 15. Timing of Locol Government
at the lime of loan origination restricting Certificotion
the project's use as a SRO project for a A private nonprofit corporation halt
period of twenty years from the date of . the following comment
final endorsement. The Secretary would Your deferenca to local govemment
reserve the right to terminate the use concurrence and support of such projects is
restriction at an earlier date for good important and necessary: however. the local
cause. The use restriction would not government role should be more carefully
have priority over the HUD-insured SRO fashioned so a. not to Inhibit project
mortgage. feasibility or timely production of Ibi.
crucially needed SRO housing. Local
13. Refinancing gove~ment certification that it has reviewed
Two commenters urged that ..the the project. found it to fLlI, need and wiU
program should allow for refinancing. II exercise its "best efforts" to supply municipal
UD R ......... D ' and support services is necessary for the
H esponse: Ine epartment S succes, of a project. Such certification should
primary purpose in initiating the section not be required. however. prior to application
221 mortgage insurance program for submission but rather as a condition of
SRO development is to expand the closing. The approval proce.. could be
supply of SRO units rather Ihan to greatly expedited If, after Inltial.pproval by
provide refinancing in the manner of the HUD. tbe Iocalgovemment review aDd
section 223(t) program. This purpose is certification-procels proceeded in tandem
stated clearly in the proposed rule for with theHUD review and final approval:
SROs. Therefore. SRO applicationa localsovemment certification being
involving existing properties are eligibla nece....,. by c1o.iog. .
under the section 221 program only if the HUD Response: We do not concur
repair program included in the with the recommendation that the
application for substantial rehabilitation certification of support from the local
meets one of the following criteria; government be deferred until later in
a. The cost of the repairs. project development (i.e.. in tandem .
replacements, and improvements in the with ~RJD approval) rather than at the
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HUD Response: We agree that the
SRO procedures should allow the
Inclusion of a unit or units comprised of
more than one room for use by project
staff members (e.g., resident managers),
However, allowing projects to involve a
mix of one.room units and multi-room
apartments could change the nature of,
and thus undermine the purpose of. an
SRO project as envisioned under the
HUD-insured mortgage program.
Accordingly, the final rule will only
permit deviation from the single. unit
design for the purpose of (0) housing'
project management. and (b) in cases of
substantial rehabilitation. where the
costs involved in converting larger units
10 single rooms would be prohibitive:
Provided. Thot no more than five
percent of the project units (excluding
units for management) consist of more
than a single room.
C. MisceIlaneous
Section 221 permits cooperative (and
investor sponsor) mortgagors as well as
nonprofit, limited distribution. public
body and general mortgagors_ The
Department did not intend for SRO .
housing to be developed as cooperative
housing: therefore. a provision has been
added to the final rule excluding
cooperative and investor sponsor
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Federal Register Vol. ti8. No. '7lI I FrIday, April 19, 1
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o
mortgogors from the section 221 S
program. ..
In t 221.565(i)(2) of the rule the term of
limitation "at lea.t two" is used. We
believe that i. preferable to the term
"one or more" used elsewhere in HUD
regulation. in de.cribing what is
required for .ub.tantial rehabilitation
since it preclude. any possible
interpretation that "one or more" could
include one and a fraction. Such an .
interpretation of the term Uone or more'.
is not now. and never was, intended by
the Department.
Other Mallen
Execulive Order 12812, Federalism
. The General Counsel. a. the . .
Designated Omcial under.ection 6(a) of
Executive Order 12612. Federalism, ha.
determined that the policiea proposed in
this proposed rule would not have
Federali.m implications when
implemented and, thus, are not aubject
to review under the Order.
Execulive Order 12606, the Family
The General Coun.el, as the
Designated Omcial under Executive
Order 12606, has determined that this
rule would not have potential .ignificant
impact on family formation,
maintenance, and general well-being,
and, thus, is not subject to review under
the Order.
A Finding of No Significant Impact
with regard to the environment has been
made in accordance with HUD
regula tions in 24 CFR pert 50, which
implement .ection 102(2)(C) of the
National Environmental Policy Act of
1969,42 U.S.C. 4321. The Finding of No
Significant Impact i. available Cor public
inspection between 7:30 e.m. end 5:30
p.m. weekday. in the Office of the Rule.
Docket Clerk, room 10276, 451 Seventh
Street SW., Wa.hington, DC 20410.
Thi. rule would not con.titute a
"major rule" a. that term i. defined in
.ection l(b) of Executive Order 12291 on
Federal Regulation. Analysis of the rule
indicates that it would not:
(1) Have an annual effect on the
economy of $100 million or more;
(2) Cause a major increa.e in cost. or
prices for consumers. individual
industrie.. Federal, State or local
government agencie., or geographic
regions: or
(3) Have a .ignificant adverse effect
on competition, employment,
investment, productivity, innovation, or
on the ability.ofUnited State.-based
enterprise. to compete with foreign-
ba.ed enterpri.e. in dome.tic or export
markets.
Under the Regulatory Flexibility Act
(5 U.S.C. 605(b)), the Undersigned
o
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hereby certifies that this rule would not
have 8 significant economic impact on a
substantial number of .mall entitie.. The
rule would enable HUn-approved
mortgagee. to i..ue in.ured mortgage.
related to .ingle-room occupancy
facilities. .
This role w~9list~ as sequence
number 1190 in the Department'.
Semiannual Agenda of Regulation.
published on October 29. 1990 (55 FR
44530, 44547), under Executive Order
12291 and the Regulatory Flexibility Act.
The Catalog of Federal Dome.tic
Assistance program number i.14.135.
List of Subject. in 24 CFR Part 221
.Low and moderate income housing.
Mortgage insurance, Reporting and
record-keeping requirements.
Accordingly, 24 CFR part 2.."1 i.
amended a. follow.:
'PART 221-LOW COST AND
MODERATE INCOME MORTGAGE
INSURANCE
1. The authority citation for 24 CFR
part 221 continue. to read a. follows:
Authority: SlI!cs. 211 and 221, National
Housing Ac~ 12 U.5.C. 17151; 221.544(a)(3) la
also issued under lee. 201(8] of the National
Housing Act, 12 U.S.C.1707(a).
2. A new 1221.5651. added, under a
new undesignated center heading. to
read as follows:
Single Room Occupancy
t 221.565 Eligibility 01 mortgag.. coverfng
olngt. room occupancy IaclIlll...
Notwith.tanding the generally
applicable requirement that mortgage.
Insured under thia lubpart be limited to
profect. providing hou.ing for low and
moderate income families and di.placed
familie.. a mortgage financing the new
con.truction or .ub.tantial
rehabilitation of a single room
occupancy project (SRO) shall be
elig~ble for insurance under this subpart.
pursuant to section 223(g) of the Act,
subject 10 compliance with the
additional requirements of this .ection.
The SRO mortgage in.urance program
.hall be a full insurance program only.
(a) Definition of a single room
occuponcy project A SRO project i. a
multifamily project compri.ed (except as
provided in paragraph (e) ofthi. .ection)
of ona room.unitl: A unit mu.t be the
primary re.idence of the occupant(.). A
unit maycontai1l'food prepaflftion'llnd
sanilary facllitielt.' Alternatively,
sanitary.facilitiell'may blllocated .
out.lde the unllll arid Ihared by tenant.
in the project! The provi.ion of .ervice.
made available to tenantl can vary
among SRO., consi.tent with the
Rules and Regulations
16203
provi.ion. of thl. aection, but.in: DO"
. eyen!.ahaltdacllity.requTriifs 'i'itiitll
license to operate IiMiii.hiid Ciirr.
home_eligible for mortgagainsuranCll
under this pal'!. AdditionallY,.facilitill!J
., re.tricling_occupancyJo particular.'
group., such as ltudentstllhllll notbe"
eligible for mortgage insuranca under
this parr.
(b] .Maximum mar/gage amounts. The
mortgage shall involve a principal
obligation that i. not in excess of the
limitation. pre.cribed in 1 221;514r
except that the replacement cost may
.include..n e.timate for the cost of
certain furnishing., luch a. lobb1
furnitUr.., approved by the
Commissioner for use in common area~
The cost of furnishing. in individuit
unit. are not eligible for inclusion In the
replacement cost!
(c) Local Government Cerlificalian.
The initial cpp!ic.tion for n:crtgcge
insurance .hall include a certification by-
the general unit of local government i1\
.which the project will be located thanl)
it is familiar with the application; (2) a
documented need exi.t. within the .
community for the project; [3) it will
provide municipal and support service.>
required for the long-term succe.. of Ihe'
project; and (4) in case. involving
di.placement or relocation of exi.ting
tenant., the .ponsor/developer ha.'
prepared a relocationjilan..acceptable to.
the local government? Thi. plan must
identify alternative affordable housing
and en.ure that adequate financial
resources are available to carry out that
plan.
(d) Lease and rent requirements. Thd'
.tenant DlU.t execute a lea.e havinlf..
duration of all.ast 30 day.. However,
the lea.e may provide for rent to bill
collected on a weekly ba.is.
(e) Occupancy and unit size
requirements-{l) Number of persons.
Each unit may be occupied by one or
more person. capable of meeting the
terms of the lease agreement. The
number of persons that may occupy'a
unit shall be governed by local code. .
and ordinance.. that take into
consideration the size of the unit. In the
absence of a local code governing the
minimum space per person requirement,
the SRO project ow!!er will establish the
minimum unit size. subject to the
Commi.sioner's approval. Where a SRO
unit i. occupied by more than one
person including a child, local
government may establi.h limitations on
relationship. of the occupant.,
con.i.lent with the Fair Housing Act.
(2) Size of Unit. Unlt..larger..than .on.
l"!9!1!. may_be Jncluded<ln a project for
purpo..... of (i) housing a I'!!sident
man~ge!!le.!lt.staff,..nd (ii) in-ca.e. ot
r
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16204 Federal Register I Vol. 56. No. 76 I Friday. April 19. 1991 I Rules and Regulations
Su\!s.t.llIialrehabUitatiODillVjJe1'l!.j}u!(~,:' assistance under parts 882 and 887 of :")eement. In form satisfactory to the
cost.s of COnyerting Jarger.un.lt"10:lltngla this title. . Commissioner. requiring that the project
,rOol1!s .l:Y_ould,be prohibitlv",Provided. (I) SubstanUal Rehabilitatian".ftfl,Q~ be operated as a SRO.rentalpnljectfllr
That no m01'l!.~,,!!,.~~ofJ!.te unUs in any .proj~Et!.;vjl\npt be eligible for' .I! P~9.99hw.el!ty .yeaJ:S frciiil:lhii"datil'
projeei(other than units occupied by s.fefi!)~!lqing under section 223(1) 'of th1l .of fll!aJ end01'!e]11~".It rega[<Ilessof~
O .management stafl) pan:eontai" !!lose ~t. SRO applications involving existing \:Y. he. ther.lhe.:m. origage .i~.preP.. 8~d. . .e"cept
.than. a singleroom. . . propertiesJ!)u~.l meefJ/ne of the ..' t!.t.a.t. J~~ go.o.~ !'3''!.~Hh.e, .C~,!,,!,.!!~.!!!!'er
(I) Project Services. Notwithstanding following' criteria fOJ:,SJI.bstantial ,may:agree.to ,termmate J!.t~_u~e.
the provisions of I 221.536(b)[2]. a SROo r.~~!.t!!~ili!!'Jto.n;1 ~greement !,no~t.9-'ts_el:'Plr.atlPn.
project may. subject ~oapproval of the (1) 'I:l:!epo.t.~!.th~.I"p.ai9' . (k) TermmatJOn of progr~m. If. at any
C . '. . - .,,' . d I . d. . . d replacemants. and Improvements, hme. tha Secretary determmes that.
. O~,:::sslon~n prol.s:blJ!l .en:" an ._excl;eds IS percent of the property'. based upon an evaluation of the
"'E" e~ . r~el'Vleet" I h pr~)~~t ~ay ....'i!'.value after completianof all repairs - program. the SRO insurance program is
4,:oi .'ncfu ~l.c.en rfa or s .'::-e f I ~ en .~; '.'1 replacements and impro~ements' or' not economically sound. the Secretary
. "nl~ ael1!les or proVl Ing 00 ;::1., '[2) The repair program involve~ the may revise. suspend or terminate the
""rvlces to tenanlS) ~ R .. .
.' ai:r . . . replacement of at leht two majar prog~am: eVlslon. suspenSIOn or.
(g!. Ebglble ~~rtgogors: No~profir. . building component~. The term "major termlnahon wo~ld )Jecome effechve 30
. pubhe body. hmlted dlstrl.buhon and building component" includes roof" . days a~ter ~ub~lcahon of the Sec~etary's
general ~ortgagors are eligible. structure"; ceiling wall. or 1100'" determlnatlon In the Federal Reg,ster.
Cooper~tlye ~nd !nve.stor Sponsot structure!; foundations;,plumbing . Dated: April 15. 1991.
mortgago~ are not ~bglble. . systems; heating and air conditioning- Ronald A. Rosenfeld.
(h) Sec~I~n 8 ASSIstance. SRO .pro)ec'" systems; or electrical systems:' General Deputy Assistant Secretary far
are not ehglble for Section 8 proJeot- (jJ Restriction ogainst chauge in use. Hausing-Federal Hausing Cammissianer.
based assistance. SRO project tenants. The mortgagor and the Commissioner IFR Dac. 91-9178 Filed 4-18-91; 8:45 ami
however. are eligible for tenant-based shall execute and record a use .'WHO COOE 42'0-27'"
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