U.S. Department of Housing and Urban Development
               Office of Fair Housing and Equal Opportunity

Special Attention of:                   Notice FHEO 96-4

All FHEO Directors                       Issued: October 28, 1996
All Multifamily Housing Directors
All Owners/ Managers HUD Assisted       Expires: October 28, 1997
 Housing

                              Cross References: Public Law # 104-99
                                             Public Law # 104-204
                              Housing Notice H-96-7, PIH Notice 96-7

Subject:  Discretionary Preferences for Admission to Multifamily
          Housing Projects

     Title VIII of the Civil Rights Act of 1968 which applies to all
housing providers and Title VI of the Civil Rights Act of 1964 which
applies to all programs which receive Federal financial assistance
prohibit discrimination and disparate impact in provision of housing
based on certain prohibited bases.

     Section 402(d)(4) of Public Law No. 104-99, The Balanced Budget
Downpayment Act, 1, signed into law on January 26, 1996, suspended
mandatory Federal Preferences in Section 8 and certain other programs.
This suspension included any local preferences then in effect.  The
law expired September 30, 1996 but the suspension was extended through
September 30, 1997 by Public Law No. 104-204 (FY 1997 HUD-VA-Independent
Agencies Appropriations Act) signed into law on September
30, 1996.

     PIH Notice 96-7  states that Housing Authorities must provide
public notice and opportunity to comment for any change to their
preferences even if only to drop the Federal Preferences.  The Notice
gives additional guidance and requires HUD approval of any changes to
residency preferences.

     Housing Notice H 96-7  advises owners and managers of HUD-assisted-and
insured housing previously subject to federal preferences
that they may voluntarily choose to maintain their Federal and local
preference system or to implement other preferences of their own
choosing (so long as it is consistent with their Affirmative Fair
Housing Marketing Plans).  The Office of Housing did not require
notice or approval of changes to Federal preferences for multifamily
housing owners.  Housing Notice H 96-7  encourages, but does not
require, owners who make any changes to their preference system
(including the elimination of any preferences) to provide appropriate
notification to applicants on the waiting list and other interested
persons.  FHEO is concerned that a preference which appears neutral on
its face could result in violations of various Civil Rights
requirements contained in Title VI, Title VIII and other Civil Rights
statute.

EPSS:   Distribution: W-3-1

     This Notice is expanding that guidance.  In cases where owners
adopt preferences not previously in effect, a copy of the change
should be sent to the HUD FHEO field office for review of its
consistency with Civil Rights law and Civil Rights related program
requirements.  All applicants should be appropriately notified of
their position on a revised waiting list in accordance with the
procedures set out at 24 CFR 5.410 (f).

Elizabeth K. Julian
Assistant Secretary for Fair Housing
  and Equal Opportunity