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HUD Clarifies that Four CARES Act CDBG Provisions Are Immediately Available

HUD’s Office of Community Planning and Development (CPD) announced that four provisions in “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) pertaining to the Community Development Block Grant (CDBG) program are immediately available. A Memorandum from CPD Acting Assistant Secretary John Gibbs was signed on April 9.  It is not posted on CPD’s homepage but can be found by going to the CDBG webpage at HUDExchange.

CPD announced on April 1 each jurisdiction’s amount of the first $2 billon of CARES Act CDBG funding (of the total $5 billion appropriated) that is being allocated through the regular FY20 formula (see Memo, 4/6). HUD will publish a Federal Register notice describing the requirements for the CARES Act CDBG grants, now referred to as “CDBG-CV” grants. The notice will also include waivers for the CDBG-CV and the FY19 and FY20 CDBG allocations. CPD urges CDBG grantees to amend or prepare their Annual Action Plans as soon as possible and not wait for the Federal Register notice or for the two additional allocations of CARES Act CDBG funds, $1 billion and $2 billion. HUD will also publish a Q&A regarding how a grantee may submit a Substantial Amendment to its Annual Action Plan to reflect its CDBG-CV allocation and planned use of the funds.

CPD states that grantees may use CDBG-CV and FY19 and FY20 CDBG funds to prevent, prepare for, and respond to the coronavirus pandemic. NLIHC’s interpretation is that the first $2 billion of CARES Act CDBG funds will not necessarily have to be used to respond to the pandemic. The remaining funds, however, are to be used to prevent, prepare for, and respond to the coronavirus pandemic. The next $1 billion of CDBG-CV is to be distributed through a new formula based on public health needs, risk of transmission of coronavirus, number of coronavirus cases compared to the national average, economic and housing market disruptions, and other factors as determined by HUD. The remaining $2 billion of CDBG-CV to be distributed at HUD’s discretion on a rolling basis, giving priority to a jurisdiction’s needs, again based on public health needs, risk of transmission of coronavirus, number of coronavirus cases compared to the national average, and economic and housing market disruptions.

Temporary Elimination of the 15% Cap on Use of CDBG for Public Services

The CARES Act eliminates the CDBG law’s 15% cap on the amount of a jurisdiction’s grant (and any program income) that is obligated in a program year for “public services.” The removal of the 15% cap applies not only to CDBG funds allocated from the $5 billion appropriation from the CARES Act, but also to any FY19 and FY20 CDBG allocations. The Memorandum makes it clear that this provision is available immediately.

Public services include those for people experiencing homelessness or elderly people, and services related to employment, crime prevention, childcare, health, drug abuse, education, fair housing counseling, and energy conservation. CDBG funds may be used to pay for labor, supplies, and material as well as to operate and/or maintain the portion of a facility in which the public service is located. This includes the lease of a facility, equipment, and other property needed for the public service.

Importantly, the CDBG Entitlement program regulations allow jurisdictions to choose to spend CDBG for rental assistance or utility assistance to households for up to three months. This provision is found in the “Ineligible Activities” section of the Entitlement regulations at 24 CFR part 570.207(b)(4):

(4) Income payments. The general rule is that CDBG funds may not be used for income payments. For purposes of the CDBG program, “income payments” means a series of subsistence-type grant payments made to an individual or family for items such as food, clothing, housing (rent or mortgage), or utilities, but excludes emergency grant payments made over a period of up to three consecutive months to the provider of such items or services on behalf of an individual or family.

The State CDBG program has separate regulations which do not include such a provision. HUD sub-regulatory guidance in “Basically CDBG for States” makes very clear a number of times, however, that although a state must follow the text of the Housing and Community Development Act, a state may use the CDBG Entitlement regulations as a “safe harbor.”

Local and state advocates will have to encourage their local or state government to use money available from the CARES Act CDBG allocation and the FY19 and FY20 CDBG allocations to provide three months of CDBG for rental assistance.

Streamlined Consolidated Plan, Annual Action Plan, Substantial Amendment Processes

The CARES Act provides that CDBG grantees may amend their citizen participation plans to establish expedited procedures to draft, propose, or amend Consolidated Plans (ConPlans), Annual Action Plans, and Substantial Amendments to those plans. The streamlined procedures must provide at least five days for public notice and a reasonable opportunity to comment.

In addition, in-person public hearings are not required. Grantees may meet the public hearing requirements with virtual public hearings if health authorities recommend social distancing and limited public gatherings and if virtual public hearings provide reasonable notification and access for the public, provide timely responses from local officials to public concerns, suggestions, and questions, and the public has access to the local officials’ responses.

The two other provisions described in the Memorandum explain that:

Jurisdictions may use CDBG-CV to cover or reimburse costs of preventing, preparing for, and responding to the coronavirus pandemic, regardless of the date the costs were incurred.

The deadline to submit Annual Action Plans or updates to ConPlans for FY20 is extended to August 16, 2021.

The April 9 Memorandum is at: https://bit.ly/2RGCgTs

More about the Community Development Block Grant (CDBG) program is on page 8-3 of NLIHC’s 2020 Advocates’ Guide.