5 things you should know about HUD’s new Public Housing Capital Fund rule


Last October, HUD published a final rule that made a number of changes both to requirements related to Capital Funds as well as to the mixed-finance development process. At the time the rule was published, Ballard Spahr LLP published a summary of the many changes made by the rule. Now that implementation of the rule has been in effect for several months, we want to highlight several provisions of the Capital Fund rule about which clients often have questions:

  • 15 years after Congress authorized the “transformation” of mixed-finance public housing units in the event of a significant reduction in appropriations of public housing operating subsidy, the Capital Fund rule finally includes a regulation to implement this statutory provision. Transformation is now approved by HUD through submission and review of an “Alternative Management Plan” and the regulation requires specific evidence of the need for transformation to accompany the Plan. An approved Alternative Management Plan allows public housing units to deviate from public housing requirements.
  • The Capital Fund rule eliminates, after a transition period, the Replacement Housing Factor Fund grant (RHF) and creates the Demolition or Disposition Transitional Funding (DDTF) grant. DDTF grants will have a five-year term. The DDTF will be a part of the Capital Fund formula grant and is subject to the same requirements as the Capital Fund, not the requirements or limitations of RHF. HUD has published special guidance for Moving to Work (MTW) agencies in connection with the transition to DDTF.
  • HUD now requires the submission of fewer “evidentiary” documents in connection with its mixed-finance approval process, however, as a result HUD has also augmented the certifications and assurances that housing authorities must make in connection with mixed-finance closings.
  • A provision in the Capital Fund rule requires housing authorities to use all contract forms prescribed by HUD. The rule does not describe those forms, but other HUD guidance documents indicate when and which forms are required.
  • For all the regulatory geeks (like me) reading this post, the Capital Fund rule cannot be found in the most recent version of the Code of Federal Regulations, dated 2013; to read the rule in all its glory, one must refer to the Federal Register notice of the rule.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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