CRITERIA FOR APPROVAL OF PLAN OF ACTION.

SEC. 225. CRITERIA FOR APPROVAL OF PLAN OF ACTION. (a) Plan of Action Involving Termination of Low Income Affordability Restrictions.— The Secretary may approve a plan of action that involves termination of the low income affordability restrictions only upon a written finding that— (1) implementation of the plan of action will not materially increase economic hardship for current tenants or involuntarily displace current tenants (except for good cause) where comparable and affordable housing is not readily available: and (2) (A) the supply of vacant, comparable housing is sufficient to ensure that such prepayment will not materially affect— (i) the availability of decent, safe, and sanitary housing affordable to lower income and very low-income families or persons in the area that the housing could reasonably be expected to serve; (ii) the ability of lower income and very low-income families or persons to find affordable, decent, safe, and sanitary housing near employment opportunities; or (iii) the housing opportunities of minorities in the community within which the housing is located; or (B) the plan has been approved by the appropriate State agency and any appropriate local government agency for the jurisdiction within which the housing is located as being in accordance with a State strategy approved by the Secretary under section 226. 101 STAT. 1881 (b) Plan of Action Including Incentives.— The Secretary may approve a plan of action that includes incentives only upon finding that— (1) the package of incentives is necessary to provide a fair return on the investment of the owner; (2) due diligence has been given to ensuring that the package of incentives is, for the Federal Government, the least costly alternative that is consistent with the full achievement of the purposes of this title; and (3) binding commitments have been made to ensure that— (A) the housing will be retained as housing affordable for very low-income families or persons, lower income families or persons, and moderate income families or persons for the remaining term of the mortgage; (B) throughout such period, adequate expenditures will be made for maintenance and operation of the housing; (C) current tenants shall not be involuntarily displaced (except for good cause); (D) any increase in rent contributions for current tenants shall be to a level that does not exceed 30 percent of the adjusted income of the tenant or the fair market rent for comparable housing under section 8(b) of the United States Housing Act of 1937, whichever is lower; (E) (i) any resulting increase in rents for current tenants (except for increases made necessary by increased operating costs)— (I) shall be phased in equally over a period of not less than 3 years, if such increase is 30 percent or more; and (II) shall be limited to not more than 10 percent per year if such increase is more than 10 percent but less than 30 percent; and (ii) assistance under section 8 of the United States Housing Act of 1937 shall be provided if necessary to mitigate any adverse affect on current income eligible tenants; and (F) (i) rents for units becoming available to new tenants shall be at levels approved by the Secretary that will ensure, to the extent practicable, that the units will be available and affordable to the same proportions of very low-income families or persons, lower income families or persons, and moderate income families or persons (including families or persons whose incomes are 95 percent or more of area median income) as resided in the housing as of January 1, 1987; and (ii) in approving rents under this paragraph, the Secretary shall take into account any additional incentives provided under this subtitle and shall make provision for such annual rent adjustments as may be made necessary by future reasonable increases in operating costs.