24 C.F.R. § 891.860
§ 891.860 Operating reserves. (24 CFR Part 891)
Operative Text
(a) The mixed-finance owner shall maintain an operating reserve account in an amount sufficient to cover the operating expenses of the development for at least a three-month period. (b) Project income, project rental assistance, tenant rents, and tax credit equity may be used to fund the operating reserve account. (c) Amounts derived from Section 202 or 811 (e.g., project income, project rental assistance, and tenant rents) in operating reserve accounts may only be used for the operating expenses of the 202 or 811 units.
Under 24 CFR Part 891 § 891.860, mixed-finance housing developments that include Section 202 or Section 811 units are required to keep an operating reserve account large enough to cover at least three months of operating expenses. The reserve can be built from several funding streams, including project income, rental assistance payments, tenant rents, and tax credit equity. However, any portion of that reserve that originates from Section 202 or 811 sources is restricted and may only be spent on the operating costs of those specific units—not on other parts of the development.
Plain English — not legal advice.
Mixed-finance owners operating under 24 CFR Part 891 § 891.860 generally maintain a reserve account that is continuously funded and monitored to ensure it meets the three-month operating expense threshold. Compliant operators establish clear accounting practices that track the origin of each dollar deposited into the reserve, particularly distinguishing Section 202 or 811-derived funds from tax credit equity or other sources. Because the regulation restricts how Section 202 and 811 funds within the reserve may be spent, operators typically implement separate ledger entries or sub-accounts to ensure those dollars are directed exclusively toward the eligible units' operating costs.
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 units within a mixed-finance development have an interest in knowing that 24 CFR Part 891 § 891.860 requires the property owner to maintain a dedicated operating reserve—and that funds tied to their units' assistance programs are legally restricted to covering those units' operating expenses. If a tenant believes the reserve is being mismanaged or that Section 202 or 811 funds are being improperly diverted, general enforcement paths include raising the issue with the local HUD field office or a HUD-approved housing counseling agency. Tenant-rights organizations familiar with federally assisted housing can help residents understand what documentation to request and what oversight mechanisms may be available under this provision.
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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