What are Replacement Housing Factor (RHF) Fund Grants?

They are Capital Fund Grants that are awarded to PHAs that have removed units from inventory for the sole purpose of developing new public housing units. The Capital Fund formula rule at 24 CFR 905.10(i) provides that a PHA may receive RHF grants for public housing units demolished or sold for a period of up to five years. A PHA may only be given RHF funding for public housing units that have not already been funded for replacement public housing units under public housing development, Major Reconstruction of Obsolete Public Housing (MROP), HOPE VI, or any other programs that would otherwise provide replacement housing. A PHA must report the units as removed from inventory in the PIC system before it will receive RHF funding.

• PIH 2010-21 (HA): Processing Information for the Submission of Replacement Housing Factor (RHF) Plans
• RHF Plan Preparation and Guidance

What are the eligible uses of RHF funds?

A PHA may only develop or acquire public housing rental units with RHF funds. All replacement housing must be undertaken in accordance with public housing development regulations found at 24 CFR Part 941, which includes requirements for mixed-finance development.

How many years of RHF funding is a PHA eligible to receive?

First Increment Funding: A PHA automatically receives five years of first increment RHF funding the year after units approved for demolition or disposition have been removed from the public housing inventory and the PHA reports the removal in PIC. If a PHA does not wish to receive RHF funding, it must reject the first increment RHF grant, in writing, every year that it does not wish to accept the funds.

Second Increment Funding: A PHA is eligible for another five years of second increment RHF funding, but the funding is not automatic. In order to receive an additional (or second) five years of RHF funding, the PHA must apply every time it is eligible for another "tier". If the PHA does not apply for this second increment funding or fails to meet the requirements for second increment RHF funding, than it becomes ineligible for the entire five years of second increment RHF funding associated with that tier.

A list of PHAs eligible for one or more new tiers of second increment RHF funding is posted annually on the Capital Fund home page, along with a deadline for submission of a second increment RHF Plan (or revision if applicable) and any other submission instructions.

How are RHF Grants Calculated?

RHF grants are calculated as part of the Capital Fund Formula for units that have been removed from the PIC/IMS in the prior Federal Fiscal Year and are otherwise eligible in accordance with RHF requirements. The amount of RHF funding a PHA receives each year is based on a number of factors including, but not limited to the:

• number of units removed from the inventory;
• project(s) associated with the removed units;
• number of years the PHA has been receiving RHF funding.

Some units that have been removed from PIC/IMS do not receive RHF funding. In these instances, the PHA is ineligible for RHF funding for the removed units. Some common reasons include:

• Units planned for replacement are being funded by Hope VI, MROP and other sources
• Units removed by sales to home ownership
• Units removed because of eminent domain
• Units that have been added to the PHA inventory since 10/1/1999 that are not attributed to HOPE VI ( The ineligible units are removed using first in first out scenario so the units that first entered RHF are made ineligible as new units are added to inventory)
• Conversion, or units removed as a result of reconfiguration.

Additionally, removing units from multiple projects in the inventory over time adds layers to the calculation. The RHF Matrix summarizes the RHF funding awarded to a PHA by project (with the approved demolition or disposition). An RHF Matrix for each PHA receiving RHF funding can be found at the Capital Fund webpage.

Additionally, removing units from multiple projects in the inventory over time adds layers to the calculation. The RHF Matrix summarizes the RHF funding awarded to a PHA by project (with the approved demolition or disposition). An RHF Matrix for each PHA receiving RHF funding can be found at the Capital Fund webpage.

The following is a table giving an example for a hypothetical PHA receiving RHF. The Matrix shows project distribution on an annual basis. In the Matrix, "1-1" signifies that the project is receiving the first year of 1st increment funding; "1-2" signifies that the project is receiving funding for the second year of the first increment and so on.

RHF Funding (by Project) First Increment Only

Project Name	1998	1999	2000	2001	2002
Project A	1-1	1-2	1-3	1-4	1-5
Project B		1-1	1-2	1-3	1-4
Project C			1-1	1-2	1-3

In the Matrix above, as of FY 2002 Project A has received 5 years of first increment RHF funding (1-5); Project B has received 4 years of first increment funding (1-4); and Project C has received 3 years of first increment funding (1-3). Using the Matrix, the first increment RHF grant for the PHA in Fiscal Year 2002 was a combined total of RHF funds for the three developments, Projects A+ Project B+ Project C as identified in the last column.

RHF Funding-Multiple Tiers by Project for AJAX PHA First and Second Increment

Project Name	1998	1999	2000	2001	2002	2003	2004	2005
Project D	1-1 $500	1-2 $500	1-3 $ 525	1-4 $550	1-5 $580	2-1 $500	2-2 $500	2-3 $525
Project E		1-1 $200	1-2 $210	1-3 $240	1-4 $300	1-5 $375	2-1 $200	2-2 $205
Project F			1-1 $100	1-2 $110	1-3 $125	1-4 $225	1-5 $100
Subtotal - 1st Increment Grant	$500	$700	$835	$900	$1,005	$600	$100	$0
Subtotal - 2nd Increment Grant	0	0	0	0	0	$500	$700	$730
Total RHF Funding						$1100	$800	$730

This Matrix shows the combined effect of both first and second increments. Project D qualifies for second increment funding in FY 2003 and Project E qualifies for second increment funding in FY 2004. Project F was not approved for second increment funding. Also note that in FY 2003 and FY 2004 the PHA could be receiving two RHF grants, a first increment grant of $600 for Projects E and F and a second increment grant of $500 for Project D. In FY 2005, the second increment grant will be $730; a combination of the RHF amounts for Projects D and E. The PHA will not have a first increment grant in FY 2005.

The shaded portion of the Matrix identifies all of the PHA's first increment grants. These should be included in the PHA's RHF Plan for the first increment. In the example below, as the result of having multiple projects receiving RHF funding in different years the first increment spans from FYs 1998 -2004. The non-shaded portion of the Matrix FY 2003-2005 is all of the PHA's second increment grants that should be included in the RHF Plan for the second increment.
 

What amount of RHF funds does a PHA receive? How can RHF funding be estimated for planning purposes?

A PHA receives approximately the same amount of RHF for the units it has removed from its inventory that it would have received in formula funding when the units were standing. (There is an adjustment based on certain "off-sets" or units removed from inventory that are not eligible for RHF funding.)

For planning purposes, a good way to estimate this amount (Notwithstanding annual Appropriations, variations in the capital fund calculation, etc) is to take the number of units reported as removed, and multiply it by the per unit funding the PHA received for the particular development in the prior year. The per unit funding report for all PHAs receiving Capital Funds can be found at the Capital Fund webpage. The information is updated annually.

When does a PHA need to submit a first increment RHF Plan?

A PHA must submit an RHF Plan whenever it wishes to accumulate one or more years of RHF funds prior to starting to use them for development. A first increment RHF Plan is submitted to the HUD Field Office for approval. Once approved, obligation and expenditure end dates can be reset based on an accumulation of funds. PHAs can accumulate 2, 3, 4 or 5 consecutive years of RHF first increment funding.

What happens if a PHA does not submit an RHF Plan?

Without an RHF Plan, the PHA has no authority to accumulate funding. If a PHA fails to submit a first increment RHF Plan the obligation start date of the RHF grant(s) will automatically be 24 months from the date that the funds became available for each year of RHF funding (the same date as the respective modernization (formula) grants. However, if the RHF Plan is submitted and approved, then the obligation and expenditure start dates will be established based on the accumulation in the approved first increment RHF plan.

What must a first increment RHF Plan include?

The first increment RHF plan must include information addressing:

• That the PHA intends to accumulate its RHF grants for several years and delay the obligation start date and the reason (s) why it needs to do so.
• The number of years of grants is the PHA accumulating (up to five years).
• The grants, by fiscal year (and grant number if known) the PHA accumulating, including any future years of funding.
• The total amount of the grants being accumulated.
• That the PHA is using the funds consistent with the terms of RHF -- the development or acquisition for the purpose of developing Public Housing ACC units in accordance with 24 CFR Part 941.
• That the PHA will revise its RHF Plan if any one of the many factors that affect its RHF funding cause RHF to end earlier that anticipated. (This will affect the obligation end date because not as many years of funding will be accumulated.)

A further description of these requirements can be found under the section on RHF Plan Submissions.

When does a PHA need to submit a second increment RHF Plan?

A PHA must submit a second increment RHF plan to receive second increment RHF grants. The PHA must meet additional criteria and indicate whether or not it plans to accumulate funds prior to undertaking development activity.

A PHA must submit separate first and second increment RHF Plans to cover up to five years of each type of RHF. Note: because of the continuing nature of both first and second increment grants there may be the need for multiple first and second increment plans to cover the entire period of funding for each type of RHF grant.

What criteria must a PHA meet in order to receive second increment RHF funding?

As mentioned above, after a PHA receives RHF funding for five years, it may be eligible funding for an additional five years. In order to be awarded second increment funding, a PHA must submit a second increment RHF Plan. In addition to the criteria included in a first increment RHF Plan, the PHA must also demonstrate that it has: 1) leveraged substantial additional funding from sources other than public housing funds, 2) received approval for all required PHA Plans, 3) complied with statutory obligation and expenditure deadlines AND 4) made substantial progress on its first increment RHF Plan. A further description of these requirements can be found under the section on RHF Plan Submissions.

Note: If the PHA requests an additional five years of funding, it must proceed with the development of the first five-year increment and submit a second, discrete, RHF Plan based on the funding provided in years 6 - 10. In no case should the development or developments planned with first increment RHF funding be planned in such a way that completion of that development or developments relies on HUD funding of the second increment of RHF.

Do obligation and expenditure deadlines apply to RHF grants?

Yes. Section 905.10(i)(7) provides that RHF funds must be obligated either within 24 months from the date that the funds become available; or with specific HUD approval, 24 months from the date the PHA accumulates adequate funds (up to five years) to undertake replacement housing. A PHA MUST submit an RHF Plan for HUD approval in order to establish alternate obligation and expenditure deadlines. A PHA may accumulate adequate -- up to five years -- of RHF funds to undertake replacement housing activities. It is important to note that a PHA may accumulate ANY five consecutive years of first increment RHF Funds OR of second increment RHF Funds; this is a change from prior RHF policy.

Additionally, for PHAs requesting a second increment of RHF funding, the previous requirement that as a condition for receiving grants in years 6-10 that all funding (increments one and two) be fully expended by the end of the 10th year of funding No Longer is Applicable. Like first increment RHF grants, second increment RHF grants must be expended within forty-eight months after the obligation start date.

Do obligation and expenditure deadlines apply when the PHA is not accumulating RHF grants?

A PHA may proceed to use its RHF grants WITHOUT with submitting an RHF Plan. In this case, the PHA will submit a development proposal to HUD, obligate 90 percent of a single RHF grant within 24 months from the date the funds were made available and expend 100 percent of the RHF grant within 48 months from when the funds were made available. An RHF grant is similar to a typical Capital Fund Grant in this instance.

How are obligation and expenditure deadlines established in instances where a PHA wishes to accumulate its RHF prior to undertaking development?

As stated above, a PHA may accumulate up to five years of RHF funds prior to starting development activities. The obligation deadlines are set as follows:

For both first and second increment RHF funds awarded through FY 2008: The obligation deadline is set 120 days after receipt of funds in the last year of funds to be accumulated. So, if a PHA is accumulating funds from FY 2003- FY 2007, the obligation start date for all five grants is 1/2008. The obligation end date is 24 months after that and the expenditure deadline 48 months from the obligation start date.

For RHF funds awarded FY 2009 and after: The obligation deadline is set to 10/30 in the last year of funds being accumulated. Again, the obligation end date is 24 months after that and the expenditure deadline 48 months from the obligation start date.

The Chart Below shows the latest possible obligation end dates for RHF grants that are being accumulated.

Chart of Obligation and Expenditure end dates
Last Year of Accumulation	Obligation End Date	Disbursement End Date
2003	1/13/2006	1/13/2008
2004	1/10/2007	1/10/2009
2005	12/14/2007	12/14/2009
2006	11/13/2008	11/13/2010
2007	1/9/2010	1/9/2012
2008	10/12/2010	10/12/2012
2009	10/29/2011	10/29/2013
2010	10/29/2012	10/29/2014
2011	10/29/2013	10/29/2015
2012	10/29/2014	10/29/2016
2013	10/29/2015	10/29/2017
2014	10/29/2016	10/29/2018
2015	10/29/2017	10/29/2019

Once a PHA has submitted an RHF Plan and the local HUD office has approved it, the information is entered into the RHF Data Collection Tool, and the obligation and expenditure deadlines are reset in LOCCS.
 

What is the relationship between the submission of a development proposal and establishment of obligation and expenditure deadlines - does one still exist?

Previously, when a PHA decided to accumulate RHF funds, HUD guidance explained that the latest date that the PHA could submit a development proposal for its first five years of RHF funding was 90 days after execution of the RHF ACC by the HUD Field Office for the fifth year of RHF funding. A PHA could submit a development proposal earlier than that date, however, if it submitted the development proposal after that time, the obligation start date was still established as if the PHA had submitted the proposal by the latest possible permissible date.

Now, the establishment of alternate obligation and expenditure deadlines is based solely on a PHA's intent to accumulate funds. The PHA is responsible for proceeding with development activities, including but not limited to the submission of a development proposal, in a timely fashion that complies with the obligation deadlines.