24 C.F.R. § 886.108
§ 886.108 Maximum annual contract commitment. (24 CFR Part 886)
Operative Text
(a) Number of units assisted. Based on analysis of housing assistance needs of families residing or expected to reside in the project, HUD shall determine the number of units to be assisted up to 100 percent of the units in the project. All units currently assisted under section 23 or section 8 shall be converted and included under the Contract pursuant to this subpart, unless the parties to the Lease or Contract object to such conversion. Units assisted under section 101 of the Housing and Urban Development Act of 1965 or under section 236(f)(2) of the National Housing Act shall not be included under the Contract pursuant to this subpart unless the Owner proposes and HUD approves such conversion. (b) Maximum annual Contract commitment. The maximum annual housing assistance payments that may be committed under the Contract shall be that amount which, when paid annually over the term of the Contract, is determined by HUD to be sufficient to provide for all housing assistance payments and fees under the Contract. (c) Project Account. In order to assure that housing assistance payments will be increased on a timely basis to cover increases in Contract Rents or decreases in Family Incomes: (1) A Project Account shall be established and maintained, in an amount as determined by the Secretary consistent with his responsibilities under section 8(c)(6) of the Act, out of amounts by which the maximum annual Contract commitment per year exceeds amounts paid under the Contract for any year. This account shall be established and maintained by HUD for each project as a specifically identified and segregated account, and payment shall be made therefrom only for the purposes of (i) housing assistance payments, and (ii) other costs specifically authorized or approved by the Secretary. (2) Whenever a HUD-approved estimate of required housing assistance payments for a fiscal year exceeds the maximum annual Contract commitment, and would cause the amount in the Project Account to be less than an amount equal to 40 percent of such maximum annual Contract commitment, HUD shall, within a reasonable period of time, take such additional steps authorized by Section 8(c)(6) of the Act as may be necessary to carry out this assurance, including (as provided in that section of the Act) “the allocation of a portion of new authorizations for the purpose of amending housing assistance contracts.”
Under 24 CFR Part 886 § 886.108, HUD determines how many units in a project receive housing assistance—up to every unit—based on assessed need, and sets a maximum annual dollar commitment sufficient to cover all assistance payments and fees over the contract term. Units already assisted under certain older programs are generally folded into the new contract, while units under other specific programs require owner proposal and HUD approval before conversion. A dedicated Project Account is maintained to hold surplus funds from years when payments fall short of the maximum commitment, ensuring that if projected needs threaten to draw that account below 40 percent of the annual cap, HUD is required to take corrective steps, including potentially amending the contract with new funding authorizations.
Plain English — not legal advice.
Owners operating under 24 CFR Part 886 § 886.108 generally ensure that all units previously assisted under Section 23 or Section 8 are transitioned into the new contract unless there is a documented objection, and that any units under Section 101 or Section 236(f)(2) are only converted after submitting a formal proposal and receiving HUD approval. A compliant operator stays informed about the Project Account balance, since HUD uses that account—funded by the difference between the annual cap and actual payments made—to cover future increases in contract rents or decreases in family incomes. Operators typically maintain accurate records of unit counts and assistance levels so that HUD's annual estimates of required payments can be verified against the maximum annual contract commitment established under this provision.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
For residents living in projects governed by 24 CFR Part 886 § 886.108, this rule provides a structural protection: a Project Account must be maintained to ensure housing assistance payments can keep pace with rising rents or falling family incomes, and HUD is obligated to act if that account drops below 40 percent of the annual contract cap. Tenants who believe their unit's assistance status was improperly converted—or that assistance payments are not being applied correctly—may raise concerns with their local HUD field office or a tenant-rights organization familiar with Section 8 project-based programs. Understanding whether a unit falls under this provision, and how the Project Account is being managed, can be a useful starting point when seeking information from HUD or housing counselors about assistance continuity.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 4, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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