---
kind: "section"
citation: "42 U.S.C. § 12742"
title: "42"
title_heading: "The Public Health and Welfare"
number: "12742"
heading: "Eligible uses of investment"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/12742"
units:
  - "Chapter 130 — National Affordable Housing"
  - "Subchapter II — Investment in Affordable Housing"
  - "Part A — HOME Investment Partnerships"
---

# §12742. Eligible uses of investment

- (a) **Housing uses—**
  - (1) **In general—** Funds made available under this part may be used by [participating jurisdictions](/usc/42/12704.md?p=4) to provide incentives to develop and support affordable rental [housing](/usc/42/12704.md?p=8) and homeownership affordability through the acquisition, new [construction](/usc/42/300s–3.md?p=7), reconstruction, or moderate or [substantial rehabilitation](/usc/42/12704.md?p=17) of affordable [housing](/usc/42/12704.md?p=8), including real property acquisition, site improvement, conversion, demolition, and other expenses, including financing costs, relocation expenses of any displaced persons, [families](/usc/42/12704.md?p=11), businesses, or organizations, to provide for the payment of reasonable administrative and planning costs, to provide for the payment of operating expenses of [community housing development organizations](/usc/42/12704.md?p=6), and to provide tenant-based rental assistance. For the purpose of this part, the term “affordable [housing](/usc/42/12704.md?p=8)” includes permanent [housing](/usc/42/12704.md?p=8) for disabled homeless persons, transitional [housing](/usc/42/12704.md?p=8), and single room occupancy [housing](/usc/42/12704.md?p=8).
  - (2) **Limitation—** The [Secretary](/usc/42/12704.md?p=16) may not restrict the choice by a [participating jurisdiction](/usc/42/12704.md?p=4) of rehabilitation, [substantial rehabilitation](/usc/42/12704.md?p=17), new [construction](/usc/42/300s–3.md?p=7), reconstruction, acquisition, or other eligible [housing](/usc/42/12704.md?p=8) uses authorized in [paragraph (1)](#a-1) unless the restriction is explicitly authorized under [section 12753(2) of this title](/usc/42/12753.md?p=2).
  - (3) **Tenant-based rental assistance—**
    - (A) **In general—** A [participating jurisdiction](/usc/42/12704.md?p=4) may use funds provided under this part for tenant-based rental assistance only if—
      - (i) the [jurisdiction](/usc/42/12704.md?p=3) certifies that the use of funds under this part for tenant-based rental assistance is an essential element of the [jurisdiction](/usc/42/12704.md?p=3)’s annual [housing](/usc/42/12704.md?p=8) strategy for expanding the supply, affordability, and availability of decent, safe, sanitary, and affordable [housing](/usc/42/12704.md?p=8), and specifies the local market conditions that lead to the choice of this option; and
      - (ii) the tenant-based rental assistance is provided in accordance with written tenant selection policies and criteria that are consistent with the purposes of providing [housing](/usc/42/12704.md?p=8) to very low- and [low-income families](/usc/42/12704.md?p=10) and are reasonably related to preference rules established under [section 1437d(c)(4)(A) of this title](/usc/42/1437d.md?p=c-4-A).
    - (B) **Fair share not affected—** A [jurisdiction](/usc/42/12704.md?p=3)’s section 8 [[42 U.S.C. 1437f](/usc/42/1437f.md)] fair share [allocation](/usc/42/2021b.md?p=2) shall be unaffected by the use of assistance under this subchapter.
    - (C) **24-month contracts—** Rental assistance contracts made available with assistance under this subchapter shall be for not more than 24 months, except that assistance to a family may be renewed.
    - (D) **Use of section 1437f assistance—** In any case where assistance under [section 1437f of this title](/usc/42/1437f.md) becomes available to a [participating jurisdiction](/usc/42/12704.md?p=4), [recipients](/usc/42/12876.md?p=8) of rental assistance under this subchapter shall qualify for tenant selection preferences to the same extent as when they received the rental assistance under this subchapter. A rental assistance program under this subchapter shall meet minimum criteria prescribed by the [Secretary](/usc/42/12704.md?p=16), such as [housing](/usc/42/12704.md?p=8) quality standards and standards regarding the reasonableness of the rent.
    - (E) **Security deposit assistance—** A [jurisdiction](/usc/42/12704.md?p=3) using funds provided under this part for tenant-based rental assistance may use such funds to provide loans or grants to very low- and [low-income families](/usc/42/12704.md?p=10) for [security](/usc/42/12704.md?p=12) deposits for rental of dwelling units. Assistance under this subparagraph does not preclude assistance under any other provision of this paragraph.
  - (4) **Infrastructure improvements in nonentitlement areas—**
    - (A) **In general—** A [participating jurisdiction](/usc/42/12704.md?p=4) may use funds provided under this part for infrastructure improvements, including the installation or repair of water and sewer lines, sidewalks, roads, and utility connections if—
      - (i) such [participating jurisdiction](/usc/42/12704.md?p=4) does not receive assistance under title I of the [Housing](/usc/42/12704.md?p=8) and Community Development Act of 1974 ([42 U.S.C. 5310](/usc/42/5310.md));[^1] and
      - (ii) such improvements are directly related to, and located within or immediately adjacent to—
        - (I) [housing](/usc/42/12704.md?p=8) assisted under this part; or
        - (II) [housing](/usc/42/12704.md?p=8) assisted under [section 42 of title 26](/usc/26/42.md).
    - (B) **Application of labor standards—** The labor standards and requirements set forth in section 110 of the [Housing](/usc/42/12704.md?p=8) and Community Development Act of 1974 ([42 U.S.C. 5310](/usc/42/5310.md)) shall apply to any infrastructure improvement conducted using funds provided under this part.
    - (C) **Rule of construction—** Nothing in this paragraph may be construed to impose any requirements of the HOME Investment Partnerships program on [housing](/usc/42/12704.md?p=8) that benefits from an infrastructure improvement conducted using funds provided under this part but was not otherwise assisted under the HOME Investment Partnerships program.
  - (5) **Lead-based paint hazards—** A [participating jurisdiction](/usc/42/12704.md?p=4) may use funds provided under this part for the evaluation and reduction of lead-based paint hazards, as defined in [section 4851b of this title](/usc/42/4851b.md).
- (b) **Investments—** [Participating jurisdictions](/usc/42/12704.md?p=4) shall have discretion to invest funds made available under this part as equity investments, interest-bearing loans or advances, noninterest-bearing loans or advances, interest subsidies or other forms of assistance that the [Secretary](/usc/42/12704.md?p=16) has determined to be consistent with the purposes of this subchapter. Each [participating jurisdiction](/usc/42/12704.md?p=4) shall have the right to establish the terms of assistance.
- (c) **Administrative costs—** In each fiscal year, each [participating jurisdiction](/usc/42/12704.md?p=4) may use not more than 10 percent of the funds made available under this part to the [jurisdiction](/usc/42/12704.md?p=3) for such year for any administrative and planning costs of the [jurisdiction](/usc/42/12704.md?p=3) in carrying out this part, including the costs of the salaries of persons engaged in administering and managing activities assisted with funds made available under this part.
- (d) **Prohibited uses—** Funds made available under this part may not be used to—
  - (1) defray any administrative cost of a [participating jurisdiction](/usc/42/12704.md?p=4) that exceed the amount specified under [subsection (c)](#c),
  - (2) provide tenant-based rental assistance for the special purposes of the existing section 8 [[42 U.S.C. 1437f](/usc/42/1437f.md)] program, including replacing public [housing](/usc/42/12704.md?p=8) that is demolished or disposed of, preserving [federally assisted housing](/usc/42/13641.md?p=2), assisting in the disposition of [housing](/usc/42/12704.md?p=8) owned or held by the [Secretary](/usc/42/12704.md?p=16), preventing displacement from rental rehabilitation [projects](/usc/42/13641.md?p=2), or extending or renewing tenant-based assistance under [section 1437f of this title](/usc/42/1437f.md),
  - (3) provide non-Federal matching contributions required under any other Federal program,
  - (4) provide assistance authorized under [section 1437g of this title](/usc/42/1437g.md),
  - (5) carry out activities authorized under [section 1437g(d)(1) of this title](/usc/42/1437g.md?p=d-1), or
  - (6) provide assistance to eligible low-income [housing](/usc/42/12704.md?p=8) under the Emergency Low Income [Housing](/usc/42/12704.md?p=8) Preservation Act of 1987 or the Low-Income [Housing](/usc/42/12704.md?p=8) Preservation and Resident Homeownership Act of 1990 [[12 U.S.C. 4101](/usc/12/4101.md) et seq.].
- (e) **Cost limits—**
  - (1) **In general—** The [Secretary](/usc/42/12704.md?p=16) shall establish limits on the amount of funds under this part that may be invested on a per unit basis. The limits shall be established on a market-by-market basis, with adjustments made for number of bedrooms, and shall reflect the actual cost of new [construction](/usc/42/300s–3.md?p=7), reconstruction, or rehabilitation of [housing](/usc/42/12704.md?p=8) that meets applicable [State](/usc/42/12704.md?p=2) and local [housing](/usc/42/12704.md?p=8) and building codes and the cost of land, including necessary site improvements. Adjustments shall be made annually to reflect inflation. Separate limits may be set for different eligible activities.
  - (2) **Criteria—** In calculating per unit limits, the [Secretary](/usc/42/12704.md?p=16) shall take into account that assistance under this subchapter is intended to—
    - (A) provide nonluxury [housing](/usc/42/12704.md?p=8) with suitable amenities;
    - (B) operate effectively in all [jurisdictions](/usc/42/12704.md?p=3);
    - (C) facilitate mixed-income [housing](/usc/42/12704.md?p=8); and
    - (D) reflect the costs associated with meeting the special needs of tenants or homeowners that the [housing](/usc/42/12704.md?p=8) is designed to serve.
  - (3) **Consultation—** In calculating cost limits, the [Secretary](/usc/42/12704.md?p=16) shall consult with organizations that have expertise in the development of affordable [housing](/usc/42/12704.md?p=8), including national [nonprofit organizations](/usc/42/12704.md?p=5) and national organizations representing private development firms and [State](/usc/42/12704.md?p=2) and local governments.
- (f) **Certification of compliance—** The requirements of [section 3545(d) of this title](/usc/42/3545.md?p=d) shall be satisfied by a [certification](/usc/42/12704.md?p=21) by a [participating jurisdiction](/usc/42/12704.md?p=4) to the [Secretary](/usc/42/12704.md?p=16) that the combination of Federal assistance provided to any [housing](/usc/42/12704.md?p=8) [project](/usc/42/13641.md?p=2) shall not be any more than is necessary to provide affordable [housing](/usc/42/12704.md?p=8).
- (g) **Limitation on operating assistance—** A [participating jurisdiction](/usc/42/12704.md?p=4) may not use more than 5 percent of its [allocation](/usc/42/2021b.md?p=2) under this part for the payment of operating expenses for [community housing development organizations](/usc/42/12704.md?p=6).

## Footnotes

[^1]: So in original. Probably should be “(42 U.S.C. 5301 et seq.);”.

## Source credit

(Pub. L. 101–625, title II, § 212, Nov. 28, 1990, 104 Stat. 4097; Pub. L. 102–550, title II, §§ 203(a), 204–207(b), (d), title X, § 1012(e), Oct. 28, 1992, 106 Stat. 3752–3754, 3905; Pub. L. 105–276, title V, § 522(b)(5), Oct. 21, 1998, 112 Stat. 2565; Pub. L. 119–101, title V, § 501(d), (e)(1), (f), (v)(7), July 11, 2026, 140 Stat. 907, 908, 917.)

## Notes

### Editorial Notes

### References in Text

The Housing and Community Development Act of 1974, referred to in subsec. (a)(4), is Pub. L. 93–383, Aug. 22, 1974, 88 Stat. 633. Title I of the Act is classified principally to chapter 69 (§ 5301 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 5301 of this title and Tables.

The Emergency Low Income Housing Preservation Act of 1987, referred to in subsec. (d)(6), is title II of Pub. L. 100–242, Feb. 5, 1988, 102 Stat. 1877, which was classified principally as a note under section 1715l of Title 12, Banks and Banking. Title II of Pub. L. 100–242, was amended generally by Pub. L. 101–625, title VI, § 601(a), Nov. 28, 1990, 104 Stat. 4249, and is now known as the Low-Income Housing Preservation and Resident Homeownership Act of 1990, which is classified principally to chapter 42 (§ 4101 et seq.) of Title 12. For complete classification of this Act to the Code, see Short Title note set out under section 4101 of Title 12 and Tables.

### Amendments

2026—Subsec. (a)(2). Pub. L. 119–101, § 501(d), amended par. (2) generally. Prior to amendment, text read as follows: “A participating jurisdiction shall give preference to rehabilitation of substandard housing unless the jurisdiction determines that—

“(A) such rehabilitation is not the most cost effective way to meet the jurisdiction’s need to expand the supply of affordable housing; and

“(B) the jurisdiction’s housing needs cannot be met through rehabilitation of the available stock.

The Secretary shall not restrict a participating jurisdiction’s choice of rehabilitation, substantial rehabilitation, new construction, reconstruction, acquisition, or other eligible housing use unless such restriction is explicitly authorized under section 12753(2) of this title.”

Subsec. (a)(3)(A)(ii). Pub. L. 119–101, § 501(v)(7)(A), made technical amendment to reference in original act which appears in text as reference to section 1437d(c)(4)(A) of this title.

Subsec. (a)(4). Pub. L. 119–101, § 501(e)(1), added par. (4).

Subsec. (d)(5). Pub. L. 119–101, § 501(v)(7)(B), made technical amendment to reference in original act which appears in text as reference to section 1437g(d)(1) of this title.

Subsec. (e)(1). Pub. L. 119–101, § 501(v)(7)(C), which directed the substitution of “section 1715l(d)(4)” for “section 1715l(d)(3)(ii)” and “as determined by the Secretary” for “not to exceed 140 percent”, could not be executed after the intervening amendment by section 501(f) of Pub. L. 119–101. See below.

Pub. L. 119–101, § 501(f), struck out “For multifamily housing, such limits shall not be less than the per unit dollar amount limitations set forth in section 1715l(d)(3)(ii) of title 12, as such limitations may be adjusted in accordance therewith, except that for purposes of this subsection the Secretary shall, by regulation, increase the per unit dollar amount limitations in any geographical area by an amount, not to exceed 140 percent, that equals the amount by which the costs of multifamily housing construction in the area exceed the national average of such costs.” after “a per unit basis.”

1998—Subsec. (d)(5). Pub. L. 105–276 substituted “section 1437g(d)(1)” for “section 1437l”.

1992—Subsec. (a)(1). Pub. L. 102–550, § 207(a), inserted “to provide for the payment of reasonable administrative and planning costs, to provide for the payment of operating expenses of community housing development organizations,” after “or organizations,”.

Pub. L. 102–550, § 205, inserted at end “For the purpose of this part, the term ‘affordable housing’ includes permanent housing for disabled homeless persons, transitional housing, and single room occupancy housing.”

Subsec. (a)(2). Pub. L. 102–550, § 203(a)(1), struck out “under paragraph (3) of this subsection or” after “authorized” in concluding provisions.

Subsec. (a)(3). Pub. L. 102–550, § 204(b), added cl. (ii) of par. (3)(A) and struck out former cl. (ii) which read as follows: “the tenant-based rental assistance is provided to persons from the waiting lists eligible for section 8 assistance in accordance with the applicable preferences.”

Pub. L. 102–550, § 204(a), added subpar. (E).

Pub. L. 102–550, § 203(a)(2), (3), redesignated par. (4) as (3) and struck out former par. (3) which provided for conditions for new construction of housing.

Subsec. (a)(4). Pub. L. 102–550, § 203(a)(3), redesignated par. (4) as (3).

Subsec. (a)(5). Pub. L. 102–550, § 1012(e), added par. (5).

Subsec. (c). Pub. L. 102–550, § 207(b)(3), added subsec. (c). Former subsec. (c) redesignated (d).

Pub. L. 102–550, § 207(b)(1), inserted before comma at end of par. (1) “that exceed the amount specified under subsection (c)”.

Subsec. (d). Pub. L. 102–550, § 207(b)(2), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e).

Pub. L. 102–550, § 206, inserted after first sentence of par. (1) “For multifamily housing, such limits shall not be less than the per unit dollar amount limitations set forth in section 1715l(d)(3)(ii) of title 12, as such limitations may be adjusted in accordance therewith, except that for purposes of this subsection the Secretary shall, by regulation, increase the per unit dollar amount limitations in any geographical area by an amount, not to exceed 140 percent, that equals the amount by which the costs of multifamily housing construction in the area exceed the national average of such costs.”

Subsecs. (e), (f). Pub. L. 102–550, § 207(b)(2), redesignated subsecs. (d) and (e) as (e) and (f), respectively.

Subsec. (g). Pub. L. 102–550, § 207(d), added subsec. (g).

### Statutory Notes and Related Subsidiaries

### Effective Date of 1998 Amendment

Amendment by title V of Pub. L. 105–276 effective and applicable beginning upon Oct. 1, 1999, except as otherwise provided, with provision that Secretary may implement amendment before such date, except to extent that such amendment provides otherwise, and with savings provision, see section 503 of Pub. L. 105–276, set out as a note under section 1437 of this title.

### Effective Date of 1992 Amendment

Amendment by sections 203–207 of Pub. L. 102–550 applicable to unexpended funds allocated under subchapter II of this chapter in fiscal year 1992, except as otherwise specifically provided, see section 223 of Pub. L. 102–550, set out as a note under section 12704 of this title.

### Regulations

Pub. L. 119–101, title V, § 501(e)(2), July 11, 2026, 140 Stat. 908, provided that: “Not later than 1 year after the date of enactment of this Act [July 11, 2026], the Secretary of Housing and Urban Development shall issue rules to carry out the amendment made by paragraph (1) [amending this section].”