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be leased on or after such effective date shall be available for leasing by lower income families other than very low-income families. (b) Not more than 5 per centum of the dwelling units which become available for occupancy under public housing annual contributions contracts and section 8 housing assistance payments contracts under this Act on or after the effective date of the Housing and Community Development Amendments of 1981 shall be available for leasing by lower income families other than very low income families.

RENTAL REHABILITATION AND DEVELOPMENT GRANTS

SEC. 17. (a) PROGRAM AUTHORITY.-(1) REHABILITATION AND DEVELOPMENT GRANTS.-The Secretary is authorized

(A) to make rental rehabilitation grants to help support the rehabilitation of privately owned real property to be used for primarily residential rental purposes in accordance with subsection (c); and

(B) to make development grants for new construction or substantial rehabilitation in accordance with subsection (d).

(2) AUTHORITY TO RESERVE HOUSING ASSISTANCE.-In connection with a grant under this section, the Secretary may reserve authority to provide housing assistance under section 8(0) to the extent necessary

(A) to provide housing assistance to persons displaced by activities under this section; or

(B) to support the grantee's program.

(3) AUTHORIZATION.-To carry out the purposes of this section, the Secretary may utilize not to exceed $615,000,000, as provided in section 5(c) for fiscal years 1984 and 1985, of which amount

(A) not to exceed $150,000,000 shall be available in each such year for rental rehabilitation, of which $1,000,000 shall be available each year for technical assistance; and

(B) not to exceed $200,000,000 for fiscal year 1984, and $115,000,000 for fiscal year 1985, shall be available for development grants.

(b) DISTRIBUTION OF RENTAL REHABILITATION GRANT FUNDS.-(1) FORMULA ALLOCATION.-Of the amount available in any fiscal year for rehabilitation grants under this section, the Secretary shall allocate amounts for rehabilitation grants under subsection (c) to cities having populations of fifty thousand or more, urban counties, and States for use as provided in subsection (e), on the basis of a formula which shall be contained in a regulation proposed by the Secretary not later than sixty days after the effective date of this section. Such regulation shall be accompanied by the specific fund allocation for fiscal year 1984 for individual cities, urban counties, and States which would result from the proposed formula and any adjustments under paragraph (2). The formula contained in the regulation shall take into account objectively measurable conditions, including such factors as low income renter population, overcrowding of rental housing, the extent of physically inadequate housing stock, and such other objectively measurable conditions as

'The effective date of the section was November 30, 1983.

the Secretary deems appropriate to reflect the need for assistance under this section, but excluding data relating to such factors which pertain to areas eligible for assistance under title V of the Housing Act of 1949.

(2) ADJUSTMENTS.-Before an allocation determined under paragraph (1) for any fiscal year is made available for use, the Secretary may adjust the allocation as follows:

(A) The Secretary is authorized to establish minimum allocation amounts for cities and urban counties, representing program levels below which, in the Secretary's determination, conduct of a rental rehabilitation program would not be feasible. The amount of any allocation which is below this minimum shall be added to the allocation for the State in which the city or county is located and shall be available in accordance with subsection (e).

(B) Beginning with fiscal years after fiscal year 1984, the Secretary is authorized to adjust the allocation for a city, urban county, or State administering a rental rehabilitation program as provided in subsection (e), by up to 15 per centum above or below the amount of such allocation, based on an annual review of performance in carrying out activities under this section in a timely manner and in achieving the result that at least 80 per centum of the units rehabilitated with assistance under this section in all program years have rents which are and remain at a level which would be affordable by lower income families. The last sentence of subparagraph (A) shall not apply to an allocation which is below the minimum amount described therein by reason of an adjustment under this subparagraph. The Secretary shall establish by regulation performance criteria for purposes of this subparagraph. (3) REALLOCATION.-After the allocation of rehabilitation grant amounts, the Secretary is authorized to reallocate such amounts among grantees on the basis of the Secretary's assessment of the progress of grantees in carrying out activities under this section in accordance with their specified schedules. Reallocations under this paragraph shall be designed to encourage use of these resources expeditiously, consistent with the sound development and administration of the grantees' rental rehabilitation programs.

(4) Recapture.-Any rental rehabilitation grant amounts which are not obligated at the end of any fiscal year shall be added to the amount available for allocation for such grants for the succeeding fiscal year.

(c) GRANTS FOR MODERATE REHABILITATION.-(1) PROGRAM DESCRIPTION.-A rehabilitation grant may be made under this section on the basis of satisfactory information provided in a program description which shall be submitted by the grantee at such time and in such manner as the Secretary may prescribe and which shall contain

(A) a description of the grantee's proposed rental rehabilitation program, which shall consist of the activities each grantee proposes to undertake for the fiscal year, including the grantee's anticipated schedule in carrying out those activities, or, in case of a State distributing resources as provided in subsection

(e), its proposed method of distributing the resources, which shall have been made available to the public;

(B) a certification that the grantee's program was developed after consultation with the public;

(C) a statement of the procedures and standards which will govern selection of proposals by the grantee, which procedures and standards shall take into account the extent to which the proposal represents the efficient use of Federal resources and the extent to which the housing units involved will be adequately maintained and operated with rents at the levels proposed;

(D) an estimate of the effect of the proposed program on neighborhood preservation;

(E) evidence demonstrating the financial feasibility of the proposed program, including the availability of non-Federal and private resources and including evidence that the projects to be selected for rehabilitation will be located in neighborhoods where rents are generally affordable to lower income families and that the character of the neighborhood indicates that such rents will not materially change over an extended period; and

(F) such other information as the Secretary shall prescribe. (2) PROGRAM REQUIREMENTS.-A rental rehabilitation program assisted under this section shall provide that

(A) grant assistance shall only be used to rehabilitate real property to be used for primarily residential rental purposes; (B) grants shall only be used to assist the rehabilitation of real property located in neighborhoods where the median income does not exceed 80 per centum of the median income for the area;

(C) grant assistance for any structure shall not exceed 50 per centum of the total costs associated with the rehabilitation of that structure, as determined by the Secretary, except that where the Secretary determines that refinancing costs and the special nature of the project require a greater amount of assistance, the grant amount shall be limited to not to exceed 50 per centum of the development cost including acquisition;

(D) rehabilitation assisted under this section shall only be that which is necessary to correct substandard conditions, to make essential improvements, and to repair major systems in danger of failure;

(E) the amount of rental rehabilitation assistance provided under this section for any structure shall not exceed $5,000 per unit except as otherwise determined by the Secretary in areas of high material and labor costs where the grantee demonstrates that every appropriate step has been taken by the grantee to contain the amount of assistance within the limit set by this paragraph and that an exception is necessary to conduct a rehabilitation program while not exceeding the rehabilitation standards of subparagraph (D);

(F) a structure may be assisted under this section only if the rehabilitation of such structure will not cause the involuntary displacement of very low-income families by families who are not very low-income families;

(G) the owner of each assisted structure agrees

(i) not to discriminate against prospective tenants on the basis of their receipt of or eligibility for housing assistance under any Federal, State, or local housing assistance program or, except for a structure for housing for the elderly, on the basis that the tenants have a minor child or children who will be residing with them; and

(ii) not to convert the units to condominium ownership (or in the case of a cooperative, to condominium ownership or any form of cooperative ownership not eligible for assistance under this section);

for at least 10 years beginning on the date on which the units in the project are completed;

(H) the grantee certifies to the satisfaction of the Secretary that the assistance will be made available in conformity with Public Law 88-352 and Public Law 90-284; and

(I) 100 per centum of the amount of assistance provided under this section shall be used by the grantee for the benefit of lower income families, except that such requirement shall be reduced to (i) 70 per centum if the grantee certifies in accordance with standards prescribed by the Secretary that such reduction is necessary, and that the grantee cannot develop a proposed program which complies with such requirement, after consultation with the public regarding the inability to develop a program which complies with such requirement, and (ii) to not less than 50 per centum where the Secretary determines that such further reduction is necessary.

(3) SECRETARIAL RESPONSIBILITY.-The Secretary shall assure that

(A) an equitable share of the rehabilitation grants under this section is used to assist in the provision of housing for families with children, particularly families requiring three or more bedrooms; and

(B) a priority shall be given to projects containing units in substandard condition which are occupied by very low-income families. (d) GRANTS FOR NEW CONSTRUCTION AND SUBSTANTIAL REHABILI

TATION.

(1) TYPES OF ASSISTANCE.-Development grant funds may be used by the grantee to make grants or loans, provide interest reduction. payments, or furnish other comparable assistance to support the new construction or substantial rehabilitation of real property to be used primarily for residential rental purposes.

(2) AREA ELIGIBILITY.-To be eligible for development grants under this subsection, a project must be located in an area that is experiencing a severe shortage of decent rental housing opportunities for families and individuals without other reasonable and affordable housing alternatives in the private market. The Secretary shall issue regulations, consistent with the preceding sentence, that set forth minimum standards for determining areas eligible for assistance. Such standards shall be based on objectively measurable conditions, and shall take into account the extent of poverty, the extent of occupancy of physically inadequate housing by lower income families, the extent of housing overcrowding experienced by

lower income families, the level and duration of rental housing vacancies, the extent of the lag between the estimated need for and production of rental housing, and other objectively measurable conditions specified by the Secretary consistent with the first sentence of this subsection. The Secretary shall propose regulations under this paragraph not later than 60 days after the date of enactment of this section and shall promptly transmit to the Congress such proposed regulations accompanied by a list of those areas which meet the minimum standards contained in such regulations. Any unit of general local government located in an area which meets such minimum standards is eligible to submit an application for a rental housing development grant under this section. Notwithstanding such minimum standards, a city shall also be eligible to submit such an application if (A) according to the most recent data compiled by the United States Bureau of the Census, such city has a population of not less than 450,000; and (B) the percentage of the total rental units in such city that are vacant and available for rent is less than 10 percent. The Secretary may also consider an application for a project to be located in an area which is not eligible under such standards where the Secretary determines that a project involving assistance for other than moderate rehabilitation is necessary in order to meet special housing needs or to advance a particular neighborhood preservation purpose.

(3) APPLICATION.-A development grant may be made under this section on the basis of information provided in an application which shall be submitted by the grantee at such time and in such manner as the Secretary may prescribe. In addition to information relating to the selection criteria set forth in paragraph (5), the application shall contain

(A) a description of the grantee's proposed rental development program, which shall consist of the activities the grantee proposes to undertake for the fiscal year, including a specification of the grantee's anticipated schedule in carrying out those activities;

(B) a certification that the grantee's program was developed after consultation with the public;

(C) a statement of the procedures and standards which will govern selection of proposals by the grantee, which procedures and standards shall take into account the extent to which the proposal represents the efficient use of Federal resources and the extent to which the housing units involved will be adequately maintained and operated with rents maintained at the levels proposed;

(D) an estimate of the effect of the proposed program on neighborhood preservation; and

(E) such other information as the Secretary shall prescribe. (4) PROGRAM REQUIREMENTS.-A rental development program assisted under this section shall provide that

(A) grant assistance shall be used to develop real property to be used for residential rental purposes only;

'The date of enactment of the section was November 30, 1983.

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