Notice CPD-14-13 provides advocates with a convenient reminder of how jurisdictions should determine the service area of an activity funded by the Community Development Block Grant (CDBG) program claiming to benefit lower income people on an areawide basis. The Notice, issued on September 23, does not provide any new guidance in this regard. Its primary purpose is to guide jurisdictions conducting income surveys to determine the percentage of low and moderate (lower) income people living in the service area of a CDBG-funded activity asserting the area lower income benefit test. The short section describing how a service area should be determined provides advocates a useful reminder of what the CDBG regulations have long required but that some jurisdictions ignore. The area lower income benefit test is the one most used by jurisdictions.
A minimum of 70% of a jurisdiction’s Community Development Block Grant (CDBG) funds must be used for activities that primarily benefit lower income people, those with income at or below 80% of the areawide median income (AMI). CDBG regulations have long had four tests for determining whether an activity might benefit lower income people:
- The area benefit test. The activity meets the identified needs of lower income people but is available to all residents of a primarily residential area where at least 51% of the population is lower income.
- The housing benefit test. CDBG-assisted housing is occupied by lower income people. For multifamily housing, at least 51% of the units must be occupied by lower income people.
- The jobs test. At least 51% of the jobs created or retained with CDBG assistance are held by or are available to lower income people (“available to” means no special education or training is necessary).
- The limited clientele test. The activity is limited to a specific group of people, at least 51% of whom are lower income people. Examples of limited clientele activities are services for people who are homeless and meals on wheels. Some activities, such as services for elderly people, are presumed to benefit lower income people. Advocates should monitor such activities because the presumption of lower income benefit can be challenged.
Pages 4-6 of the Notice discuss properly identifying the service area for meeting the area benefit test. HUD will generally accept the service area determined by a CDBG grantee unless there is substantial evidence to the contrary. This is opportunity for advocates to intervene. As the regulations state, in assessing such evidence the full range of direct effects of the assisted activity will be considered, and the activity when taken as a whole must not benefit moderate income people (80% of AMI in CDBG) to the exclusion of low income people (50% of AMI). The Notice describes situations to consider in entitlement jurisdictions (those that automatically receive CDBG from HUD) and in the State CDBG program (states sub-allocate funds to small towns and rural areas).
The Notice describes three factors to consider in defining the service area of an entitlement jurisdiction: the nature, location, and accessibility of the activity. An example of the nature of an activity is a CDBG-assisted road. A small, two-lane street in a residential neighborhood is likely to meet the area wide lower income benefit test, but a four-lane, arterial street primarily used by commuters passing through a lower income neighborhood is not likely to meet the test. Likewise, a park that has many ball fields and spectator stands capable of accommodating hundreds of fans is not likely to meet the test even though it is in a lower income neighborhood. Regarding location, when a facility is located near a boundary of a particular neighborhood, its service area would be expected to include portions of the adjacent neighborhood. For accessibility, geographic barriers should be considered. For example, one portion of an area should not be considered part of a service area if a river or interstate highway prevents people in that portion from using a facility in another portion of the area.
Notice CPD-14-13 is at http://portal.hud.gov/hudportal/documents/huddoc?id=14-13cpdn.pdf
For other area benefit guidance, see Basically CDBG, Chapter 3, “National Objectives.” pages 3-3 through 3-7 at https://www.hudexchange.info/resources/documents/Basically-CDBG-Chapter-3-Nat-Obj.pdf, and Guide to National Objectives and Eligible Activities for Entitlement Communities, Chapter 3, “L/M Benefit Area” pages 3-7 through 3-12, and Appendix D, “Determining Service Areas” at https://www.hudexchange.info/resources/documents/CDBG_Guide_National_Objectives_Eligible_Activities.pdf