SEC-212 -- ELIGIBLE USES OF INVESTMENT. (a) Housing Uses.- (1) In general.-Funds made available under this subtitle may be used by participating jurisdictions to provide incentives to develop and support affordable rental housing and homeownership affordability through the acquisition, new construction, reconstruction, or moderate or substantial rehabilitation of affordable housing, including real property acquisition, site improvement, conversion, demolition, and other expenses, including financing costs, relocation expenses of any displaced persons, families, businesses, or organizations, and to provide tenant-based rental assistance. (2) Preference to rehabilitation.-A participating jurisdiction shall give preference to rehabilitation of substandard housing unless the jurisdiction determines that- (A) such rehabilitation is not the most cost effective way to meet the jurisdiction's need to expand the supply of affordable housing; and (B) the jurisdiction's housing needs cannot be met through rehabilitation of the available stock. The Secretary shall not restrict a participating jurisdiction's choice of rehabilitation, substantial rehabilitation, new construction, reconstruction, acquisition, or other eligible housing use unless such restriction is explicitly authorized under paragraph (3) of this subsection or under section 223(2). (3) Conditions for new construction.- (A) In general.-Funds made available under this subtitle may be used (at the discretion of a participating jurisdiction) for new construction of housing only if the housing is to serve a local market area that, in the determination of the Secretary has- (i) an inadequate supply of housing at rentals below the fair market rent established for the area under section 8 of the United States Housing Act of 1937, and (ii) a severe shortage of substandard residential structures in the jurisdiction that are suitable for rehabilitation as affordable rental housing. (B) Establishment of criteria.-The Secretary shall publish- (i) objective criteria for determining whether a jurisdiction's housing supply is sufficiently inadequate to permit new construction pursuant to subparagraph (A), and (ii) a list of jurisdictions that in the determination of the Secretary meet those criteria. The Secretary shall give reasonable opportunity for jurisdictions not designated on the published list to demonstrate, on the basis of additional information, that they meet the criteria. Such criteria shall permit new construction by not fewer than 30 percent of the jurisdictions receiving an allocation under section 216(1). Such criteria shall include objective data on housing market conditions such as low vacancy rates, low turnover of units with rents below fair market rents, and a high proportion of substandard housing. (C) Neighborhood revitalization.-Notwithstanding subparagraph (A), a participating jurisdiction may use funds made available under this subtitle for construction of affordable housing if the participating jurisdiction certifies that- (i) the program of construction is needed to facilitate a neighborhood revitalization program that emphasizes rehabilitation of substandard housing for rental or homeownership opportunities by low-income and moderate-income families in an area designated by the jurisdiction; (ii) the housing is located in a low- or moderate-income neighborhood, as defined in section 10(j)(13) of the Federal Home Loan Bank Act; (iii) the number of units to be constructed with assistance under this subtitle does not exceed 20 percent of the total number of units in the neighborhood revitalization program that are assisted with funds under this subtitle; and (iv) the housing is to be produced by a community housing development organization, as defined in section 104(6), or a public agency. (D) Applicability.-Clause (iii) of subparagraph (C) shall not apply if the jurisdiction certifies that- (i) the housing is to be located in a severely distressed area with large tracts of vacant land and abandoned buildings, (ii) the housing is to be located in an area with an inadequate supply of existing housing that can economically be rehabilitated to meet identified housing needs, or (iii) the new construction is required to accomplish the neighborhood revitalization program. (E) Special needs housing.-Notwithstanding subparagraph (A), a participating jurisdiction may use funds made available under this subtitle for construction of- (i) affordable housing for large families; (ii) affordable housing for persons with disabilities; (iii) single room occupancy housing; and (iv) other categories of affordable housing for persons with special needs that the Secretary may designate; if the participating jurisdiction certifies on the basis of objective data in its annual housing strategy that a high priority need for such housing exists in the jurisdiction, and that there is not a supply of vacant, habitable, public housing units in excess of normal vacancies resulting from turnovers that could meet the specified need. (4) Tenant-based rental assistance.- (A) In general.-A participating jurisdiction may use funds provided under this subtitle for tenant-based rental assistance only if- (i) the jurisdiction certifies that the use of funds under this subtitle for tenant-based rental assistance is an essential element of the jurisdiction's annual housing strategy for expanding the supply, affordability, and availability of decent, safe, sanitary, and affordable housing, and specifies the local market conditions that lead to the choice of this option; and (ii) the tenant-based rental assistance is provided to persons from the waiting lists eligible for section 8 assistance in accordance with the applicable preferences. (B) Fair share not affected.-A jurisdiction's section 8 fair share allocation shall be unaffected by the use of assistance under this title. (C) 24-month contracts.-Rental assistance contracts made available with assistance under this title shall be for not more than 24 months, except that assistance to a family may be renewed. (D) Use of section 8 assistance.-In any case where assistance under section 8 of the United States Housing Act of 1937 becomes available to a participating jurisdiction, recipients of rental assistance under this title shall qualify for tenant selection preferences to the same extent as when they received the rental assistance under this title. A rental assistance program under this title shall meet minimum criteria prescribed by the Secretary, such as housing quality standards and standards regarding the reasonableness of the rent. (b) Investments.-Participating jurisdictions shall have discretion to invest funds made available under this subtitle as equity investments, interest-bearing loans or advances, noninterest-bearing loans or advances, interest subsidies or other forms of assistance that the Secretary has determined to be consistent with the purposes of this title. Each participating jurisdiction shall have the right to establish the terms of assistance. (c) Prohibited Uses.-Funds made available under this subtitle may not be used to- (1) defray any administrative cost of a participating jurisdiction, (2) provide tenant-based rental assistance for the special purposes of the existing section 8 program, including replacing public housing that is demolished or disposed of, preserving federally assisted housing, assisting in the disposition of housing owned or held by the Secretary, preventing displacement from rental rehabilitation projects, or extending or renewing tenant-based assistance under section 8 of the United States Housing Act of 1937, (3) provide non-Federal matching contributions required under any other Federal program, (4) provide assistance authorized under section 9 of the United States Housing Act of 1937, (5) carry out activities authorized under section 14 of the Housing Act of 1937, or (6) provide assistance to eligible low-income housing under the Emergency Low Income Housing Preservation Act of 1987 or the Low-Income Housing Preservation and Resident Homeownership Act of 1990. (d) Cost Limits.- (1) In general.-The Secretary shall establish limits on the amount of funds under this subtitle that may be invested on a per unit basis. The limits shall be established on a market-by-market basis, with adjustments made for number of bedrooms, and shall reflect the actual cost of new construction, reconstruction, or rehabilitation of housing that meets applicable State and local housing and building codes and the cost of land, including necessary site improvements. Adjustments shall be made annually to reflect inflation. Separate limits may be set for different eligible activities. (2) Criteria.-In calculating per unit limits, the Secretary shall take into account that assistance under this title is intended to- (A) provide nonluxury housing with suitable amenities; (B) operate effectively in all jurisdictions; (C) facilitate mixed-income housing; and (D) reflect the costs associated with meeting the special needs of tenants or homeowners that the housing is designed to serve. (3) Consultation.-In calculating cost limits, the Secretary shall consult with organizations that have expertise in the development of affordable housing, including national nonprofit organizations and national organizations representing private development firms and State and local governments. (e) Certification of Compliance.-The requirements of section 102(d) of the Department of Housing and Urban Development Reform Act of 1989 shall be satisfied by a certification by a participating jurisdiction to the Secretary that the combination of Federal assistance provided to any housing project shall not be any more than is necessary to provide affordable housing.