(b) Requirements for exclusion of existing or rehabilitated units. Excluded units must, in the five years prior to the request for proposals (RFP) or the proposal or project selection date in the case of selection without RFP, fall into one of the following categories provided that the units are removed from all categories prior to the effective date of the HAP contract:

1. (1) The units have received one of the following forms of HUD assistance:

   1. (i) Public Housing Capital or Operating Funds (Section 9 of the 1937 Act);
   2. (ii) Project-Based Rental Assistance (Section 8 of the 1937 Act). Project-based rental assistance under Section 8 includes the Section 8 moderate rehabilitation program, including the single-room occupancy (SRO) program;
   3. (iii) Housing For the Elderly (Section 202 of the Housing Act of 1959);
   4. (iv) Housing for Persons with Disabilities (Section 811 of the Cranston-Gonzalez National Affordable Housing Act);
   5. (v) Rental Assistance Program (RAP) (Section 236(f)(2) of the National Housing Act); or
   6. (vi) Flexible Subsidy Program (Section 201 of the Housing and Community Development Amendments Act of 1978).

2. (2) The units have been subject to a federally required rent restriction under one of the following programs:

   1. (i) The Low-Income Housing Tax Credit program (26 U.S.C. 42);
   2. (ii) Section 515 Rural Rental Housing Loans (42 U.S.C. 1485); or

   3. (iii) The following HUD programs:

      1. (A) Section 236;
      2. (B) Section 221(d)(3) Below Market Interest Rate;
      3. (C) Housing For the Elderly (Section 202 of the Housing Act of 1959);
      4. (D) Housing for Persons with Disabilities (Section 811 of the Cranston-Gonzalez National Affordable Housing Act);
      5. (E) Flexible Subsidy Program (Section 201 of the Housing and Community Development Amendments Act of 1978); or
   4. (iv) Any other program identified by HUD through Federal Register notice subject to public comment.

(c) Replacement units. Newly constructed units developed under the PBV program may be excluded from the program cap and project cap provided the primary purpose of the newly constructed units is or was to replace units that meet the criteria of paragraph (b)(1) or (2) of this section. The newly constructed unit must be located on the same site as the unit it is replacing; however, an expansion of or modification to the prior project's site boundaries as a result of the design of the newly constructed project is acceptable as long as a majority of the replacement units are built back on the site of the original project and any replacement units that are not located on the existing site are part of a project that shares a common border with, are across a public right of way from, or touch that site. In addition, in order for the replacement units to be excluded from the program and project caps, one of the following must be true:

1. (1) Former residents of the original project must be provided with a selection preference that provides the residents with the right of first occupancy at the PBV newly constructed project when it is ready for occupancy.
2. (2) Prior to the demolition of the original project, the PBV newly constructed project must have been identified as replacement housing for that original project as part of a documented plan for the redevelopment of the site.