Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development. The agency is closing a loophole local housing authorities have been using to ensure repairs are made to public housing.

The federal government is moving to close a loophole that Cambridge Housing Authority officials hoped would give them the millions of dollars they say they need to preserve the city’s public housing developments, home to Cambridge’s poorest residents.

As the authority feared, the U.S. Department of Housing and Urban Development has changed its rules in a way that could prevent Cambridge and other local authorities throughout the country from taking advantage of the strategy. The housing authority still plans to pursue its plan, CHA officials said this week.

The CHA planned to transfer ownership of almost all its housing stock — 2,108 units — to private entities controlled by the authority, legally ending the housing developments’ status as public housing.

The move would entitle the authority to get new rental assistance vouchers from HUD that would bring in almost twice the federal subsidy as the authority now gets for public housing, keeping the housing affordable for tenants.

Although the move entailed risks, authority officials said it was the only way to finance $300 million in extensive renovations. Without the improvements, many developments would deteriorate to the point where they could no longer be used and would have to be abandoned; deep cuts to federal public housing aid have already forced the authority to curtail repairs.

But as staff prepared applications to HUD to “dispose” of its housing to affiliates, the federal agency changed its regulations. On Feb. 2, the government agency issued a notice saying it would “generally” reject disposition requests based on “insufficient public housing funds” — exactly the justification Cambridge planned to use. The agency said there are other funding sources available to fund budget gaps.

The federal agency “is attempting to close the door … increasing the urgency of the CHA proceeding with its submissions as quickly as possible,” planning consultant Margaret Moran wrote in a memorandum on Tuesday.

Despite the HUD move, the authority’s planning and development director, Terry Dumas, said Friday that “we still have a good shot” at getting federal approval.

“Probably,” Dumas added.

Bid goes on

Cambridge officials and affordable-housing advocates had expected HUD to close the loophole sooner or later, because it would require the federal agency to spend a lot more money — money it doesn’t have.

Until recently, disposing of public housing usually meant demolishing it or selling it. But as federal aid to public housing plummeted over the past several years, local housing authorities around the country discovered that they could get the more generous rental vouchers if they “disposed” of their housing stock by transferring it to an affiliate. HUD has approved the transfer of thousands of units under the previous rules, Moran’s memo said.

Applications for an estimated 16,000 more units have been or will be submitted, CHA officials have said. The government said the new rule applies to any application submitted after Feb. 2, the date on its notice.

Local officials knew about the rules change within a few days of the HUD notice, Dumas said. But they didn’t mention it at public meetings they were holding in developments around the city — meetings where many residents expressed fear and fury about the strategy. Six meetings were held after Feb. 2, at which officials did say they were worried the government would change the regulations.

Asked why the authority didn’t disclose such a significant development, Dumas said: “I’m not sure we had thoroughly digested it.”

“I don’t think that precludes our application,” she repeated, since “we have always known” HUD might shut the door.

The authority plans to go ahead with its submission and will argue that alternative funding programs won’t provide enough money. CHA’s lawyer “has advised that HUD does not have the authority to implement” the change because it didn’t seek comments from the public and “in some respects it is overbroad and based on a flawed reading” of federal law, said the memo from Moran, the planning consultant.

But the memo didn’t mention any legal challenge to HUD. Dumas said that would be up to the authority’s commissioners and executive director.