HUD’s Office of Community Planning and Development (CPD) published proposed changes to regulations for the Community Development Block Grant (CDBG) program in the Federal Register on January 10. According to CPD, the primary reason for the proposed changes, the first major revisions in more than 20 years, is to make it easier for jurisdictions to promote the use of CDBG for economic development activities. The proposed rule also includes many other changes, including alterations to synchronize the proposed changes with Indian Community Development Block Grant (ICDBG) program regulations. Comments are due by March 11.
In this article, we highlight key proposed changes, including proposed housing-related changes, Consolidated Plan changes, and changes to compliance periods and economic development activities.
Housing-Related Proposed Changes
Mirroring the statute, the regulations require jurisdictions to use CDBG to meet any of the three “national objectives”: benefiting low- and moderate-income people, aiding in preventing or eliminating slums and blight, or meeting an urgent need when conditions pose a serious and immediate threat to health or welfare and when other financial resources are not available [§200(a)(2)].
In general, use of CDBG for housing activities must meet the Housing Low- and Moderate-Income (LMI) Benefit Test. This means at least 51% of the units in a multifamily property must be occupied by households with incomes of less than 80% of the area median income (AMI) [24 CFR part 570.208(a)(3) for Entitlement Jurisdictions and 570.483(b)(3) for states]. When it is necessary to reduce the development cost of constructing a multifamily, non-elderly rental property, the existing regulation allows for an exception of the 51% test. At least 20% of the units must be occupied by LMI households [§208(a)(3)(i), §483(b)(3)(i)]. CPD proposes an additional exception, adding substantial rehabilitation and conversion of a nonresidential structure to a multifamily, non-elderly rental housing project.
Using CDBG to rehabilitate privately-owned buildings for housing is an eligible activity. In 1996, the statute added reconstruction as an eligible use. CPD proposes clearly identifying reconstruction as an eligible activity related to housing at §202(a).
Although not exclusively pertaining to housing, the current regulation at §201(a) allows jurisdictions to use CDBG to acquire real property using a long-term lease, but it does not specify how long the lease must be. CPD’s 1998 guidance defined a long-term lease as one of 15 or more years. The proposed rule would clarify that a long-term lease is one of 15 or more years.
Consolidated Plan Proposed Changes
The Consolidated Plan (ConPlan) regulations require CDBG Entitlement Jurisdictions’ (not states) required “citizen” participation plans to identify what they consider would be a “substantial amendment” to their ConPlans [24 CFR part 91.105(c)]. The rule requires an Entitlement Jurisdiction to consider a change in the use of CDBG funds from one eligible activity to another to be a substantial amendment. CPD proposes adding that an activity not previously identified in the ConPlan or an Annual Action Plan to the ConPlan is a substantial amendment.
The ConPlan “citizen” participation regulations require jurisdictions to “publish” a draft ConPlan/Annual Action Plan in general circulation newspapers so that residents can examine the draft and submit comments. It also requires a summary of the draft document and list locations where complete copies can be examined, such as libraries, government offices, and public places [§91.105(b)(2), §91.115(b)(2)]. CPD proposes requiring the drafts to be also posted on a jurisdiction’s official website. In addition to a summary, the proposed rule “encourages” jurisdictions to use all available social media and electronic communication, such as emails, text messages, media advertisement, public service announcements, pre-recorded messages delivered via automatic telephone dialing systems, and electronic notices to public and private organizations. The proposed rule offers grocery store bulletin boards and neighborhood centers as examples of public places. The proposed rule explicitly reminds jurisdictions that publications must be accessible to people with disabilities and to people with limited English proficiency.
Compliance Periods
As previously noted, the regulation requires jurisdictions to use CDBG to meet any of the three “national objectives.” However, the rule does not specify a time period for meeting a national objective. CPD proposes requiring CDBG activities to meet a national objective within six years from the date of a jurisdiction’s initial drawdown of funds, or the length of the “period of performance,” whichever is shorter. The proposed rule would define “period of performance” for the first time; a jurisdiction must expend all the CDBG it received for a program year within six years, beginning on the date CPD approves a jurisdiction’s grant agreement and ending six years from that date.
Economic Development Activities
According to CPD, the primary purpose of the proposed rule changes is to make it easier for jurisdictions to promote the use of CDBG for economic development activities as well as the use of the Section 108 Loan Guarantee component of CDBG. CPD asserts that existing regulations are obstacles that prevent the use of CDBG for economic development activities. A presentation of the proposed economic development changes would require lengthy, detailed contextual explanations and is beyond the scope of this article, given NLIHC’s focus on housing available and accessible to extremely low-income people.
In general, for an economic development activity to meet a CDBG LMI national objective, it must meet the Creating or Retaining Jobs Test, meaning the activity is designed to create or retain jobs, at least 51% of which are held by or made available to LMI people [§208(a)(4), §483(b)(4)]. The existing regulations refine this test and provide means for making “presumption” of LMI benefit. Yet CPD asserts that documenting whether a job is held by or made available to an LMI person is a financial and administrative burden on jurisdictions. Therefore, the proposed changes seek to lessen the rigor for meeting the LMI jobs test, potentially making it easier to use CDBG for economic development activities that might fail the statute’s “primary objective” of principally benefiting low- and moderate-income people.
Read the Federal Register version of the proposed rule at: http://tinyurl.com/2wbzeaas
Find an easier-to-read advance version of the proposed rule at: http://tinyurl.com/2dryy2hb
More information about CDBG is on page 9-4 of NLIHC’s 2023 Advocates’ Guide.
More information about the Consolidated Plan on page 8-23 of NLIHC’s 2023 Advocates’ Guide.