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A TRUE COPY CERTIFICATION ON LASTP J . R. SMITH AGE , CLERK ( 1 ) Pay up to 100 percent of the cost of new construction, including the building of a new structure or building an addition to an existing structure that increases the floor area by 100 percent or more, and the cost of land associated with that construction, for use as housing. (2) If grant funds are used for new construction, the applicant must demonstrate that the costs of new construction are substantially less than the costs of rehabilitation or that there is a lack of available appropriate units that could be rehabilitated at a cost less than new construction. For purposes of this cost comparison, costs of rehabilitation or new construction may include the cost of real property acquisition. (b) Ineligible costs. Grant funds may not be used for new construction on leased property. § 578.49 Leasing. (a) Use. ( 1 ) Where the recipient or subrecipient is leasing the structure, or portions thereof, grant funds may be used to pay for 100 percent of the costs of leasing a structure or structures, or portions thereof, to provide housing or supportive services to homeless persons for up to 3 years. Leasing funds may not be used to lease units or structures owned by the recipient, subrecipient, their parent organization(s), any other related organization(s), or organizations that are members of a partnership, where the partnership owns the structure, unless HUD authorized an exception for good cause. (2) Any request for an exception must include the following. (i) A description of how leasing these structures is in the best interest of the program; (ii) Supporting documentation showing that the leasing charges paid with grant funds are reasonable for the market; and (iii) A copy of the written policy for resolving disputes between the landlord and tenant, including a recusal for officers, agents, and staff who work for both the landlord and tenant. (b) Requirements. ( 1 ) Leasing structures. When grants are used to pay rent for all or part of a structure or structures, the rent paid must be reasonable in relation to rents being charged in, the area for comparable space. In addition, the rent paid may not exceed rents currently being charged by the same owner for comparable unassisted space. (2) Leasing individual units. When grants are used to pay rent for individual housing units, the rent paid must be reasonable in relationto rents being charged for comparable units, taking into account the location, size, type, quality, amenities, facilities, and management services. In addition, the rents may not exceed rents currently being charged for comparable units, and the rent paid may not exceed HUD-determined fair market rents. (3) Utilities. If electricity, gas, and water are included in the rent, these utilities may be paid from leasing funds. If utilities are not provided by the landlord, these utility costs are an operating cost, except for supportive service facilities. If the structure is being used as a supportive service facility, then these utility costs are a supportive service cost. (4) Security deposits and first and last month 's rent. Recipients and subrecipients may use grant funds to pay security deposits, in an amount not to exceed 2 months of actual rent. An advance payment of the last month's rent may be provided to the landlord in addition to the security deposit and payment' of the first month's rent. (5) Occupancy agreements and subleases. Occupancy agreements and subleases are required as specified in §578.77(a). (6) Calculation of occupancy charges and rent. Occupancy charges and rent from program participants must be calculated as provided in §578.77. i