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PIH issues final capital fund rule

Posted by BEMuser on Oct 29, 2013 10:35:45 AM

Last week in the Federal Register, HUD’s Office of Public and Indian Housing (PIH) published the final capital fund rule. As you may recall, it has been nearly three years since PIH published the proposed capital fund rule on February 7, 2011. Among numerous other changes, the new 47-page final rule:

  • Consolidates former public housing modernization programs into “a single, clear, updated regulation,” 24 CFR Part 905
  • Eliminates three other parts of 24 CFR:
  • Includes two changes made by the Housing and Economic Responsibility Act (HERA) of 2008:
    • The removal of the former emergency set-aside for natural disasters and emergencies
    • The definition of “qualified PHAs”
  • Moves and reorganizes the capital fund formula from 905.10 to 905.400 without changing any coefficients defined by negotiated rulemaking in 1999 and 2000
  • Establishes a new definition section in Part 905 (with a few definitions revised since the proposed rule and a couple of new ones added)
  • Clarifies capital fund eligible and ineligible activities, noting that emergencies not identified in the five-year action plan are eligible capital fund costs
  • Phases in over five years (rather than the proposed three years) a cap of 10 percent on the amount of capital funds that a PHA may use for management improvements, noting that the provision of direct social services and the costs for security guards or ongoing security services are not eligible management improvements
  • Incorporates energy efficiency standards
  • Requires small, as well as large, PHAs to conduct a physical needs assessment (PNA), but delays the applicability of this requirement
  • Clarifies the calculation of total development cost (TDC) limits and allows PHAs to request a TDC exception for integrated utility management, capital planning, and other capital and management activities that promote energy conservation and efficiency
  • Includes in the regular capital fund formula grant five years of a demolition or disposition transitional funding (DDTF) grant to replace the replacement housing factor (RHF) grant of up to 10 years, also providing for a DDTF transition period
  • Provides, as one option to the guaranty of irrevocability of funding, that the required letter of credit be valued at 10 percent of the contract price (rather than 25 percent, as proposed)
  • Revises the description of eligible amenities (see 905.202(c))
  • Revises the identity of interest regulations to allow PHAs to use an instrumentality as a general contractor in mixed-finance projects without requesting a waiver
  • Provides that units removed because of homeownership are ineligible for RHF funding

The final rule, which includes a discussion of comments received on the 2011 proposed rule, will become effective on November 25, 2013.

NMA can assist your agency with PNA planning and energy audits. For more information, contact To stay updated on the latest program information, subscribe to the PIH Alert.

Topics: Capital Fund, Energy Efficiency, Final Rule, HERA, PNA, Utilities

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