Comments are due Friday on the proposed Capital Fund Rule, which combines and streamlines the former public housing modernization programs, including the Comprehensive Grant Program, Comprehensive Improvement Assistance Program, and Public Housing Development Program, for inclusion in the Capital Fund Program (CFP). The rule would affect Replacement Housing Factor (RHF) funding.

On February 7, 2011, the U.S. Department of Housing and Urban Development Office of Public and Indian Housing issued the proposed rule for the Public Housing Capital Fund Program in 24 CFR Part 905. Along with the new rule, several new and/or revised CFP forms would be issued, including the CFP Annual Statement/Performance and Evaluation Report (form HUD -50075.1), CFP 5-Year Action Plan (form HUD -50075.2), and the CFP Annual Contributions Contract (ACC) Amendment, as well as a new guidebook. In addition, the proposed rule reserves space for future Physical Needs Assessment, Capital Fund Finance Program, and mixed-finance regulations.

Of particular importance is the proposal to eliminate second increment RHF grants. This would make Public Housing Agencies (PHAs) that remove public housing units from their inventory through the demolition and disposition process eligible for only five years of RHF funding, rather than the current 10 years. The transition to a five-year RHF program would be effective in FFY 2011 for PHAs that removed inventory in FFY 2010. In FFY 2011, any PHA that began receiving RHF in FFY 2010 based on demolition or disposition that occurred in FFY 2009 or earlier would receive the remainder of its first increment funding and be eligible for a second increment. As a result, PHAs that are already receiving RHF funding in FFY 2011 would not be negatively affected by the transition to a five-year program. Because RHF funds are a set-aside from the Capital Fund, the elimination of second increment RHF grants would increase formula grants to all PHAs.

In addition, beginning in FFY 2011, PHAs would be eligible to receive RHF funding for units removed from their inventory for homeownership sales. PHAs would also be eligible to use RHF grants to fund the development of either public housing rental or homeownership units.