Disaster Discourse: The Hagerty Blog


In June 2019, the US Department of Housing and Urban Development (HUD) released a Notice in the Federal Register (83 FR 28836) regarding changes to duplication of benefits and the treatment of Small Business Administration (SBA) loans. The change stipulates that for major disasters occurring in 2015, 2016, and 2017, grantees must perform a duplication of benefits analysis for eligible applicants (i.e., homeowners, businesses) applying to receive funds through the Community Development Block Grant-Disaster Recovery (CDBG-DR). The change will help ensure that applicants only receive assistance to cover any unmet need.

What is a duplication of benefits and how is it determined?

After a disaster, applicants may be eligible for a number of benefits, such as  FEMA Individual Household Assistance, personal insurance, and/or SBA low-interest loans. Applicants may apply for one or all of the available assistance to help bridge financial shortfalls and aid their recovery. A duplication of benefits occurs when an applicant (1) receives assistance from multiple sources intended for the same purpose or (2) the amount of assistance provided exceeds the total identified need.

To determine whether a duplication of benefits has occurred, the grantee (typically the state must:

  • Identify the total cost to rehabilitate or reconstruct a damaged home;
  • Verify the total amount of assistance received from FEMA, SBA, and other sources;
  • Calculate duplication of benefits by subtracting non-duplicative assistance from the total amount of assistance;
  • Reduce the total award by the amount of the duplication of benefits; and
  • Obtain an agreement from applicants to repay duplicative assistance.

What does not count as a duplication of benefits?

Total assistance does not include personal assets such as cash in a checking or savings account (excluding insurance payouts and disaster proceeds), retirement accounts, credit cards and lines of credit, in-kind donations (unless non-cash donations can reduce the total need), and private loans.

Assistance received that is intended for a purpose other than the assistance applied for does not count as duplication of benefits. For example, if an applicant applied to SBA for assistance with home repairs and they only received assistance from FEMA for rental assistance, there is no duplication of benefits because the assistance provided are not dedicated to meet the same identified need.

How will the duplication of benefits changes help homeowners with their recovery?

Under the new guidance, additional CDBG-DR assistance can be directed to the homeowner by eliminating restrictions on FEMA, SBA, or other subsidized loans. Specifically:

  • Short-term subsidized SBA loans used for eligible costs can be reimbursed with CDBG-DR funds.
  • Declined or canceled subsidized loans are not considered a duplication of benefits.
    • Declined loans: loans offered to an applicant by a lender, but turned down by the applicant. Loan documents are never signed or executed.
    • Canceled loans: loans that were accepted by an applicant wherein all or a portion of the loan amount was not distributed, and is no longer available to the applicant.

Eligibility for CDBG-DR assistance is income-based. As part of HUD’s National Objective, CDBG-DR funds are intentionally directed toward low to moderate income households (i.e., households with incomes equal to or less than 80 percent of the area mean income).

These legislative changes empower eligible households to use CDBG-DR funding  to pay down, or pay off, a subsidized loan from another source, such as FEMA or SBA. This allows subsidized loans to serve as gap financing between the time a subsidized loan is available and CDBG-DR funding is awarded—enabling low to moderate income households to rebuild their homes and return to their normal lives faster.

How does the modified legislation affect grantees?

These changes also enable grantees to amend their Action Plans to include a loan reimbursement program aimed at helping disaster-impacted residents.  Through consultation with local government and residents, the grantee can to decide how the new legislation is implemented and seek necessary waivers from the HUD Secretary. For example, a grantee could request a waiver allowing interest payments of the SBA’s loans to be reimbursed by CDBG-DR assistance or setting a minimum threshold of an individual program award. This is one of many steps for communities preparing for CDBG-DR programming – including the $1.5 billion recently announced to support for the major disasters declared in 2018.

Alexandra Wesley-Smith is a Senior Recovery Managing Associate at Hagerty supporting the City of Santa Rosa in its wildfire recovery. Prior to joining Hagerty, Alexandra worked in community and economic development for 20 years. She supported hurricane recovery efforts in Louisiana and Texas. She holds a Master of Urban and Regional Planning from the University of New Orleans. She now lives in the Russian River area of Northern California and enjoys exploring its diverse terrain with her dogs, Lola and Chip.  She does not miss the humidity of the deep south.