Statutory, HUD, State, and Local Preferences — HUD Handbook 4350.3 REV-1 — Occupancy Requirements of Subsidized Multifamily Housing Programs

Congress and HUD have established various types of preferences in an effort to provide housing to those most in need. HUD rules currently include four different kinds of preferences that apply to various programs. Owners must apply preferences to applicants based on the rules for the property subsidy type as well as any owner-adopted preferences. The following are types of preferences:

Statutory preferences — displacement. Owners of Section 221(d)(4), 221(d)(3), and 221(d)(3) BMIR properties must give preference to applicants who have been displaced by government action or a presidentially declared disaster.
HUD regulatory preferences.
- a. HUD regulations require that owners of Section 236 properties give preference to applicants who have been displaced by government action or a presidentially declared disaster.
- b. In Section 236 properties that also offer rental assistance through the RAP Program, owners must rank applicants according to the following criteria [24 CFR 236.715] .

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NOTE: These ranking criteria are secondary to the preferences required above.

Figure 4-3: Summary of Preference Requirements by Property Type

Program	Statutory Preferences - Displacement	HUD Regulatory Preferences	Owner- Adopted Preferences
Section 221(d)(3) Section 221(d)(3) BMIR Section 221(d)(4)
Section 236
Section 8 New Construction Substantial Rehabilitation State Housing Agency New Construction or Sub Rehab Rural Housing 515/8 Property Disposition Set-Aside Section 202/8 Loan Management Set-Aside (LMSA)

(1) Applicants eligible for RAP assistance.
(2) Applicants eligible to pay less than market rent under the Section 236 program.
(3) Applicants with income sufficient to pay the market rent approved for the property. (See paragraph 3-8 for a discussion of the limitations on renting to over-income applicants. See Figure 4-4 for illustration.)

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State and local preferences. Owners may apply preferences required by state or local law only if they are consistent with HUD and applicable civil rights requirements. For example, some states have laws that require owners to provide a preference for housing to military veterans. Owners must receive HUD approval in order to apply this locally legislated requirement. Owners must submit a written request to the HUD Field Office, describing the state or local laws requiring such preferences, requesting HUD concurrence on the preferences.

Figure 4-4: Example of Section 236 Ranking Preferences Based on Income and Rent

Clear River Apartments is a Section 236 property with RAP assistance. The basic rent is $350, and the market rent is $500.

Clear River Apartments is a Section 236 property with RAP assistance. The basic rent is $350, and the market rent is $500.
Date of Application	Applicant Name	Estimated rent based upon income reported on application form.	Rank order for selection based on estimated rent (assuming no other preference)
6/15/2001	Joseph Jones	$372	3
8/1/2001	Marenka Salnikov	$500	5
8/15/2001	Donny Yee	$312	1
8/23/2001	Rebecca Green	$225	2
9/12/2001	Sastri Sharma	$360	4