24 C.F.R. § 891.855
§ 891.855 Replacement reserves. (24 CFR Part 891)
Operative Text
(a) The mixed-finance owner shall establish and maintain a replacement reserve account for Section 202 or 811 supportive housing units. This account must meet all the requirements of 24 CFR 891.405. (b) The mixed-finance owner may obtain a disbursement from the reserve only if the funds will be used to pay for capital replacement costs for the Section 202 or 811 supportive housing units in the mixed-finance development and in accordance with the terms of the regulatory and operating agreement. In the case of repairs to common elements, the Section 202/811 replacement reserve can be used on a pro rata basis based on the percentage of Section 202 or 811 units in the building whose common elements are being repaired. In the event of a disposition of the mixed-finance development, or the dissolution of the owner, any Section 202 or 811 funds remaining in the replacement reserve account must remain dedicated to the Section 202 or 811 supportive housing units to ensure their long-term viability, or as otherwise agreed by HUD. (c) Subject to HUD's approval, reserves may be used to reduce the number of Section 202 or 811 dwelling units in the development for the purpose of retrofitting units that are obsolete or unmarketable.
Under 24 CFR Part 891 § 891.855, mixed-finance developments that include Section 202 or Section 811 supportive housing units are required to maintain a dedicated replacement reserve account governed by the standards set out in 24 CFR 891.405. Withdrawals from this account are restricted to capital replacement costs tied specifically to those supportive housing units, with shared-space repairs allocated on a proportional basis. If the development is sold or the ownership entity dissolves, any remaining reserve funds must stay committed to the long-term viability of the Section 202 or 811 units unless HUD agrees otherwise, and HUD may also approve using reserves to retrofit units that have become obsolete or unmarketable.
Plain English — not legal advice.
Operators of mixed-finance developments subject to 24 CFR Part 891 § 891.855 generally establish a separate replacement reserve account at the outset and ensure it continuously meets the standards of 24 CFR 891.405. Compliant owners document each disbursement to confirm it covers qualifying capital replacement costs for the Section 202 or 811 units, and when common-area repairs are involved, they calculate the Section 202/811 share on a pro rata basis reflecting those units' proportion of the building. Owners also plan for ownership transitions or dissolution by ensuring reserve funds remain dedicated to the supportive housing units, and they seek HUD approval before using reserves for any unit-reduction retrofitting.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Residents living in Section 202 or Section 811 supportive housing units within a mixed-finance development have an interest in the protections established by 24 CFR Part 891 § 891.855, which requires that dedicated reserve funds be used only to maintain and improve their units and shared spaces. If a tenant has concerns that reserve funds are being misused or that required capital repairs are being neglected, general enforcement paths include raising the issue with the property's management, contacting the local HUD field office, or reaching out to a tenant-rights organization familiar with HUD-assisted housing. Understanding this provision can also be relevant if a development undergoes a change in ownership, since the rule requires that any remaining Section 202 or 811 reserve funds continue to support those units' long-term viability.
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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