HUD Releases Notice Guiding Use of $10 Billion in CDBG-DR

A HUD Exchange email on August 2 distributed an advance copy of the notice guiding states’ use of $10 billion in CDBG-DR funds intended to address unmet long-term disaster-related needs stemming from 2017 disasters. On February 9, 2018, Congress appropriated $28 billion in CDBG-DR. Of that amount, $16 billion is to be used to address unmet needs, $11 billion of which is to be allocated to states impacted by Hurricane Maria, with $2 billion of the $11 billion set aside for rebuilding the electrical systems of Puerto Rico and the U.S. Virgin Islands. The remaining $12 billion is set aside for mitigation projects.

On April 10, HUD announced $10 billion would be allocated for unmet needs, indicating how much would be available for each state. (For the purpose of the notice, Puerto Rico and the Virgin Islands are generally included in the term “state.”) The notice released on August 2 only applies to the $10 billion for unmet needs; a future notice will provide direction pertaining to mitigation funds and the electrical power systems in Puerto Rico and the Virgin Islands.

The top four key features of the notice are: 

  1. The public review and comment period is increased to 30 calendar days (up from 14).
  2. For multifamily housing, the required affordability period is changed from 20 years to:
    1. 15 years if CDBG-DR is used to rehabilitate or reconstruct a multifamily rental property that has eight or more units.
    2. 20 years if CDBG-DR is used to newly construct a multifamily rental property that has five or more units.
  3. There is no reduction in the requirement that 70% of the funds be used for activities that benefit low and moderate-income households, those with income at or less than 80% of the area median income.
  4. Because incomes in Puerto Rico are “unusually low,” HUD will increase the low and moderate-income thresholds for determining whether an activity benefits “low and moderate income” people. HUD will publish the new thresholds on the HUD Exchange website.

Additional Features

NLIHC will prepare a comprehensive description of select provisions of the August 2 notice by next week. A summary of additional features based on an initial review follows.

Much of the February 9, 2018 notice applies

The August 2 notice amends the Federal Register notice published on February 9, 2018 (termed the “Prior Notice” in the new notice) that directs the use of $7.4 billion in CDBG-DR funds appropriated by Congress on September 8, 2017 (see Memo, 2/26). Except as indicated in the new notice, the funds allocated under it are subject to the requirements of the Prior Notice.

A table in the August 2 notice lists how much is available to each state from the $7.4 billion and $10 billion allocations. The table also indicates amounts available for the first time to California for the 2017 wildfires, as well as to Georgia (severe storms in January 2017 and Hurricane Irma) and Missouri (severe storms in April and May 2017).

States only have to submit a Substantial Amendment to their Action Plan

States that received an allocation from the $7.4 billion appropriation (Florida, Puerto Rico, Texas, and the Virgin Islands) or local governments awarded funds from a state as a subgrantee (for example, Houston), do not have to draft a new Action Plan; rather, they only have to draft a Substantial Amendment to their existing Action Plan. The Substantial Amendment must be prominently posted on a grantee’s official website for not less than 30 calendar days for public review and comment. The Substantial Amendment must be submitted no later than 90 days after the notice is published in the Federal Register, or 90 days after a state’s initial Action Plan was approved in whole or in part, whichever is later.

Puerto Rico’s Substantial Amendment must be reviewed for consistency with the Commonwealth’s fiscal plan and its 12- and 24-month economic and disaster recovery plan.

Because California is receiving CDBG-DR for the 2017 wildfires for the first time, the state must draft a complete Action Plan and submit it to HUD for approval within 120 days from the date the notice is published in the Federal Register

Each grantee’s Action Plan must specify criteria for determining changes considered substantial. At a minimum, a Substantial Amendment is: a change in program benefit or eligibility criteria; the addition or deletion of an activity; or the dollar threshold of a reallocation of funds.

Affordability period for single-family home new construction

In addition to the altered affordability periods for multifamily rental housing mentioned at the beginning of this article, the notice also requires a five-year affordability period for newly constructed single-family housing. Grantees must develop and impose resale or recapture restrictions enforced through deed restrictions, covenants, or similar mechanisms. No affordability period is required for single-family housing rehabilitated or reconstructed with CDBG-DR.

Grantees must assess the cost-effectiveness of rehabilitation and reconstruction

Grantees must establish policies and procedures to assess the cost-effectiveness of proposed projects intended to assist households to rehabilitate or reconstruct homes using CDBG-DR from either the Prior Notice or the new notice. Grantees must have criteria for determining when the cost of rehabilitation or reconstruction will not be cost-effective compared to other means of assisting a property-owner, such as buyouts or acquiring property, or constructing area-wide protective infrastructure, instead of individual building mitigation, such as elevating an existing structure.

Allowing Puerto Rico and the Virgin Islands to use CDBG-DR to promote tourism

Puerto Rico and the Virgin Islands requested waivers to be able to use CDBG-DR for advertising and marketing to promote tourism in order to help rebuild their economies, both of which heavily rely on tourism. HUD has granted such waivers in the past and with this notice allows the Virgin Islands to use up to $5 million and Puerto Rico to use up to $15 million for tourism advertising and marketing. Puerto Rico also intends to use these funds to attract new businesses to generate jobs and tax revenues.

The August 2, 2018 advance version of the CDBG-DR notice is at: