24 C.F.R. § 891.140
§ 891.140 Development cost limits. (24 CFR Part 891)
Operative Text
(a) HUD shall use the development cost limits, established by Notice in the Federal Register and adjusted by locality, to calculate the fund reservation amount of the capital advance to be made available to individual Owners. Owners that incur actual development costs that are less than the amount of the initial fund reservation shall be entitled to retain 50 percent of the savings in a Replacement Reserve Account. Such percentage shall be increased to 75 percent for Owners that add energy efficiency features. (b) The Replacement Reserve Account established under paragraph (a) of this section may only be used for repairs, replacements, and capital improvements to the project.
Under 24 CFR Part 891 § 891.140, HUD sets locality-adjusted cost ceilings—published in the Federal Register—to determine how large a capital advance an Owner may receive. If an Owner's actual construction or development costs come in below that ceiling, the Owner keeps half of the difference in a dedicated Replacement Reserve Account; that share rises to three-quarters when the project incorporates qualifying energy-efficiency features. Money held in the Replacement Reserve Account is restricted exclusively to repairs, replacements, and capital improvements on the same project.
Plain English — not legal advice.
Owners operating under 24 CFR Part 891 § 891.140 generally track actual development expenditures carefully against the initial fund reservation, because any savings determine the amount deposited into the Replacement Reserve Account. Compliant operators document energy-efficiency features at the outset, since those features trigger the higher 75-percent savings retention rate. Funds deposited into the Replacement Reserve Account are then kept separate and used only for eligible physical improvements—repairs, replacements, and capital improvements—to the project.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
For residents living in housing developed under 24 CFR Part 891 § 891.140, the Replacement Reserve Account requirement means that a dedicated pool of funds must be maintained specifically for the physical upkeep of the property. If a tenant believes reserve funds are being misused or that required repairs are going unaddressed, general enforcement paths include raising the issue with the local HUD field office, contacting a HUD-approved housing counseling agency, or reaching out to a tenant-rights organization familiar with Section 202 or Section 811 programs. Consulting those resources can help residents understand what oversight mechanisms apply to their specific project.
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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