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(B) grant assistance for any structure shall not exceed 50 per centum of the total costs associated with the rehabilitation or development 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;

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

(D) 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);

during the 20-year period beginning on the date on which the units in the project are available for occupancy;

(E) the owner of each assisted structure agrees that, during the 20-year period beginning on the date on which 50 per centum of the units in the structure are occupied or completed, at least 20 per centum of the units the construction or substantial rehabilitation of which is provided for under the application shall be occupied, or available for occupancy by, lower income families;

(F) the structure

(i) will have a value after rehabilitation or construction that is not more than the amount of a mortgage on the structure that could be insured under section 207 of the National Housing Act; and

(ii) is secured by a mortgage which bears a rate of interest and contains such other terms and conditions as the Secretary determines are reasonable;

(G) the grantee must commence construction or substantial rehabilitation activities not later than 24 months after notice of project selection; and

(H) the State or unit of general local government that receives the assistance 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.

(5) PROJECT SELECTION.-In selecting projects to receive development grants, the Secretary shall make such selection on the basis of the extent

(A) of the severity of the shortage of decent rental housing opportunities in the area in which the project or projects are to be located for families and individuals without other reasonable and affordable housing alternatives in the private market;

(B) of non-Federal public and private financial or other contributions that reduce the amount of assistance necessary under this section;

(C) to which the project or projects contribute to neighborhood development and mitigate displacement;

(D) to which the applicant has established a satisfactory record of performance in meeting assisted housing needs and has the capacity to undertake the program in a timely


(E) to which the assistance requested will provide the maximum number of units for the least cost to the Federal Government, taking into consideration the extent to which assistance provided will be recaptured and cost differences among different areas, among financing alternatives, and among the types of projects and tenants being served;

(F) to which the grantee will establish a mechanism to assure the maintenance of affordable rentals for lower income families;

(G) to which the applicant has demonstrated the financial feasibility of the proposed program, including the availability of non-Federal and private resources; and

(H) to which an equitable share of the development grant funds under this section will be used to assist in the provision of housing for families with children, particularly families requiring three or more bedrooms.

(6) PRIORITIES.-In selecting projects for grants under this subsection, the Secretary shall give a priority to proposals involving projects

(A) which exceed the minimum requirements of paragraph (4)(E); and

(B) in areas where the waiting lists for housing assistance are relatively long and where families holding certificates under section 8 require an excessive length of time to find housing.

(7) ENFORCEMENT OF PROGRAM REQUIREMENTS.-(A) The grantee shall take appropriate legal action to enforce compliance with the requirements of this subsection by the owner of any assisted property or his or her successors in interest during the 20-year period beginning on the date on which 50 per centum of the units are occupied or are completed. For any violation of such agreements, the owner or his or her successors in interest shall make a payment to the grantee of an amount that equals the total amount of assistance provided under this title with respect to such project, plus interest thereon (without compounding), for each year and any fraction thereof that the assistance was outstanding, at a rate determined by the Secretary taking into account the average yield on outstanding marketable long-term obligations of the United States during the month preceding the date on which the assistance was made available. The amount of such assistance (and accrued interest) which is required to be repaid shall be reduced by 10 per centum for each full year in excess of 10 years which intervened between the commencement of the period and the violation. Any amounts recovered by the grantee shall be used to furnish assistance under this section.

(B) Notwithstanding any other provision of law, any assistance provided under this subsection shall constitute a debt, which is payable in the case of any failure to carry out the agreements, and shall be secured by the security instruments provided by the owner to the grantee.

(8)(A) RENT PROVISIONS.-Rents charged for units available for occupancy by lower income families in any project assisted under this subsection shall be approved by the grantee. In approving such rents, the grantee shall provide that the rents of such units are not more than 30 per centum of the adjusted income of a family whose income equals 50 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families. Not less than 30 days prior written notice of any increase in rents shall be provided to such tenants.

(B) Any schedule of rents submitted by an owner to the grantee for approval shall be deemed to be approved unless the grantee informs the owner, within 60 days after receiving such schedule, that such schedule is disapproved.

(9) GRANT AMOUNT.-The amount of a development grant provided under this subsection shall not be more than that amount which will provide decent rental or cooperative housing of modest design which is affordable for families and individuals without other reasonable and affordable housing alternatives in the private market, including an amount necessary to achieve compliance with paragraph (8)A).

(e) STATE PROGRAM. (1) Except as provided in paragraph (2), the State shall administer resources made available under subsection (b) for any fiscal year. These resources shall only be used to carry out activities under this section in units of general local government and areas of the State that do not receive allocations under subsection (b) and in urban counties and cities whose allocations are less than the minimum allocation amount established under subsection (b)(2), but may not be used in areas which are eligible for assistance under title V of the Housing Act of 1949. The State may use all or part of these resources (A) to carry out its own rental rehabilitation program, or (B) to distribute them to units of general local government. A city with a population over fifty thousand may, with the agreement of the State government, elect to contract with the State to administer the grant program under this section in any fiscal year.

(2) States may elect not to administer resources made available under subsection (b). This election shall be made in such manner and before such time as the Secretary may prescribe. The Secretary shall administer the resources available to any State exercising such an election in accordance with regulations and procedures prescribed by the Secretary, including the administration of grant programs of cities with populations over fifty thousand which elect not to administer their own program. Such regulations shall, to the maximum extent practicable, be comparable to those for cities and urban counties receiving resources under subsection (b).

(3) A State may apply for and receive, on behalf of a unit of local government located in that State and with the concurrence of that unit of general local government, a rental development grant to be used in accordance with the provisions of subsection (d).

(4) In any case in which the State is a grantee under any provision of this section, the Secretary shall require that the State take such actions as may be appropriate to assure compliance with the program requirements, owner agreements, and other provisions of this section.

(f) APPLICABILITY OF REQUIREMENTS OR AGREEMENTS.-Requirements imposed by or agreements made with States and units of general local government regarding rents in structures assisted under this section (including requirements relating to the rents which may be charged after rehabilitation) shall not apply to a structure assisted under this section unless (1) such requirements are imposed or agreements are entered into pursuant to a State law or local ordinance of general applicability which was enacted and in effect in that jurisdiction prior to the date of enactment of this section, and (2) such requirements or agreements would apply generally to structures not assisted under this section.

(g) RELOCATION.-The Secretary shall by regulation establish such standards governing reasonable relocation payments and other related assistance as the Secretary determines to be appropriate.

(h) ADMINISTRATIVE EXPENSES.-Grantees receiving assistance under this section shall not deduct therefrom any amounts to cover administrative expenses incurred by them in carrying out their responsibilities under this section.

(i) PRESERVATION, ENVIRONMENTAL POLICY, AND LABOR STANDARDS. (1) The Secretary shall establish procedures which support national historic preservation objectives and which assure that, if any rehabilitation or development proposed to be assisted under this section would affect property which is included on the National Register of Historic Places or which is eligible for inclusion on the National Register of Historic Places, such activity shall not be undertaken unless (A) it will reasonably meet the standards issued by the Secretary of the Interior and the appropriate State historic preservation officer is afforded the opportunity to comment on the specific rehabilitation or development program, or (B) the Advisory Council on Historic Preservation is afforded an opportunity to comment on cases for which the grantee of assistance, in consultation with the State historic preservation officer, determines that the proposed activity cannot reasonably meet such standards or would adversely affect historic property as defined therein.

(2) The Secretary's award and grantee's use of resources made available under this section shall be subject to section 104(f) of the Housing and Community Development Act of 1974.

(3) A project assisted under this section shall be treated as a project subject to a mortgage insured under section 220 of the National Housing Act for the purpose of section 212 of such Act.

(j) FINANCING.-Subject to terms and conditions that are prescribed by the Secretary and are consistent with the purpose and other provisions of this section, any obligation issued by a State or local housing agency for the purpose of financing the development of a project or projects assisted under this section is hereby deemed an obligation that meets the requirements of, and has the benefits. (including the benefit of interest earned with respect to the obliga

tion being exempt from Federal taxation) associated with, an obligation described in section 11(b).

(k) DEFINITIONS.-For the purpose of this section

(1) the term "rehabilitation grant" means a grant to finance moderate rehabilitation;

(2) the term "development grant" means a grant to finance new construction or substantial rehabilitation;

(3) the Secretary shall use the same population data and rules for designating cities and urban counties as apply under title I of the Housing and Community Development Act of 1974;

(4) the term "real property to be used primarily for residential rental purposes" includes cooperative or mutual housing which has a resale structure which enables the cooperative to maintain affordability for lower income families; (5) the term "grantee" means—

(A) any city or urban county receiving resources under subsection (b), and any unit of general local government receiving resources under subsection (d);

(B) any State administering a rental rehabilitation or development program as provided in subsection (e); and

(C) any unit of general local government which receives assistance from the Secretary as provided in subsection (e); (6) the term "State" means each of the several States and the Commonwealth of Puerto Rico; and

(7) the term "unit of general local government" means (A) any city, county, town, township, parish, village, or other general purpose political subdivision of a State; (B) any Indian tribe (as defined in section 102(a)(17) of the Housing and Community Development Act of 1974); and (C) the District of Columbia, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States.

The Secretary shall encourage cooperation by units of general local government in the administration of grants under this section by permitting consortia of geographically proximate units of general local government to apply for assistance on behalf of their members, including establishment of eligibility under subsection (b) for consortia whose combined populations exceed fifty thousand and which can otherwise meet the requirements of such subsection. Any amounts made available to such a consortium shall be deducted from the allocation to the State in which the units of general local government are located.

(1) REVIEW AND AUDIT.-The Secretary shall, at least on an annual basis, make such reviews and audits as may be necessary or appropriate to determine

(1) where the grantee is a unit of general local government, or a State carrying out its own program as provided in subsection (e)(1), whether the grantee has carried out its activities in a timely manner and in accordance with the requirements of this section, and has a continuing capacity to carry out those activities in a timely manner; and

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