PBV Project Cap Exceptions: Which Units Can Exceed the Normal Limit?
PBV project cap exceptions allow certain Project-Based Voucher units to receive assistance without being counted against the ordinary per-project limit. Other units can be excluded from the calculation entirely, while projects in certain areas can qualify for a higher project cap instead of an exception.
Those are three different concepts. They should not be treated as interchangeable, and none of them automatically increases the separate number of vouchers a public housing agency is allowed to project-base across its entire voucher program.
Start With the Current Project Cap
Under the current PBV regulation, a PHA ordinarily may not select a project or enter into the applicable PBV contracts if the number of assisted units exceeds the greater of 25 units or 25 percent of the dwelling units in the project, after applying the regulatory adjustment for excluded units.
That is the project cap, also called the PBV income-mixing requirement.
HUD's rules then provide three mechanisms that can change the number of assisted units a project can contain:
- A higher project cap for projects located in an area where vouchers are difficult to use.
- Excepted units that serve qualifying families and do not count toward the project cap.
- Excluded units under separate rules for certain previously assisted or rent-restricted housing and qualifying replacement units.
These distinctions operate within the broader Project-Based Voucher program, but they answer a narrower question: how many PBV-assisted units can be placed in one project.
Elderly Units Can Be Excepted From the Project Cap
Units exclusively serving elderly families are a current PBV project-cap exception.
The relevant family must meet HUD's definition of an elderly family. The HAP contract must identify the number of units being treated as excepted, and the owner must set those units aside for families that qualify for the exception.
A unit does not become excepted simply because a development markets itself as senior housing. For the unit to count under this exception, it must actually be occupied by a family that satisfies the applicable elderly-family requirement.
HUD also requires the PHA to address what happens when a family initially qualifies through an elderly household member but that person later leaves because of circumstances beyond the family's control, such as death or long-term institutional care. The PHA's Administrative Plan determines whether the unit can continue to receive excepted status for that remaining family in those circumstances.
Eligible FUP Youth Have Their Own Exception
Current regulations also except units exclusively made available to eligible youth described under the Family Unification Program provisions of the U.S. Housing Act.
When ordinary FUP assistance that could otherwise serve both eligible families and eligible youth is restricted to youth for this purpose, the PHA has additional responsibilities. It must determine that limiting those PBV units to youth is consistent with local housing needs for both FUP populations, document that determination and include the limitation in its Administrative Plan.
Occupancy matters here as well. The unit qualifies for project-cap excepted status when it is occupied by an eligible youth receiving the applicable FUP assistance.
The current occupancy rules also tie the exception to the period of that youth assistance. This is not a permanent project classification that survives without regard to who occupies the unit.
Supportive Services Create a Broader Project-Cap Exception
A third current exception covers units exclusively made available to households that are eligible for supportive services available to PBV-assisted residents of the project.
The rule is based on eligibility for the services, not mandatory participation.
A family cannot be required to participate in the supportive services simply to live in the excepted PBV unit. The services may be provided by someone other than the property owner, and they do not have to be physically located at the project.
They must, however, be reasonably available and designed to help participating families achieve self-sufficiency or live in the community as independently as possible.
The project must make qualifying supportive services available to all PBV-assisted families in the project. The PHA also has to define in its Administrative Plan:
- The types of services that can support the exception.
- The extent of those services.
- How long or how frequently services will be available when relevant.
- The reasonable period within which the services must become available after a family requests them.
Under the current regulation, that PHA-defined period cannot exceed 120 calendar days from the family's request.
A PHA that operates a Family Self-Sufficiency program may use FSS services to meet the project-cap exception when the regulatory requirements are satisfied.
Service Eligibility Does Not Mean Service Participation Is Mandatory
This point is easy to get wrong because older PBV descriptions sometimes framed the supportive-services exception differently.
Under the current rule, a unit can be excepted when a member of the family is eligible for at least one of the qualifying supportive services even if the family chooses not to participate.
If a family member does participate and successfully completes the services, the unit can remain excepted while a member of that family continues to occupy it, even if the remaining household later becomes ineligible for the available services.
If the entire family instead becomes ineligible for all available supportive services during tenancy without the successful-completion protection applying, the unit may lose its excepted status.
Loss of the unit's excepted status does not itself permit the family to be terminated from PBV assistance or evicted because the family no longer qualifies for those services.
Disability Alone Is Not a Current Stand-Alone Project-Cap Exception
One of the most important HOTMA-era distinctions is what no longer appears on the current list.
A unit is not automatically excepted from today's project cap merely because it serves a family with a disability.
Older PBV HAP contracts can still contain a disabled-family exception because HUD removed the former stand-alone exception effective April 18, 2017. Contracts already in effect before that change generally continue under their existing excepted-unit terms unless the PHA and owner validly amend those terms.
For a new project, a household that includes a person with a disability may still fit the supportive-services exception if that household satisfies the current supportive-services requirements. That is different from saying disability by itself creates an exception.
Homeless and Veteran Units Are Not Automatically Project-Cap Exceptions
Another common error comes from mixing the PBV program cap with the project cap.
Current federal rules allow certain units serving people experiencing homelessness and veteran families to help a PHA qualify for an increased program cap. Those categories do not appear by themselves on the current list of project-cap exceptions in § 983.54.
A project serving homeless families or veterans could still contain units that qualify for a project-cap exception for another reason. For example, households could separately satisfy the supportive-services exception. But the population label alone does not create that result.
The PHA has to test the unit under the correct regulation rather than carrying a program-cap category over into the project-cap calculation.
Some Locations Get a Higher Cap Instead of an Exception
A qualifying location changes the project calculation in another way.
Under the current rule, a project located in an area where vouchers are difficult to use may receive PBV assistance up to the greater of 25 units or 40 percent of the adjusted dwelling units in the project.
That is a higher project cap. It does not make every unit in the project an excepted unit.
The current regulatory definition includes three types of areas:
- A census tract with a poverty rate of 20 percent or less, as determined by HUD.
- A ZIP Code area where HUD determines the rental vacancy rate is below 4 percent.
- A ZIP Code area where 90 percent of the Small Area Fair Market Rent exceeds 110 percent of the applicable metropolitan-area or county Fair Market Rent.
The definition is therefore broader than the older shorthand that referred only to low-poverty census tracts.
A PHA should rely on current HUD data when determining whether a specific address qualifies. An owner should not assume eligibility from general neighborhood characteristics or an old census figure.
Excepted Units and Excluded Units Are Different
An excepted unit is a unit that does not count toward the project cap because it is reserved for and occupied by a family that qualifies under one of the applicable exception categories.
An excluded unit receives different treatment. Units qualifying under § 983.59 do not count toward either the PBV project cap or the program cap.
Excluded units are also removed from the project's dwelling-unit count when the PHA calculates the ordinary 25-percent cap or the higher 40-percent cap.
That difference affects both the numerator and denominator of a project-cap analysis and is why simply asking how many apartments are in the building may not produce the correct regulatory calculation.
Certain Previously Assisted or Rent-Restricted Units Can Be Excluded
Section 983.59 currently allows certain existing or rehabilitated units to be excluded from both caps when they meet the detailed regulatory requirements.
Among the covered categories are units that recently received specified forms of HUD assistance, including certain public housing, project-based rental assistance, Section 202, Section 811, Rental Assistance Program or Flexible Subsidy assistance.
The regulation also covers units that were subject to federally required rent restrictions under specified programs, including:
- Low-Income Housing Tax Credit.
- Section 515 Rural Rental Housing Loans.
- Specified HUD-assisted or HUD-restricted housing programs.
- Other programs HUD may identify through a Federal Register notice.
For existing or rehabilitated units, the qualifying assistance or rent restriction must fall within the regulatory lookback period, and the units must be removed from the prior category before the PBV HAP contract becomes effective.
The existence of an old tax-credit allocation, HUD mortgage or affordable-housing restriction does not by itself establish that a unit qualifies. The PHA needs the documents showing that the particular § 983.59 conditions are met.
Replacement Units Can Also Qualify for Exclusion
The exclusion rules extend to certain newly constructed replacement units.
The primary purpose of the new units must be to replace units that meet the applicable previous-assistance or federal rent-restriction criteria. Current rules also impose requirements concerning the replacement project's location and its relationship to the original site.
In addition, one of the required resident or redevelopment conditions must apply, such as providing former residents the specified right-of-first-occupancy preference or having identified the new project as replacement housing in the required documented redevelopment plan before demolition.
Replacement does not create unlimited excluded units.
The bedroom configuration may change, and the new development can contain a different total number of PBV-assisted units, but only up to the number of qualifying units in the original project can receive the exclusion. Additional PBV units remain subject to the applicable program and project caps.
How the PHA Counts Excepted Units
The HAP contract must specify how many units are being treated as project-cap excepted units, and the owner must reserve that number for qualifying families.
For a unit to actually receive excepted treatment, it must be occupied by a family that meets the relevant exception.
When the family moves out, the unit generally must again be made available to a family that meets the applicable exception if the PHA intends for that unit to continue receiving excepted treatment.
If a unit loses its qualifying status during tenancy, the PHA's Administrative Plan must identify how the agency handles that situation. Current regulations permit mechanisms that can include substituting another qualifying unit, removing the unit from the HAP contract or changing its cap status when doing so would not cause a cap violation.
The PHA therefore cannot permanently label apartment 204 “excepted” and ignore who occupies it or whether the qualifying conditions continue.
A Project Can Use More Than One Exception Category
HUD does not require an entire project to rely on a single project-cap exception.
One project may contain elderly excepted units, qualifying supportive-services units and eligible-youth units. It may also contain excluded units under § 983.59.
The PHA determines the number of units that receive PBV assistance and how many qualify as excepted, subject to the federal requirements.
The underlying project documentation should therefore identify each category rather than simply stating that the entire development is “cap exempt.”
The Project Cap and Program Cap Must Be Tested Separately
A project can satisfy the project-cap rule and still create a program-cap problem for the PHA.
The project cap answers how many PBV-assisted units may be located in a particular project.
The program cap limits how much of the PHA's overall authorized voucher inventory can be committed to PBV assistance. Under the current regulation, the ordinary program cap is 20 percent of authorized voucher units, with additional authority available for specified categories.
Project-cap excepted units do not automatically disappear from the program-cap calculation.
Some units can qualify under both sets of provisions, but each test has to be satisfied independently. For example, eligible FUP youth can have relevance under both rules, while units meeting § 983.59 are expressly excluded from both caps.
This is also why homelessness or veteran status should not be inserted into a project-cap calculation simply because those populations appear in the increased program-cap regulation.
Excluded Units Change the Percentage Denominator
Units excluded under § 983.59 receive another important treatment: they are removed from the dwelling-unit count used to calculate the project-cap percentage.
Suppose a project has 100 dwelling units but 10 satisfy § 983.59 and are excluded. For purposes of the percentage calculation, the PHA does not simply use all 100 units as the denominator. The excluded units are removed first, and the cap is calculated using the adjusted dwelling-unit count.
The PHA then separately accounts for excepted PBV units that do not count against the resulting project cap.
This sequence matters whenever a development contains a combination of ordinary PBV units, excepted units and units excluded under § 983.59.
The Administrative Plan Is Part of the Exception Analysis
Federal regulations establish the available project-cap mechanisms, but several details depend on PHA policy.
For supportive-services units, the Administrative Plan must describe which services will qualify, their availability and the period within which requested services will be made available.
For certain elderly-family occupancy changes, the plan determines whether the PHA exercises the discretion HUD provides when the original qualifying household member is no longer in the unit because of circumstances beyond the family's control.
The plan must also explain how the PHA will respond when a previously excepted unit or a unit receiving treatment under an increased program cap no longer qualifies.
Project owners therefore need both the current federal regulation and the current Administrative Plan. One cannot substitute for the other.
Documentation Has to Support the Actual Exception
A PHA should be able to document why every unit receiving special cap treatment fits that treatment.
The necessary record depends on the category. It may involve:
- Household eligibility for the applicable exception.
- HAP contract identification of excepted units.
- Administrative Plan policies.
- Description and availability of qualifying supportive services.
- FUP youth documentation and required local-needs determination.
- HUD data supporting difficult-to-use-area status.
- Evidence of previous HUD assistance or federally required rent restrictions.
- Records showing the timing of prior assistance or restrictions.
- Replacement-housing and redevelopment documentation.
- Unit counts showing how the project and program caps were calculated.
A project's resident profile alone is not enough. Serving seniors, people with disabilities, veterans, youth or people experiencing homelessness does not automatically tell the PHA which cap provision applies.
Use the Current Rule Instead of an Old Exception List
PBV cap rules have changed repeatedly, including through HOTMA, later implementation rules and subsequent technical amendments. Older guidance may describe a disabled-family exception that is no longer available to new HAP contracts, omit the FUP youth category, define difficult-to-use areas too narrowly or use outdated section numbers and calculations.
For a new project analysis, start with the current versions of §§ 983.3, 983.6, 983.54, 983.59 and 983.262, then apply the PHA's current Administrative Plan.
The safest classification is specific: identify whether the project is using the ordinary cap, a higher location-based cap, project-cap excepted units, § 983.59 excluded units, or a combination of those treatments. Then test the PHA's separate program cap independently.