What Is the Faircloth Amendment and How Does It Work?

The Faircloth Amendment is a 1998 federal law that caps the number of public housing units eligible for federal operating and capital funding at the number each Public Housing Agency owned, assisted, or operated on October 1, 1999. Codified as Section 9(g)(3) of the United States Housing Act of 1937, it does not literally ban construction. It cuts off the two funding streams — Capital Fund and Operating Fund dollars — that make deeply affordable public housing financially viable, so any units built above an agency’s 1999 count get no new federal money to build or run them. The result has been a near-freeze on traditional public housing construction for more than two decades.¹

What the Law Actually Says

The statute sets a general prohibition and two narrow exceptions. The general rule: a Public Housing Agency cannot use Capital Fund or Operating Fund money to build public housing units if doing so would produce a net increase over its October 1, 1999 unit count. That baseline count includes units demolished as part of revitalization, so tearing buildings down doesn’t quietly shrink the ceiling.¹

The first exception lets an agency build and operate affordable housing beyond the cap using its existing Capital or Operating Fund allocation. HUD’s funding formulas, however, will not send additional dollars for those extra units. An agency can spread its fixed budget thinner across more units, but it will not get a bigger check.¹

The second exception applies to mixed-finance developments that bring in significant outside investment. If the project leverages private or other public capital and its projected lifetime cost comes in below what tenant-based vouchers would cost over the same period, HUD’s formulas can provide additional operating and modernization funding for those units. Initial development costs remain excluded.¹

The 1999 Baseline

Every Public Housing Agency has its own Faircloth Limit set by its unit count on October 1, 1999. HUD publishes these limits and tracks them in its inventory management systems.² The snapshot was taken a year after the Quality Housing and Work Responsibility Act of 1998 created the amendment, and it has not moved since.

The baseline does not adjust for population growth, demographic change, or local housing market shifts. A city that has added hundreds of thousands of residents since 1999 has the same public housing ceiling it had then. Agencies with questions about their specific limit can contact HUD’s Office of Public and Indian Housing.³

How the Funding Restriction Works in Practice

The enforcement mechanism is financial. Nothing in the statute stops an agency from putting up a building. What the law does is cut off the two federal streams that keep public housing running at rents low-income tenants can pay: Capital Fund dollars for development and physical improvements, and Operating Fund dollars for maintenance, utilities, and management. Without ongoing operating subsidy, the numbers on deeply affordable housing don’t work.³

An agency that builds above its cap can spend its existing federal allocation on those units, but HUD will not raise the formula allocation to cover them. The agency absorbs the cost from a fixed pot. For most agencies, that gap makes above-cap construction financially unworkable.²

Faircloth Authority: Room to Build Below the Cap

Because many agencies have demolished aging buildings or converted units to other programs since 1999, the gap between the 1999 baseline and the current unit count is often substantial. That gap is called Faircloth authority, and it represents units an agency can still develop or acquire with full Capital and Operating Fund support.³

The arithmetic is straightforward. An agency with a 1999 cap of 4,000 units currently operating 2,500 has authority to develop 1,500 more within the federally funded system. Nationally, unused Faircloth authority is large. More than 250,000 public housing units have been lost since the mid-1990s, mostly through demolition of deteriorating buildings, while roughly 1.1 million units remain in operation.

To confirm its available authority, an agency should verify its published Faircloth Limit, check for pending changes not yet reflected, and make sure its current unit count in HUD’s IMS/PIC inventory system is accurate. New development has to be reported promptly in those systems so Operating and Capital Fund allocations begin on schedule.³

Mixed-Finance Development

The main vehicle for putting Faircloth authority to work is mixed-finance development, in which public, private, and nonprofit funds combine to build housing that can mix public housing units with market-rate or other subsidized units. HUD’s mixed-finance program is designed to blend these sources, and the statutory exception for mixed-finance projects that leverage outside investment can unlock additional federal operating dollars.⁴

Agencies pursuing mixed-finance deals must submit a series of HUD forms and meet cost-control and safe-harbor standards. The process requires an amendment to the Annual Contributions Contract, restrictive covenants on the property, and a development proposal with detailed financial projections. HUD’s guidance treats the Faircloth Limit as a compliance checkpoint throughout.⁴

Faircloth-to-RAD

Starting in 2021, HUD opened a pathway that pairs Faircloth authority with the Rental Assistance Demonstration program. Under Faircloth-to-RAD, an agency develops new units as mixed-finance public housing and, on completion, converts them immediately to long-term Section 8 project-based voucher or project-based rental assistance contracts. The RAD subsidy stream is more predictable than traditional public housing funding, which makes the projects easier to finance.

The structure has a wrinkle. Only units currently operating as public housing qualify for RAD conversion, so the development has to be documented as mixed-finance public housing first. At initial closing, the paperwork reflects public housing rules; HUD issues a Notice of Anticipated RAD Rents and a RAD Conversion Conditional Approval to signal that the conversion will happen when construction is done. When the building opens, the project swaps its public housing documents for RAD subsidy documents and use agreements.

Early adopters have found that the per-unit RAD subsidy alone often isn’t high enough to cover new construction costs. Agencies have closed the gap by layering in other project-based rental subsidies, using Moving To Work flexibility to raise rent levels, or partnering with developers whose projects already have financing in place.

Why the Cap Matters

The public housing stock has shrunk by more than 250,000 units since the mid-1990s, largely through demolition of buildings in serious disrepair. The existing inventory carries an estimated $169 billion backlog of deferred maintenance and capital needs. Median inflation-adjusted rent rose roughly 13 percent between 2001 and 2018 while median renter income grew only 0.5 percent. Families that do receive housing vouchers typically spend close to two and a half years on waitlists first, and HUD does not systematically track how many households are waiting nationwide.

A frozen construction ceiling on one side, a shrinking existing stock on the other, and rising rents in between have made the Faircloth Amendment one of the most significant structural constraints on expanding deeply affordable housing in the country.

Repeal Efforts

Legislation to eliminate the Faircloth Amendment has been introduced but has not advanced. In the 117th Congress, the Repeal the Faircloth Amendment Act proposed striking Section 9(g)(3) entirely.⁵ The bill did not pass. Repeal on its own would not produce new public housing, since Congress would still need to appropriate construction funding, but supporters describe it as a necessary first step to clear the legal barrier.

Until Congress acts, the cap stands. Agencies looking to add deeply affordable units have to work inside the Faircloth Limit, tap unused Faircloth authority, or use conversion pathways like Faircloth-to-RAD to shift new units onto Section 8 platforms.

1
Office of the Law Revision Counsel. 42 USC 1437g – Public Housing Capital Fund and Operating Fund
2
U.S. Department of Housing and Urban Development. CY 2022 Guidance on Complying with the Maximum Number of Units Eligible for Operating Subsidy Pursuant to Section 9(g)(3)(A) of the Housing Act of 1937
3
Department of Housing and Urban Development. Faircloth Limit FAQs
4
U.S. Department of Housing and Urban Development (HUD). Mixed-Finance Public Housing
5
Congress.gov. Repeal the Faircloth Amendment Act