HUD PIH Notice § 2024-40

                               U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                            WASHINGTON, D.C. 20410–8000
      OFFICE OF PUBLIC AND INDIAN HOUSING




      Special Attention of:                              Notice PIH 2024-40 (HA)
      Public Housing Agencies (PHAs)                     Issued: December 26, 2024
      Public Housing Directors                           This notice supersedes and replaces Notice
      Resident Management Corporations                   PIH 2021-07

      Cross-References: Notices: PIH 2016-22; 2019-13; 2020-23; 2021-37; 2023-07; RAD Final
      Implementation Notice Revision 4 (H-2019-09; PIH-2019-23 (HA)


      Subject: Demolition and/or disposition of public housing property, eligibility for tenant-
      protection vouchers, and associated requirements.

 I.      Purpose.

         This notice explains application requirements to request the U.S. Department of Housing
         and Urban Development’s (HUD’s) approval to demolish and/or dispose of public housing
         property under Section 18 of the United States Housing Act of 1937 (42 U.S.C. 1437p)
         (1937 Act) and related Tenant Protection Voucher (TPV) eligibility for such actions (refer
         to PIH Notice 2023-07, Revision 1 or the latest Housing Choice Voucher (HCV) Funding
         Notice). This notice is used in conjunction with HUD’s implementing regulations at 24
         CFR Part 970 and other requirements to the Special Applications Center (SAC)
         applications. This document is intended to provide clarity to the public regarding existing
         requirements under the law.

         For purposes of this notice, public housing includes all dwelling property, including units
         in mixed finance transactions and non-dwelling property (e.g., vacant land, administrative
         buildings and community buildings) acquired, developed, modernized, operated, or
         maintained with 1937 Act funds (other than Section 8 assistance provided under the 1937
         Act).

II.      SAC Application Requirements.

         A. Processing. HUD’s SAC reviews demolition and disposition applications (SAC
            applications) in accordance with the requirements of 24 CFR Part 970. SAC only
            reviews complete SAC applications. Pursuant to 24 CFR 970.29, HUD will disapprove a
            SAC application if HUD determines: (1) a certification made by the PHA under 24 CFR
            Part 970 is clearly inconsistent with the PHA Plan or any information and data available
            to or requested by HUD; or (2) the application was not developed in consultation with
            residents, resident groups, and local government officials.

         B. PHA Plan. The PHA must certify that the proposed demolition or disposition of a
            public housing property is included in a PHA Annual Plan, Significant Amendment, or
            MTW Annual Plan. All PHAs must discuss the demolition or disposition at a public
            hearing, as required by 24 CFR 903.7(h)(2). The PHA must comply with the resident

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   consultation requirements for the PHA Plan, including discussing with its Resident
   Advisory Board (RAB) the proposed repositioning or redevelopment option, including
   demolition/disposition).

C. Environmental Requirements. Proposed demolitions and disposition must comply
   with an environmental review and environmental clearance in accordance with 24 CFR
   970.13. A final approval is given by the HUD Approving Official whether the
   environmental review is conducted by HUD under 24 CFR Part 50 or by a Responsible
   Entity under 24 CFR Part 58 to determine whether the project will have a significant
   impact on the environment. See PIH Notice 2016-22. The PHA is responsible for
   providing the Responsible Entity or local HUD Office of Public Housing (Field Office)
   with a full description of the activities, per 24 CFR 50.21 Aggregation and 24 CFR
   58.32 Project aggregation, in connection with the demolition and/or disposition and if
   the future uses of the site are known at time of SAC application submission (e.g., onsite
   RAD redevelopment, conversion to greenspace to increase community’s flood
   resilience, sale to a residential entity, Section 8 Project-Based Voucher (PBV) activity)
   to comply with aggregation requirements. The site re-use is not limited to future actions
   by the PHA but includes any future known re-use. See 24 CFR 970.13(b) for factors in
   determining what constitutes a known future use. See also 24 CFR 58.32 and 24 CFR
   50.21.

D. Resident Consultation. In addition to resident consultation for PHA Plans, the PHA
   must comply with resident consultation requirements under 24 CFR 970.9, including
   consultation with:
           Residents who may be affected by the demolition or disposition action;
           Resident organizations for the affected project, if any;
           PHA-wide resident organizations, if any; and,
           The RAB or equivalent body.
    Affected residents include public housing residents living in other units not proposed
    for removal at the same project as the property proposed for removal (units or vacant
    land) and/or residents living in any of the PHA’s other public housing units.

    The PHA must ensure communications and materials are accessible to individuals with
    disabilities and take reasonable steps to provide meaningful access to persons with
    Limited English Proficiency (LEP). See Other Requirements, Section VI(G)(5) of this
    notice, for more information on these requirements.

    Along with a narrative of its consultation process, the PHA must attach evidence of
    consultation (i.e., sign-in sheets, dates, and agenda for meetings). The PHA must allow
    residents and their representatives to submit written comments regarding the PHA’s
    proposed Section 18 Plan and must consider these comments when determining
    whether and how to proceed with a proposed demolition or disposition, including
    vacant land. If the PHA proposes a demolition only application, the PHA must conduct
    a new consultation with residents if it later submits a disposition only application for
    the same vacant land post building demolition.


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   As a best practice regarding resident consultation, the SAC encourages the PHA to
   follow the RAD resident consultation requirements. All meetings should be made
   accessible to people with disabilities and provide language assistance for all residents.
   The PHA should conduct two meetings with residents before submitting the
   application, conduct two meetings with residents after HUD accepts the public housing
   repositioning action, and one meeting before the final removal action occurs.

E. Offer of Sale to Resident Organizations (Disposition Only). The PHA must, in
   appropriate circumstances as determined by the Assistant Secretary, provide resident
   entities with the opportunity to purchase the project, subject to certain exceptions under
   24 CFR 970.9(b)(3). A PHA requesting consideration of exceptions to 24 CFR
   970.9(b)(1) must follow the process stated at 24 CFR 970.9(b)(4). A resident entity
   with an interest in purchasing the property must make the request in writing to the
   PHA, no later than 30 days after having received the notification of sale from the PHA.
   For its purchase offer to be considered, the resident entity must demonstrate that it has
   obtained firm commitment for the necessary financing within 60 days of serving its
   written notice of interest under 24 CFR 970.9(b)(1).

F. Board Resolution. The PHA must obtain a signed and dated resolution from its Board
   of Commissioners authorizing the PHA to submit the SAC application. The Board
   must be consulted and approve all material parts of the SAC application including the
   justification method of disposition (if applicable); use of proceeds; results of resident and
   local government consultation, and relocation plan. The authorizing board resolution
   must be dated after all initial local government and resident consultations are conducted.

G. Phased Applications. The PHA may submit SAC applications through a “phased”
   method with staggered relocation timelines, to facilitate phased redevelopment of a
   public housing project, so that buildings in later phases remain eligible for public
   housing funding during earlier phases of the proposed activities. A PHA submits a
   SAC application in HUD’s Inventory Management System/PIH Information Center
   (IMS/PIC) for each phase, with different relocation start dates. The same supporting
   documentation (e.g., board resolution, resident consultation, government consultation,
   environmental review) may be submitted in support of multiple phases. See 24 CFR
   970.7(a).

H. Commensurate Public Benefit and Use Restrictions. Unless an exception is met, the
   PHA must receive fair market value (FMV) when they dispose of public housing
   property to a non-affiliated entity. In accordance with 24 CFR 970.19, dispositions
   proposed below FMV require a finding of commensurate public benefit, which HUD
   determines on a case-by-case basis. Generally, the disposed property is used or
   redeveloped as low-income housing (i.e., public housing, project-based Section 8
   housing, including through Rebuild/Restore (formerly Faircloth to RAD)), or, if low-
   income housing is not feasible, for other affordable housing purposes serving low-
   income families (income at or below 80% of area median). Affordable housing may
   include, but is not limited to, public housing, project-based Section 8 housing, and
   housing developed with low-income housing tax credits (LIHTC). HUD encourages the
   PHA to give public housing residents priority for occupancy of the affordable housing

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        units. Additionally, the PHA is encouraged to maximize economic opportunities
        available to residents (as described in Section VI.F.4 of this notice) when requesting
        HUD approval of a below FMV disposition based on commensurate public benefit.
        The PHA should specifically describe these economic opportunity benefits in its SAC
        applications as part of the commensurate public benefit description. Public buildings
        and infrastructure include streets, bridges, schools, police and fire stations and other
        public improvements and do not qualify as a commensurate public benefit.

       To ensure compliance with a HUD-approved commensurate public benefit, the SAC
       approval will require that a use restriction that survives foreclosure of mortgages and
       other liens be recorded in public land records. As part of the SAC application, a PHA
       may propose a preferred form of use restriction (e.g., LIHTC extended use agreement,
       HOME agreement, provision in ground lease, separate use agreement) and proposed
       minimum term, but the final form and term of use restriction is determined by HUD
       based on the approved commensurate public benefit. HUD, the PHA, and the proposed
       acquiring entity shall all be parties to the use restriction (see exception for LIHTC
       Transactions in endnotes). Each use restriction must meet the following criteria:
        1. Recorded in a first priority position;1
        2. Binding upon successors and assigns (including HUD-approved transferees);
        3. Prior written HUD approval required to:
                 voluntarily convey, assign, transfer, lease, sublease, or otherwise dispose of the
                  property, or any interest in the property (except HUD approval is not required
                  for the conveyance or dedication of land for use as streets, easements for public
                  utilities; and residential leases);
                 mortgage, pledge, or otherwise encumber the property (certain involuntary
                  transfers, i.e., foreclosure is permitted but must be subject to the use
                  restriction);
                 demolish an existing structure or construct a new structure; and,
                 amend or release the Use Agreement.
        HUD will not release the Declaration of Trust/Declaration of Restricted Covenants
        (DOT/DORC) (HUD – 52190 approved 7/23/2023) until it approves the final form of
        use restriction. HUD encourages the PHA to annually report to its board of directors to
        confirm compliance with use restriction.

    I. Ground Lease Dispositions. PHAs often use ground leases to facilitate the
       development of affordable housing on former public housing property. A PHA may
       prefer to dispose through a Ground Lease instead of fee simple sale because it allows the
       PHA to retain a long-term ownership interest in the property after the lease ends, keeps
       any real estate tax benefits a PHA has access to, and control how the property is used



1
  If the disposition will occur in conjunction with a Low-Income Housing Tax Credit (LIHTC) financial closing, the
Field Office may accept a LIHTC Land Use Restriction Agreement or (LURA) as the Use Agreement document, if
the Field Office determines the LIHTC LURA ensures the commensurate public benefit approved by the SAC.

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       during the lease term. The PHA must obtain HUD approval to lease public housing for
       non-public housing purposes if the lease term is over 1-year and does not qualify for an
       exception under 24 CFR 970.3(b). The PHA must describe the terms of the Ground
       Lease in their Section 18 applications, including terms, payments (up-front or annual),
       and name of proposed lessee. A Ground Lease is a negotiated disposition (vs. public bid
       sale) and HUD will only approve it if HUD finds it is in the best interests of the PHA
       and federal government.

       If public housing property is disposed via a Ground Lease and the Ground Lease
       terminates prior to the required commensurate public benefit term set out in the SAC
       approval, HUD retains a real property interest under 2 CFR Part 200.311.2 The PHA is
       responsible for tracking the 1937 Act Funds (Capital Funds and Operating Funds)
       invested at the property prior to the Ground Lease being placed on the property, as well
       as any new 1937 Act Funds invested once the Ground Lease is in place. If the PHA does
       not have records evidencing the last 1937 Act Funds expended at a property, HUD will
       assume that the PHA used all Capital Funds at the property the year before the
       disposition. The PHA is responsible for notifying HUD of any pending or actual ground
       lease terminations. HUD will consider if and how the termination impacts any Use
       Agreement. HUD may require the PHA to record a DOT/DORC on the property and/or
       require the PHA to obtain additional approvals from HUD to retain the property without
       the DOT/DORC or to sell the property.

    J. Disposition Proceeds. See PIH Notice 2020-23 for guidance on the use and treatment of
       Section 18 disposition proceeds.

    K. Changes After SAC Application Approval. Generally, the PHA must comply with all
       terms of the SAC approval. Technical corrections to SAC approval letters (such as non-
       substantial changes to acreage or unit corrections) may be requested by emailing
       SACTA@hud.gov. No material changes may be made to the SAC approval letter. Any
       material changes require a new SAC application submission.
        Material changes include:
            Method of disposition modifications;
            Public bid sale for less than 80% of the appraised FMV (the PHA must describe its
             due diligence in offering the public housing property for sale on the open and
             competitive market and its rationale for accepting an offer that is below 80% of
             appraised FMV; alternatively, the PHA may submit an updated appraisal); and,




2
 Based on 42 USC 1437 g(d)(3), 24 CFR 905.304(a)(1,(2) and (3) and (c), Funds used for development have a 40-
year term to which they must be operated as public housing. Capital Funds have a 20-year term when used for
modernization (extends each time any Capital Funds are used at a property) and a 40-year term when used for
development. Operating Funds have a 10-year term, which begins at the conclusion of the fiscal year the Operating
Funds were last expended. Note that even small of amounts of Operating Funds (i.e., to mow the lawn) trigger this
10-year term.


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              Revised terms of commensurate public benefit for below FMV disposition (the
               PHA must describe the revised future use of the property so HUD can confirm the
               commensurate public benefit).
           The PHA may request a new SAC application for material changes by sending an email
           to SACTA@hud.gov with evidence that the PHA has consulted the residents, the RAB,
           and resident groups about the change, and a board resolution approving the change.
           Once a request for material changes is made, the prior approval letter will be rescinded.
III.   Disposition Justification (24 CFR 970.17).
       HUD will approve a disposition when a PHA can certify it is in the best interest of the
       residents or the PHA to dispose of the public housing project or other real property by sale
       or other transfer relative to one of the following reasons:

       A. Justification Criteria for Dwelling Units (24 CFR 970.17(a)(b) or (c)). HUD reviews
          PHA certifications and narratives, along with other information available to or requested
          by HUD to ensure consistency of the PHA’s SAC application submission. HUD
          approves SAC applications for dwelling unit dispositions based on one of the following
          three reasons:

           1. Surrounding Area (24 CFR 970.17(a)): The conditions in the area surrounding the
              project (e.g., density, industrial or commercial development) adversely affect the
              health or safety of the residents or the feasible operation of the project by the PHA.
              The PHA must support its application with at least one of the following:

               a. Health or safety. The PHA demonstrates conditions that present serious
                  obstacles in maintaining the units as healthy or safe housing and why the PHA
                  cannot cure or mitigate those conditions in a cost-effective manner. HUD
                  encourages the PHA to submit supporting third-party documentation, which
                  includes environmental reviews conducted by a Responsible Entity under 24
                  CFR Part 58 or by HUD under 24 CFR Part 50. HUD may consider other
                  available information, including analyses of land development, socioeconomics,
                  community facilities and services, and natural features; or

               b. Infeasible operation. The PHA demonstrates a lack of demand for the units via
                  supporting documentation which includes evidence that the units have long-term
                  vacancy issues, notwithstanding due diligence in marketing (e.g., census tract
                  data on declining population in the jurisdiction; units located in an isolated area
                  with limited access to transportation and infrastructure; high turnover rates). On
                  a case-by-case basis, HUD may require a PHA to submit a market analysis or
                  HUD may perform one.

           2. Improved Efficiency/Effectiveness Through Off-Site Development of Low-
              income Housing (24 CFR 970.17(b)). The disposition allows the acquisition,
              development or rehabilitation of other properties that will be more efficiently or
              effectively operated as low-income housing projects (these post SAC application
              actions will require their own environmental reviews). “Low-income housing” is
              defined by Section 3 of the 1937 Act and includes public housing units, PBV units,

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   or Section 8 Project-Based Rental Assistance (PBRA) units and does not include
   housing where tenants are using tenant-based Section 8 HCV. The PHA must
   demonstrate to the satisfaction of HUD that sufficient replacement low-income
   housing units are being provided in connection with the disposition of the property.
   In providing the statement justifying the proposed disposition, the PHA explains its
   plans to acquire, develop, or rehabilitate low-income housing projects. For public
   housing units, the PHA must submit the development proposal to HUD under 24
   CFR Part 905. HUD encourages the PHA to consider RAD or a RAD/Section 18
   blend as an alternative prior to submitting SAC application under the efficient and
   effective justification.

3. PHA certifies that it has determined the disposition to be appropriate (24 CFR
   970.17(c)). The PHA must certify that it has determined the disposition is
   appropriate for reasons that are in the best interests of the residents and the PHA;
   consistent with the PHA goals and plans; and otherwise, consistent with the 1937
   Act. In making such a certification, a PHA must consider the needs of its
   jurisdiction for public housing units, the goals and obligations of the PHA to
   operate, maintain, and provide decent and safe housing in accordance with its ACC
   and other tools available to the PHA to preserve and reposition its public housing
   stock. HUD encourages the PHA to review all other public housing preservation
   options prior to the submission of this public housing property removal application.
   The SAC considers project-specific circumstances, needs and resources and in
   accordance with 24 CFR 970.29 any other information or data requested by HUD,
   while reviewing each individual SAC application. Below are examples of
   circumstances where a disposition may be appropriate:

   a. Unit obsolescence. The units are obsolete as to physical condition in accordance
      with applicable demolition criteria described at Section IV.A.1 of this notice.

   b. Very Small PHAs. The PHA owns and operates 50 or fewer public housing
      units under its ACC and can demonstrate that it is in the best interests of the
      residents and PHA to close out its Section 9 public housing program in
      accordance with Notice PIH 2019-13, or any successor or replacement notice.

   c. Improved Efficiency/Effectiveness Through On-Site Development of Low-
      income Housing (24 CFR 970.17(c)). A PHA demonstrates that it can
      redevelop property to better meet the affordable housing needs of the
      community. The requirements of Section II.A.2 of this notice apply except that
      the replacement low-income housing units are located on-site. The replacement
      of low-income housing units may be newly constructed or the same public
      housing units after rehabilitation. If the PHA is proposing to dispose of public
      housing units to allow the same units to be modernized (rehabilitated) under
      mixed-finance public housing project rules of 24 CFR Part 905, the PHA
      submits the SAC application under the “MF-MOD” disposition application type
      in IMS/PIC, or as directed in any successor system. This ensures the PHA will
      continue to receive Capital Fund and Operating Fund subsidy for the units
      throughout the modernization period.

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       d. Scattered Site Units. A PHA demonstrates that the distance between units and
          lack of uniformity of systems (e.g. HVAC, utilities) makes it challenging to
          continue to operate and/or maintain the units as public housing. For purposes of
          this notice, scattered site units mean units in contiguous or non-contiguous
          buildings with four or fewer total units on one side of a city block.

B. Blending Section 18 Disposition Approvals with RAD Conversion (24 CFR
   970.17(c)).

   Provided that a project meets the criteria outlined below, a PHA that is converting a
   portion of the public housing units within a Converting Project and is replacing the
   units proposed for disposition with project-based Section 8 assistance within the
   Covered Project may be subject to the provisions governing RAD/Section 18 Blends, as
   the terms “Converting Project” and “Covered Project,” and “RAD/Section 18 Blends”
   are defined in the Rental Assistance Demonstration (RAD) Final Implementation
   Notice Revision 4 (H-2019-09 PIH-2019-23 (HA)), as amended from time to time (the
   “RAD Notice”). The aggregate number of replacement units under project-based
   Section 8 must meet the RAD “substantial conversion of assistance” requirements as
   established in the RAD Notice. All residents shall be treated uniformly and in
   accordance with RAD requirements, including the civil rights requirements and reviews
   described in the RAD Fair Housing, Civil Rights, and Relocation Notice (PIH 2016-17
   (HA)). RAD/Section 18 blends are primarily processed by the Office of
   Recapitalization and are subject to RAD Notice requirements and processes related to
   Financing Plan submission requirements, underwriting, DOT releases, terms of the
   disposition (e.g., treatment of proceeds), and placement of a long-term use agreement at
   the Covered Project. In addition to RAD requirements, the PHA must also satisfy all
   Section 18 submission requirements.

   1. RAD/Section 18 Construction Blend. The percentage of units eligible for
      disposition under Section 18 within the Converting Project is based on the
      following: 1) whether that project will be demolished and redeveloped; 2) whether
      the assistance will be transferred to a new site under RAD; or 3) the hard
      construction costs, including general requirements, overhead and profit, and
      payment and performance bonds, proposed for a rehabilitation of the Covered
      Project as compared to the Housing Construction Costs (HCC) as published by
      HUD for the given market area. The following table sets forth the eligibility criteria
      for a RAD/Section 18 Construction Blend and, for each criteria, the maximum
      percentage of units eligible for Section 18 and the minimum number of units that
      will convert under RAD within the Converting Project:
      Eligibility                                               Unit Mix Percentage
                                                                (Section 18/RAD)
         Proposed rehab where hard construction costs exceed   up to 90% Section 18 at
          90% of the HCC for the given market area OR                least 10% RAD
         Demolition and Redevelopment of the project OR
         Transfer of Assistance



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          Proposed rehab where hard construction costs exceed   up to 60% Section 18 at
           60% of the HCC for the given market area                   least 40% RAD
          Proposed rehab where hard construction costs exceed   up to 30% Section 18 at
           30% of the HCC for the given market area                   least 70% RAD

       A PHA intending to use a RAD/Section 18 Construction Blend must first submit an
       Application for the project in accordance with Section 1.9 of the RAD Notice.

    2. RAD/Section 18 Small PHA Blend. For any PHA with 250 or fewer public
       housing units under its ACC, at the PHA’s discretion, up to ninety percent (90%)
       of the units in a Converting Project may be disposed of under Section 18 and at
       least ten percent (10%) of the units must be converted under RAD. The PHA is
       not required to remove all its remaining public housing units through a Small PHA
       Blend transaction. However, to be eligible for the Small PHA blend, in addition to
       the PHA Plan requirements the PHA must submit to the HUD Field Office a
       feasible repositioning plan approved by the PHA’s Board of Commissioners and
       acceptable to HUD that shows how the PHA will remove the remainder of its public
       housing assets and will result in the closeout of the PHA’s Section 9 ACC
       consistent with PIH Notice 2019-13 or successor notice (see further guidance that
       HUD will post) .

        Any PBV contract created under this subparagraph must be administered by a
        Section 8 contract administrator with at least 250 HCV units under its HCV
        Consolidated ACC prior to the creation of the PBV Housing Assistance Payments
        (HAP) contract unless the Field Office determines that the proposed contract
        administrator has sufficient capacity to administer the PBV contract. The Field
        Office will consider factors such as the proposed contract administrator’s prior
        SEMAP scores, recent HCV-related audit findings for the contract administrator,
        and whether the proposed contract administrator will have sufficient budget
        authority and units under its Consolidated ACC (in addition to any existing RAD or
        Non-RAD PBV HAP Contracts) to adequately serve the tenant-based waiting list
        and provide mobility options for the PBV residents.

        A PHA intending to use a RAD/Section 18 Small PHA Blend must first submit an
        Application for the project in accordance with Section 1.9 of the RAD Notice.

    3. Sequenced Blends. A PHA that has first received approval for a property under a
       Section 18 disposition application under another justification under Section III.A of
       this notice (except for under Section III.A.2 and Section III.A.3.c) shall be subject
       to the provisions governing RAD/Section 18 Blends provided they request and
       receive SAC approval to conditionally rescind the Section 18 approval for some
       portion of RAD eligible units and convert the public housing assistance of at least
       10% of units under RAD.

C. Justification Criteria of Non-Dwelling Buildings and Vacant Land (24 CFR
   970.17(d)). The PHA certifies, by narrative statement and supporting documentation,
   that disposition of non-dwelling buildings or vacant land meets one of the criteria: under

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         24 CFR 970.17(d)(1) the property exceeds the needs of the project after the date of full
         availability (DOFA); or 24 CFR 970.17(d)(2) the disposition of the property is
         incidental to, or does not interfere with, continued operation of the remaining portion of
         the development.
IV.   Demolition Justification.

      In accordance with the Annual Contributions Contract (ACC) and other applicable public
      housing requirements, public housing property cannot be demolished without HUD
      approval. The PHA must secure HUD approval to demolish public housing property under
      another authority (i.e., Section 24 Choice Neighborhoods, RAD), or under Section 18 of
      the 1937 Act). In carrying out approved demolitions under Section 18 of the 1937 Act, the
      PHA complies with all applicable public housing requirements (i.e., procurement, Davis-
      Bacon wages, fair housing requirements). If the PHA uses Capital Funds to pay for the
      demolition, it complies with all applicable 5-year Annual Plan and other Capital Fund
      Program requirements.

      If a PHA’s proposed demolition occurs after the proposed disposition of public housing
      units or other property (e.g., by a LIHTC acquiring entity), then HUD approval is not
      required for the demolition. Instead, the PHA must comply with the disposition criteria
      under 24 CFR 970.17 and Section III of this notice.

      A. Justification Criteria (24 CFR 970.15). HUD reviews demolition requests in
         accordance with the following criteria: (1) the project or portion of a project is obsolete
         as to physical condition, location, or other factors, making it unsuitable for housing
         purposes; and no reasonable program of modifications is cost-effective to return the
         public housing project or portion of the project to useful life; and (2) in the case of an
         application for demolition of a portion of a project, the demolition will help to ensure
         the viability of the remaining portion of the project.

          1. Physical Condition (24 CFR 970.15(b)(1)(i) and (b)(2)). The PHA must
             demonstrate substantial physical issues of the buildings/units (e.g., critical structural
             issues, deficiencies in major systems, deterioration due to prolonged deferred
             maintenance) that cannot be corrected in a cost-effective manner. The PHA may
             submit Physical Needs Assessments (PNAs), government inspections (including
             condemnation orders), and/or independent architect or engineer’s reports as
             supporting documentation. HUD may consider other available information,
             including REAC scores; Capital Fund Program Five Year Action Plans, Energy
             Performance Contracting (EPC) information; and/or on-site inspections by HUD
             staff.
              If a project’s rehabilitation costs are between 57.14% (or 62.5% if elevator
              building) and 90% of total development cost (TDC), the PHA may either
              voluntarily pursue a demolition or disposition action for the project or may
              rehabilitate the project with Capital Funds. However, if rehabilitation costs for a
              project exceed 90% of TDC, the PHA’s only choice is to pursue a demolition or
              disposition or use funds other than Capital Funds to address the project’s capital
              needs.

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a. PHA’s must submit the following to certify physical obsolescence:
      HUD-52860-A (8/31/2023) Form;
      HUD-52860-B (8/31/2023) Form;
      Scope of Work Report. This includes a list of specific and detailed work
       items that require rehabilitation or repair, preferably prepared by an outside
       engineer or architect; and,
      Excel document of Scope of Work Rehab Cost-Estimates (including
       Allowable Soft Costs, see below).

b. Scope of Work. The scope of work should include the following:
      Estimates based on the standards outlined in the most recent International
       Building Code (IBC) and National Fire Protection Association (NFPA) 5000
       standards. The PHA may include local code requirements (e.g., fire codes;
       requirements for natural disasters such as flooding or wildfires);
      Building systems (e.g., HVAC, plumbing, electric), external amenities (e.g.,
       roofs, doors, windows), and internal amenities (e.g., kitchens, bathrooms,
       flooring) limited to those that address immediate capital needs for a
       maximum of three years. Replacement costs are restricted to items
       evidenced to be in poor condition that require immediate replacement or
       with a remaining useful life of three years or less. Actual service life may
       depend on initial quality of the item, local environmental factors, use/abuse,
       and levels of routine maintenance. The age of an item alone is not evidence
       of need to repair or replace. Each item is individually estimated and may
       reference life cycle values per the R.S. Means Facilities Maintenance and
       Repair Cost Data book;
      Underground utilities (e.g., sewer, water, gas, electric), regardless of
       distances, provided the PHA owns the utility and evidences the need for
       replacement;
      Mitigation costs of asbestos, lead-based paint, or other environmental issues
       supported by reports submitted with the SAC application;
      Structural defects when supported by reports from a licensed professional
       engineer;
      Accessibility improvements for persons with mobility, vision, hearing or
       other disabilities, provided improvements are consistent with standards,
       regulations, and other requirements under Section 504 of the Rehabilitation
       Act of 1973 (including the Uniform Federal Accessibility Standards
       (UFAS)), Fair Housing Act, Americans with Disabilities Act, other
       applicable federal authorities, state or local requirements that exceed federal
       baseline requirements, and accessibility requirements in remedial
       agreements or orders;
      Imminent health and/or safety issues even if such costs are otherwise not
       eligible provided the PHA provides supporting documentation from an
       independent party evidencing the occurrence and resulting health and/or
       safety risks. Due to extreme weather events the cost of installing air

                                    11
       conditioning or heating systems (where previously non-existent) may be
       included.

c. Items Generally Not Allowed in the Scope of Work. HUD reserves the right
   to disallow items in a scope of work if HUD determines there are more cost-
   effective alternatives to address the rehabilitation or replacement needs. If the
   PHA completes major capital work after the scope of work is prepared, the PHA
   must include a description of that work in the SAC application. HUD generally
   does not allow the following costs to be included in a rehabilitation scope of
   work:
      Work associated with enhancements or improvements of working systems or
       fixtures at the project (including energy efficiency “green” improvements);
      Amenities not currently existing at the project (e.g., solar panels; tankless
       water heaters; trash enclosures, washer/dryer hook-ups; garbage disposals;
       central air conditioning; addition of new porches);
      Work items that address a project’s needs beyond three years;
      Local code compliance if the building code requirements are otherwise not
       triggered by the rehabilitation/repair;
      Landscaping or other site work beyond five feet of the exterior walls of a
       building;
      Upgrading utility lines that are otherwise in working condition;
      Work items associated with site improvements and appurtenances (e.g.,
       parking lots, security cameras, playgrounds, community centers), even if
       those site improvements or appurtenances exist and are in need of repairs;
       and
      Replacing PHA personal property (e.g., replacing appliances or other
       removable fixtures such as refrigerators, ovens, and window treatments).
   Generally, any work item listed in “Fair” or “Good Condition”.

d. Cost Estimates. The following generally applies to cost estimates of the eligible
   scope of work items:
      Total development costs (TDC) comparisons per HUD-posted costs for the
       year the rehabilitation estimate is made. See 24 CFR 905.314.
      R.S. Means cost index, Marshall and Swift cost index, or other accurate and
       reliable cost estimates (e.g., actual and competitive bids).
      Housing construction costs (HCC) as defined in 24 CFR Part 905 (including
       existing items inside a building or within five feet of the exterior walls; and
       costs to repair landscaping damaged due to rehabilitation).
      PNA report should provide a summary description of the methodology used
       to prepare the PNA including the number of units inspected and the ratio of
       vacant to occupied units inspected. An occupied building should have a
       reasonable number of occupied and vacant units inspected that represent a
       similar ratio of the occupied vs. vacant units when preparing a PNA.

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           The PHA may not include additional costs attributable to inflation or “cost
           escalation.” For example, if a PNA completed in 2022 indicates a roof
           replacement is necessary in 2024, the PHA must use current estimated costs
           without any escalation, cost adjustments or other means of adjusting for
           inflation for work projected to be undertaken/completed in 2024. Instead, the
           PHA uses 2022 cost index information.

       e. Allowable Soft Costs. The following fees are maximum amounts for soft costs
          associated with public housing rehabilitation. HUD may consider higher
          percentages for soft costs for compelling reasons on a case-by-case basis. The
          PHA may flexibly determine costs for each item provided the total cost does not
          exceed the maximum. Percentages are based on hard construction and will vary
          based on the project size:
              Construction contingency: 7.5%
              Architectural/engineer’s design and construction monitoring fees: 5.5%
              Profit and overhead fees for specialty subcontractor (e.g., HVAC, electric,
               plumbing, elevator): 10%
              General condition fees (e.g., permit, insurance, bonds): 5%
              PHA administrative costs: 2%

    2. Location (24 CFR 970.15(b)(1)(ii) and (b)(2)). PHA demonstrates the location of
       the units causes obsolescence, including physical deterioration of the neighborhood;
       change in neighborhood from residential to industrial or commercial; or
       environmental conditions which jeopardize the suitability of the site or a portion of
       the site and its housing structures for residential use. The cost test for obsolescence
       based on location includes the PHA’s cost to cure the obsolescence (e.g., buffering
       nearby industrial or commercial development; mitigating environmental conditions)
       and whether these costs exceed applicable TDC percentages. In some cases, there
       may be no way to cure obsolescence, regardless of cost (e.g., project is in a Federal
       Emergency Management Agency (FEMA) designated floodway). In other cases,
       obsolescence may be curable with a mitigation cost (e.g., flood-proofing and flood
       insurance for designated floodplains).

    3. Other Factors (24 CFR 970.15(b)(1)(iii) and (b)(2)). PHA demonstrates factors
       impacting the marketability, usefulness, or management of the units that seriously
       impede operations for residential use supported by third party documentation. The
       cost test for obsolescence based on other factors includes the PHA’s cost to cure the
       cause and whether these costs exceed applicable TDC percentages. In some cases,
       curing obsolescence is not possible regardless of costs. In cases where
       obsolescence may be curable, include the PHA’s cost of due diligence in marketing
       and cost to cure obsolete factors (e.g., cost to add a second bathroom to units with a
       high number of bedrooms).

B. De Minimis Demolition (24 CFR 970.27). In any 5-year period, a PHA may demolish
   the lesser of 5 dwelling units or 5 percent of the total public housing dwelling units


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         without the need to obtain HUD approval under 24 CFR Part 970, provided the resulting
         space is used to meet the service or other needs of the residents or the PHA determines
         the unit(s) are beyond repair. Demolition criteria of 970.15 do not apply to de minimis
         demolitions. Prior to demolishing units under this authority, the PHA must submit
         information to HUD via IMS/PIC, including a description of the proposed units and
         other items required by 24 CFR 970.7(a)(1), (2), (12), (13), and (14), environmental
         review under Part 50 or 58, and required resident consultation pursuant of 24 CFR
         970.9.

V.    Eligibility and Application Process for Tenant-Protection Vouchers (TPV).

      A. TPV Eligibility. As part of HUD’s approval of a SAC application, a PHA may be
         eligible to receive Section 8 HCV assistance from HUD in the form of TPVs. The
         issuance of TPVs to a PHA does not occur automatically with SAC approval of an
         application. Instead, the PHA must apply separately for TPVs in accordance with HCV
         Funding Notice (see PIH Notice 2024-16 or any successor notice,) after SAC approves
         the SAC application.

         HUD determines a PHA’s TPV award based on the relevant appropriations and other
         HUD-issued guidance (including the applicable year’s HCV funding notice). HUD’s
         approval of the SAC application indicates the maximum number of both relocation and
         replacement TPVs that a PHA may be eligible to receive.

         Based on limited availability of TPV funding, HUD is limiting the maximum TPV
         awards to 25% of the units occupied in the last 24 months at the development for
         dispositions under the improved efficiency or effectiveness justification (see Section
         III.A.2 or Section III.A3.c of this notice). However, even if a PHA is not eligible to
         receive TPVs in a SAC-approved removal, the PHA must still comply with relocation
         requirements of 24 CFR 970.21.

      B. TPV Application Process. Refer to the SAC approval letter for TPV application
         process.
VI.   Other Requirements.

      A. Existing Financial Transactions. A PHA with an approved transaction through the
         Capital Fund Financing Program (CFFP), Section 30 (including PHA Mortgaged
         Transaction (PMT)), Energy Performance Contracting (EPC), or Operating Fund
         Financing Program (OFFP) must comply with additional instructions provided by HUD
         regarding such financing and may not take any steps to implement a SAC-approved
         application without receiving confirmation from HUD that all applicable requirements
         of the financing are satisfied. The PHA must certify an existing financial agreement is
         not at risk because of the proposed demolition or disposition action.

      B. Operating Fund Accuracy andUpdating Days to Relocation. As part of the SAC
         application, the PHA includes an estimated number of days from a SAC-approved
         application that it plans to start relocation. HUD recognizes relocation plans sometimes
         change. However, because HUD relies on relocation information to determine

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   Operating Funds, the PHA is responsible for ensuring the relocation information
   remains reasonably accurate. If days to relocation in a SAC application is not
   reasonably accurate, Asset Repositioning Fee (ARF) payments under 24 CFR 990.190
   will be affected. See Notice PIH 2021-37 on how to update relocation dates. The PHA
   shall not preemptively relocate residents from the proposed public housing units prior to
   receiving a signed SAC application approval. Resident relocation shall follow the
   timeline approved in a PHA’s SAC application.

C. Re-occupying Units Proposed for Demolition or Disposition. 24 CFR 970.25(a) states
   a PHA should not re-rent units at turnover while HUD is considering a SAC application.
   However, due to community needs or for other reasons consistent with its PHA Plan, a
   PHA may decide it is in the best interests of the PHA, its residents, and the community
   to re-occupy vacated units that are under SAC review. If the PHA proposes demolition
   or disposition because units are structurally unsound, located in a floodway, or
   otherwise uninhabitable, the PHA cannot reoccupy the units. The PHA cannot re-
   occupy units after issuance of the 90-day relocation notice.

D. Reporting Requirements. Within seven days of completion of the demolition or
   disposition (e.g., execution of the sale or lease contract for disposition), the PHA must
   report the action in IMS/PIC, or as directed in any successor system. On a case-by-case
   basis, HUD may require other reporting information.

E. False Certifications and HUD Enforcement. Any person knowingly presenting a false,
   fictitious or fraudulent statement or claim in a HUD matter, including certifications and
   supporting documentation submitted with SAC applications, is subject to criminal
   penalties, civil liability, or administrative actions which HUD may prosecute. HUD
   may pursue debarment/suspensions of principals and PHAs, and any enforcement
   actions available including, but not limited to, injunctive relief and other equitable
   remedies. If you knowingly make a false statement, you may be subject to criminal
   and/or civil penalties under Section 1001 of Title 18 of the United States Code. In
   addition, any person who knowingly and materially violates any required disclosures of
   information, including intentional non-disclosure, is subject to civil money penalty not
   to exceed $10,000 for each violation.

F. Civil Rights Requirements. This notice does not modify a PHA’s fair housing, civil
   rights, or accessible housing obligations. It does clarify those obligations with respect to
   public housing demolition/disposition under Section 18.

    1. PHA Certification. As part of the SAC application, the PHA must certify it will
       carry out the removal action in compliance with all applicable civil rights
       requirements, including Title VI of the Civil Rights Act of 1964, the Fair Housing
       Act, Section 504 of the Rehabilitation Act of 1973, Title II of the Americans with
       Disabilities Act of 1990, all regulations implementing these authorities, other
       applicable Federal, State, and local civil rights laws, and the duty to affirmatively
       further fair housing. A PHA’s certification means that it will fulfill the
       requirements set out in HUD regulations found at Title 24 of the Code of Federal
       Regulations, including regulations in place at the time of this certification, and any

                                            15
   subsequently promulgated regulations governing the obligation to affirmatively
   further fair housing.

   The PHA is always responsible for understanding and implementing the
   requirements of HUD regulations and policies and has a continuing obligation to
   affirmatively further fair housing in compliance with the 1968 Fair Housing Act, the
   Housing and Community Development Act of 1974, The Cranston-Gonzalez
   National Affordable Housing Act, and the Quality Housing and Work
   Responsibility Act of 1998. (See 42 U.S.C. 3608, 5304(b)(2), 5306(d)(7)(B),
   12705(b)(15), and 1437C– 1(d)(16)). The PHA must also certify that, if HUD
   approves the SAC application, subsequent implementation complies with all
   applicable civil rights requirements, including environmental determinations for
   environmental justice.

2. HUD Civil Rights Review. HUD’s Office of Fair Housing and Equal Opportunity
   (FHEO) conducts a civil rights review of certain SAC applications based on the
   removal justification, which may include applications for non-dwelling property.
   Pursuant to 24 CFR 970.7(a)(17), HUD may request additional information,
   including information about the PHA’s compliance with nondiscrimination
   requirements in relocations under 24 CFR 970.21(a) and the PHA’s affirmatively
   furthering fair housing certification under 24 CFR 903.7(o).

3. Disclosure of Remedial Orders and Compliance Agreements. In its SAC
   application, the PHA provides a certification that the demolition or disposition does
   not violate any remedial civil rights order or agreement, voluntary compliance
   agreement, final judgment, consent decree, settlement agreement, or other court
   order or agreement (per 24 CFR 970.7(a)(16)). In addition, the PHA states whether
   it is operating under any Federal, State, or local remedial order, compliance
   agreement, final judgment, consent decree, settlement agreement or other court
   order or agreement, including but not limited to those related to fair housing or
   other civil rights finding of noncompliance. If the PHA is operating under such a
   document, it must provide a citation to the document and attach a narrative
   description explaining how the proposed demolition or disposition is consistent with
   such document.

4. Federal Labor Standards and Economic Opportunity. A PHA using HUD funds
   for demolition or disposition must comply with all applicable federal labor
   standards of Section 12 of the 1937 Act (42 U.S.C. 1437j) (Davis-Bacon) and
   requirements of Section 3 of the Housing and Urban Development Act of 1968 (12
   U.S.C 1701u), as amended. Activities include but are not limited to demolition and
   resident relocation. Under Section 3 and 24 CFR Part 75, recipients of certain HUD
   financial assistance must provide employment, training, and economic opportunities
   to the greatest extent feasible to Section 3 residents or business concerns.
   Recipients of HUD funds have Section 3 obligations regardless of the amount of
   funds (see 24 CFR 75.3).



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           5. Resident Consultation for Persons with Disabilities and Persons with Limited
              English Proficiency. To ensure individuals with disabilities have reasonable
              opportunities to consult on the SAC application, the PHA must ensure
              communications and materials are accessible and in compliance with Section 504 of
              the Rehabilitation Act of 1973, 24 CFR 8.6, and the Americans with Disabilities
              Act of 1990, 28 CFR Parts 35.160-35.163. This includes ensuring that written and
              oral communications, including resident meetings, are provided in appropriate
              alternative formats as needed (e.g., Braille, audio, large type, accessible electronic
              communications, assistive listening devices, sign language interpreters, computer-
              assisted real time transcription of meetings, Brailed materials, large print
              documents, and accessible web-based and email communications).

               In selecting locations for consultation with residents, the PHA must provide equal
               access for persons with disabilities by conducting sessions at locations that are
               physically accessible to persons with disabilities, including individuals who use
               wheelchairs. Individuals with disabilities must receive services in the most
               integrated setting appropriate to their needs, meeting the needs of qualified
               individuals with disabilities that fully enable interactions. The PHA should be
               guided by the goal of maximizing participation in an integrated setting so that
               residents with disabilities and residents without disabilities may hear and consider
               each other’s views. Priority shall be given to on-site accessible locations (e.g., TV
               rooms or informal gathering places) even if this requires multiple sessions with
               smaller groups of residents.

               Title VI of the Civil Rights Act of 1964, Executive Order 13166, HUD’s guidance
               on Title VI and LEP discrimination (72 FR 2732), and regulations at 24 CFR Part 1
               require the PHA to take reasonable steps to ensure meaningful access to their
               programs and activities for persons who have limited ability to read, speak, or
               understand English (i.e., individuals who have limited English proficiency or LEP
               persons). Written materials provided in English are to be provided in regularly
               encountered languages among the residents. The PHA may need to provide
               interpreters to communicate between different languages to ensure LEP persons
               have meaningful access. The PHA holds meetings in languages other than English
               to provide direct communication and participation.

VII.   Relocation of Residents.

       A. Relocation Requirements. When residents will be displaced from their public housing
          units and/or public housing assistance due to a demolition and/or disposition, the PHA
          must follow relocation requirements at 24 CFR 970.21, and not the relocation
          requirements at 49 CFR Part 24, which implements the Uniform Relocation Assistance
          and Real Property Acquisition Policies Act of 1970 (URA), as amended. 24 CFR 970.21
          states that a PHA must offer each family displaced by demolition or disposition
          comparable housing that meets housing quality standards (HQS) and is located in an
          area that is generally not less desirable than the location of the displaced persons. The
          housing must be offered on a nondiscriminatory basis, without regard to race, color,
          religion, creed, national origin, disability, age, familial status, or gender, in compliance

                                                    17
           with applicable Federal and state laws. For persons with disabilities displaced from a
           unit with reasonable accommodations, comparable housing should include similar
           accommodations. The PHA is required to provide for the payment of the actual and
           reasonable relocation expenses of each resident to be displaced, including residents
           requiring reasonable accommodations because of disabilities. However, if the proposed
           acquisition, rehabilitation or demolition is to be carried out with HUD funds subject to
           URA requirements or is to be carried out with other HUD-funded activities subject to
           URA requirements the URA may apply to tenant relocations. Additionally, if CDBG or
           HOME funds are used in the demolition or with conversion of lower-income dwelling
           units to a use other than lower-income dwelling units, the project may be subject to
           section 104(d) of the Housing and Community Development Act of 1974, including
           relocation assistance and one-for-one replacement provisions under 24 CFR Part 42
           subpart C.

        B. Quality of Relocation Units. In accordance with 24 CFR 970.21, PHAs must offer each
           family displaced by demolition or disposition comparable housing that meets housing
           quality standards (HQS). In addition, in accordance with 24 CFR 982.404, if the
           comparable housing offered is HCV assistance (tenant-based or project-based), the
           owner must maintain the unit in accordance with HQS. If the owner fails to maintain the
           dwelling unit in accordance with HQS, the PHA must take enforcement action in
           accordance with 24 CFR 982.404.

        C. Relocation Considerations. If the PHA intends to build or otherwise provide affordable
           replacement housing for the public housing units proposed for removal, HUD
           recommends that the PHA give the residents who are relocated from the public housing
           units the first right to occupy the new replacements units.

        D. Housing Search. In accordance with 24 CFR 970.21, PHAs must provide any necessary
           counseling for residents that are displaced. When the PHA is relocating families with
           HCV assistance (including TPVs), HUD encourages the PHA to provide families with
           mobility counseling and utilize the HUD PIC HCV Program and the HUD Exchange
           Housing Mobility Toolkit. See Notice PIH 2022-18 for guidance on the use of HCV
           ongoing administrative fees for expenses related to assisting HCV families to lease
           units.

VIII.   Technical Assistance. Contact SACTA@hud.gov.




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IX.   Paperwork Reduction Act. Information collection requirements contained in this notice are
      approved by the Office of Management and Budget (OMB) under the Paperwork Reduction
      Act of 1995 (44 U.S.C. 3501-3520). The OMB control numbers are 2577-0029, 2502-0612
      and 2577-0075.




                                       ____________________________________
                                       Richard J. Monocchio
                                       Principal Deputy Assistant Secretary
                                       Public and Indian Housing




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