SUPPLEMENTARY INFORMATION:

I. Background

Fiscal Year (FY) 2006 appropriations for HUD were recently enacted in Public Law 109-115 (119 Stat. 2936), which was approved on November 30, 2005 (the Act). HUD's appropriations are found in Title III of this law. Section 327 of the administrative provisions of Title III place restrictions on housing assistance that can be provided to students of higher education under Section 8 of the U.S. Housing Act of 1937 (42 U.S.C. 1437f). Specifically, Section 327 of Public Law 109-115 (Section 327) provides as follows:

“Sec. 327. (a) No assistance shall be provided under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) to any individual who—

(1) Is enrolled as a student at an institution of higher education (as defined under section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002));

(2) Is under 24 years of age;

(3) Is not a veteran;

(4) Is unmarried;

(5) Does not have a dependent child; and

(6) Is not otherwise individually eligible, or has parents who, individually or jointly, are not eligible, to receive assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f).

(b) For purposes of determining the eligibility of a person to receive assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), any financial assistance (in excess of amounts received for tuition) that an individual receives under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), from private sources, or an institution of higher education (as defined under the Higher Education Act of 1965 (20 U.S.C. 1002)), shall be considered income to that individual, except for a person over the age of 23 with dependent children.”

The new law is intended to address recent incidents of college students obtaining federal housing assistance without their educational financial assistance counting as income for purposes of income eligibility for federal housing assistance. The law also describes how educational financial assistance is to be treated in the calculation of income for purposes of determining eligibility.

Section 327 of the Act directs HUD to issue a final rule to carry out this section no later than 30 days from the date of enactment of the law. Since HUD finds the restrictions of the law to be clear, this final rule codifies the restrictions largely as set forth in the statute.

HUD strongly encourages public housing agencies, owners, and management agents administering Section 8 programs to, as soon as it is practicable, recertify existing Section 8 participants that have family members that may meet the requirements of Section 327 of the Act. Prompt recertification, in addition to careful applicant screening, will ensure compliance with the restrictions of the new law.

II. This Final Rule

This final rule amends 24 CFR part 5, subpart F, which addresses income eligibility in assisted housing, among other matters, to incorporate the provisions of the new law. Specifically, this rule makes the following amendments to 24 CFR part 5, subpart F.

Section 5.609(b) of subpart F, which lists forms of compensation that are calculated as income, is amended to include as income, for programs under section 8 of the U.S. Housing Act of 1937 (section 8), the educational financial assistance described in Section 327(b) of the Act, except for persons over the age of 23 with dependent children. Section 327(b) provides for such exemption for persons over the age of 23 with dependent children. HUD has interpreted the term “financial assistance” as used in Section 327(b) to not include loan proceeds for the purpose of determining income.

Section 5.609(c)(6) of subpart F lists forms of compensation that are excluded from the calculation of annual income. Prior to the change being made by this final rule, § 5.609(c) provided for the full amount of student financial assistance paid directly to the student or the educational institution to be excluded from annual income. Section 5.609(c)(6) is amended to provide, by cross-reference to § 5.609(b), that the exclusion does not pertain, with regard to Section 8 programs, to the financial assistance described in Section 327(b) of the Act.

A new regulatory section, § 5.612, is added to 24 CFR part 5, subpart F, to codify the criteria set forth in Section 327(a) of the Act by which an individual enrolled in an institution of higher education is ineligible for assistance. Subsection (a)(6) of Section 327 concludes the list of criteria by providing that an individual who is enrolled in an institution of higher education is ineligible for assistance if the individual is not otherwise individually eligible, or has parents who, individually or jointly, are ineligible to receive assistance under Section 8. Since Section 327 is focused on income eligibility of a higher education student, the Department interprets the section's reference to the eligibility of the parents to also refer to income eligibility.

In addition to the amendments made to 24 CFR part 5, subpart F, this final rule also makes conforming amendments to 24 CFR 880.603(b), 24 CFR 883.302, 24 CFR 884.102, 24 CFR 886.102, 24 CFR 886.132, 24 CFR 886.321(b), 24 CFR 891.610(c), 24 CFR 982.201, and 24 CFR 982.552.

III. Justification for Final Rule

HUD generally publishes a rule for public comment before issuing a rule for effect, in accordance with its own ( printed page 77743) regulations on rulemaking in 24 CFR part 10. Part 10, however, provides for exceptions to the general rule if the agency finds good cause to omit advanced notice and public participation. The good cause requirement is satisfied when prior public procedure is “impractical, unnecessary, or contrary to the public interest” (see 24 CFR 10.1). In this rulemaking, however, HUD is issuing a final rule to comply with a statutory directive to issue final regulations within 30 days of enactment of Public Law 109-115.

IV. Findings and Certifications

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule would impose no additional economic or other burdens on small entities. The entities affected by this rule are agencies administering tenant-based and project-assisted housing and properties that are already required to screen applicants applying for assistance. This rule provides clear directions on how educational financial assistance is to be calculated in an income determination prior to receiving assistance under section 8 of the U.S. Housing Act of 1937.

Environmental Impact

In accordance with 24 CFR 50.19(c)(1) of the Department's regulations, this rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Therefore, this final rule is categorically excluded from the requirements of the National Environmental Policy Act (42 U.S.C. 4321 et seq.).

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1531-1538) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This rule does not impose any federal mandates on any state, local, or tribal government or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits, to the extent practicable and permitted by law, an agency from publishing any rule that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.

For the reasons stated in the preamble, HUD amends 24 CFR part 5 as follows:

1. The authority citation for 24 CFR part 5 is revised to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 3535(d), and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

2. In § 5.609, add a new paragraph (b)(9) and revise paragraph (c)(6) to read as follows:

3. Add § 5.612 to read as follows:

4. The authority citation for 24 CFR part 880 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 3535(d), 12701, 13611-13619, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

5. In § 880.603(b), the introductory paragraph is revised to read as follows:

6. The authority citation for 24 CFR part 883 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 13611-13619, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

7. In § 883.302, the definitions of Family and Low-Income Family are removed and the definition of Annual Income is revised to read as follows:

8. The authority citation for 24 CFR part 884 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 13611-13619, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

9. In § 884.102, the definition of Income is revised to read as follows:

10. The authority citation for 24 CFR part 886 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 13611-13619, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

11. In § 886.102, the definition of Income is revised to read as follows:

12. Revise § 886.132 to read as follows:

13. Section 886.321(b)(1) is revised to read as follows:

14. The authority citation for 24 CFR part 891 continues to read as follows:

Authority: 12 U.S.C. 1701q, 42 U.S.C. 1437f, 3535(d), 8013, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

15. Section 886.610(c) is revised to read as follows:

16. The authority citation for 24 CFR part 982 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 3535(d), 12701, 13611-13619, and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.

17. Section 982.201(a) is revised to read as follows:

18. Section 982.552 is amended to add a new paragraph (b)(5) to read as follows: