42 U.S.C. § 1437aaa–4: Other program…

Summary

Public housing agencies must sell a project to an approved buyer under an approved homeownership plan. When picking families to buy, the program must put current tenants first and give second priority to families who finished a Secretary‑approved self‑sufficiency program. The Secretary can set cost limits for these activities. The federal government will keep paying annual contributions for the project after a sale, but not more than the maximum allowed by law in section 1437c(a). Operating Fund money cannot be used for a project after it is sold. Money from the first sale must pay for the homeownership program and related needs, like running costs, repairs, business help for low‑income families, supportive services, more homeownership chances, and other Secretary‑approved uses. Homeowners may sell their homes, but the program can place resale limits. Resident management groups, resident councils, or cooperatives have a first right to buy at the buyer’s contract price; if they don’t, the public housing agency or grant recipient may buy instead. The homeowner must sign a promissory note for the difference between market value and purchase price, secured by a mortgage. If a home is sold within 6 years, rules limit how much profit the family can get (only equity, the value of family-paid improvements, and a set inflation-based appreciation). If sold between 6 and 20 years, the program recaptures an amount equal to the declining balance on that note. Half of recaptured net proceeds go back to the program entity for approved uses and half go to the federal government, subject to appropriations. No more than $250,000 per project may be used for economic development under these programs. Recipients must transfer ownership to tenants within a reasonable time set by the Secretary, use approved tenant selection rules while managing the property as rentals, notify rejected applicants in writing, show resident management groups have 3 years’ proven management or hire a qualified manager, keep full financial records, and allow audits by the Secretary and the Comptroller General.

Title 42, §1437aaa–4

The Public Health and Welfare, Source: USLM XML via OLRC

(a)Sale by public housing agency to applicant or other entity required

Where the Secretary approves an application providing for the transfer of the eligible project from the public housing agency to another applicant, the public housing agency shall transfer the project to such other applicant, in accordance with the approved homeownership program.

(b)Preferences

In selecting eligible families for homeownership, the recipient shall give a first preference to otherwise qualified current tenants and a second preference to otherwise qualified eligible families who have completed participation in an economic self-sufficiency program specified by the Secretary.

(c)Cost limitations

The Secretary may establish cost limitations on eligible activities under this subchapter, subject to the provisions of this subchapter.

(d)Annual contributions

Notwithstanding the purchase of a public housing project under this section, or the purchase of a unit in a public housing project by an eligible family, the Secretary shall continue to pay annual contributions with respect to the project. Such contributions may not exceed the maximum contributions authorized in section 1437c(a) of this title.

(e)Amounts from Operating Fund allocation

Amounts from an allocation from the Operating Fund under section 1437g of this title shall not be available with respect to a public housing project after the date of its sale by the public housing agency.

(f)Use of proceeds from sales to eligible families

The entity that transfers ownership interests in, or shares representing, units to eligible families, or another entity specified in the approved application, shall use the proceeds, if any, from the initial sale for costs of the homeownership program, including operating expenses, improvements to the project, business opportunities for low-income families, supportive services related to the homeownership program, additional homeownership opportunities, and other activities approved by the Secretary.

(g)Restrictions on resale by homeowners

(1)In general

(A)Transfer permitted

A homeowner under a homeownership program may transfer the homeowner’s ownership interest in, or shares representing, the unit, except that a homeownership program may establish restrictions on the resale of units under the program.

(B)Right to purchase

Where a resident management corporation, resident council, or cooperative has jurisdiction over the unit, the corporation, council, or cooperative shall have the right to purchase the ownership interest in, or shares representing, the unit from the homeowner for the amount specified in a firm contract between the homeowner and a prospective buyer. If such an entity does not have jurisdiction over the unit or elects not to purchase and if the prospective buyer is not a low-income family, the public housing agency or the implementation grant recipient shall have the right to purchase the ownership interest in, or shares representing, the unit for the same amount.

(C)Promissory note required

The homeowner shall execute a promissory note equal to the difference between the market value and the purchase price, payable to the public housing agency or other entity designated in the homeownership plan, together with a mortgage securing the obligation of the note.

(2)6 years or less

In the case of a transfer within 6 years of the acquisition under the program, the homeownership program shall provide for appropriate restrictions to assure that an eligible family may not receive any undue profit. The plan shall provide for limiting the family’s consideration for its interest in the property to the total of— (A)

(B)the value, as determined by such means as the Secretary shall determine through regulation, of any improvements installed at the expense of the family during the family’s tenure as owner; and

(C)the appreciated value determined by an inflation allowance at a rate which may be based on a cost-of-living index, an income index, or market index as determined by the Secretary through regulation and agreed to by the purchaser and the entity that transfers ownership interests in, or shares representing, units to eligible families (or another entity specified in the approved application), at the time of initial sale, and applied against the contribution to equity.

Such an entity may, at the time of initial sale, enter into an agreement with the family to set a maximum amount which this appreciation may not exceed.

(3)6–20 years

In the case of a transfer during the period beginning 6 years after the acquisition and ending 20 years after the acquisition, the homeownership program shall provide for the recapture by the Secretary or the program of an amount equal to the amount of the declining balance on the note described in paragraph (1)(C).

(4)Use of recaptured funds

Fifty percent of any portion of the net sales proceeds that may not be retained by the homeowner under the plan approved pursuant to this subsection shall be paid to the entity that transferred ownership interests in, or shares representing, units to eligible families, or another entity specified in the approved application, for use for improvements to the project, business opportunities for low-income families, supportive services related to the homeownership program, additional homeownership opportunities, and other activities approved by the Secretary. The remaining 50 percent shall be returned to the Secretary for use under this subchapter, subject to limitations contained in appropriations Acts. Such entity shall keep and make available to the Secretary all records necessary to calculate accurately payments due the Secretary under this subsection.

(h)Third party rights

The requirements under this subchapter regarding quality standards, resale, or transfer of the ownership interest of a homeowner shall be judicially enforceable against the grant recipient with respect to actions involving rehabilitation, and against purchasers of property under this subsection or their successors in interest with respect to other actions by affected low-income families, resident management corporations, resident councils, public housing agencies, and any agency, corporation, or authority of the United States Government. The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action.

(i)Dollar limitation on economic development activities

Not more than an aggregate of $250,000 from amounts made available under section 1437aaa–1 and 1437aaa–2 of this title may be used for economic development activities under section 1437aaa–1(b)(6) and 1437aaa–2(b)(9) of this title for any project.

(j)Timely homeownership

Recipients shall transfer ownership of the property to tenants within a specified period of time that the Secretary determines to be reasonable. During the interim period when the property continues to be operated and managed as rental housing, the recipient shall utilize written tenant selection policies and criteria that are consistent with the public housing program and that are approved by the Secretary as consistent with the purpose of improving housing opportunities for low-income families. The recipient shall promptly notify in writing any rejected applicant of the grounds for any rejection.

(k)Capability of resident management corporations and resident councils

To be eligible to receive a grant under section 1437aaa–2 of this title, a resident management corporation or resident council shall demonstrate to the Secretary its ability to manage public housing by having done so effectively and efficiently for a period of not less than 3 years or by arranging for management by a qualified management entity.

(l)Records and audit of recipients of assistance

(1)In general

Each recipient shall keep such records as may be reasonably necessary to fully disclose the amount and the disposition by such recipient of the proceeds of assistance received under this subchapter (and any proceeds from financing obtained in accordance with subsection (b) or sales under subsections (f) and (g)(4)), the total cost of the homeownership program in connection with which such assistance is given or used, and the amount and nature of that portion of the program supplied by other sources, and such other sources as will facilitate an effective audit.

(2)Access by the Secretary

The Secretary shall have access for the purpose of audit and examination to any books, documents, papers, and records of the recipient that are pertinent to assistance received under this subchapter.

(3)Access by the Comptroller General

The Comptroller General of the United States, or any of the duly authorized representatives of the Comptroller General, shall also have access for the purpose of audit and examination to any books, documents, papers, and records of the recipient that are pertinent to assistance received under this subchapter.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This subchapter, referred to in subsec. (g)(4), was in the original “this subtitle”, and was translated as reading “this title”, meaning title III of act Sept. 1, 1937, ch. 896, as added by Pub. L. 101–625, to reflect the probable intent of Congress, because title III of act Sept. 1, 1937, does not contain subtitles. section 1437aaa–1(b)(6) of this title, referred to in subsec. (i), was redesignated section 1437aaa–1(b)(7) of this title by Pub. L. 102–550, title X, § 1012(h)(1)(A), Oct. 28, 1992, 106 Stat. 3906. section 1437aaa–2(b)(9) of this title, referred to in subsec. (i), was redesignated section 1437aaa–2(b)(10) of this title by Pub. L. 102–550, title X, § 1012(h)(2)(A), Oct. 28, 1992, 106 Stat. 3906.

Amendments

1998—Subsec. (e). Pub. L. 105–276 substituted “Amounts from an allocation from the Operating Fund” for “Operating subsidies”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1998 AmendmentAmendment by title V of Pub. L. 105–276 effective and applicable beginning upon Oct. 1, 1999, except as otherwise provided, with provision that Secretary may implement amendment before such date, except to extent that such amendment provides otherwise, and with

Savings Provision

, see section 503 of Pub. L. 105–276, set out as a note under section 1437 of this title.

§1437aaa–4 Other Program Requirements