The United States (US) Department of Housing and Urban Development (HUD) issued a Federal Register Notice (Notice) on August 20, 2020, addressing a range of issues on the use of $5 billion of Community Development Block Grant (CDBG-CV) appropriated by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to account for costs arising from the COVID-19 pandemic. Pursuant to the CARES Act, HUD allocated an initial $2 billion to all Fiscal Year (FY) 2020 CDBG grantees using standard statutory formulas with an additional $1 billion directed solely to states, insular areas and the District of Columbia (DC). The Notice indicates that HUD will announce the allocation of the remaining $2 billion at an unspecified future time. To view CDBG-CV allocations click on the following link: All CARES Act Grants-Excel.
This Notice adds to the body of CDBG-CV material HUD has issued since early April. Many grantees have already filed amendments to existing action plans and have begun drawing upon their CDBG-CV funds, while other grantees have taken an alternative path to incorporate the funds into their pending FY 2020 action plans.
For the more than 1,200 CDBG local government entitlement grantees, this planning process has been straight forward and facilitated by CARES Act directives and regulatory waivers designed to speed the process. On the other hand, states have awaited the recent Federal Register Notice to gain some clarity on the use of CARES Act funds directed to them and the Notice confirms signals that HUD had been telegraphing over the prior months. Collectively, these steps should enhance the ability of states to direct CDBG resources to areas in need of assistance to address COVID-19 needs.
- Direct Action – The Notice permits states to carry out activities directly in all jurisdictions, including CDBG entitlement jurisdictions, as is generally the case for the use of CDBG disaster recovery funding. HUD’s rationale is that this step will help facilitate coordination of statewide and regional activities in response to COVID-19.
- Minimum Funding for Non-entitlement Jurisdictions – HUD is requiring that states set aside a minimum amount of funding for small communities that are not CDBG entitlement jurisdictions. The state-by-state minimum for this purpose is the amount received as the “non-entitlement” amount in the column labeled “04-02-2020 CDBG-CV1” in the above linked Excel file.
- Ability to Allocate to Entitlement Communities – Consistent with CARES Act language, states may also award CDBG-CV funds directly to Entitlement jurisdictions.
- Authorization for States to Work in Tribal Areas – States may use their CDBG-CV funds to carry out activities in tribal areas but must obtain the consent of the Indian tribe with jurisdiction over the tribal area. Conversely, states may also provide Indian tribes with funds as subrecipients.
- Increase in State Administrative and Technical Assistance (TA) Allowance – HUD has used its statutory waiver authority to increase the overall state administrative and TA cap from 3 to 7 percent (maximum split is 5 percent for admin and 2 percent for TA). Concurrently, HUD is waiving the statutory requirement for state matching amounts.
Other actions described by the Notice are also intended to facilitate the use of CDBG-CV funding for COVID-19 response. The Notice restates the CARES Act provision that removes the statutory limitation on public service expenditures for CDBG-CV as well as grantees’ FY 2019 and 2020 CDBG funds. HUD has used the Notice to extend the permissible term of emergency payments for rent, mortgages and utilities from three months to six months. HUD also made it slightly easier to qualify expenses as meeting CDBG national objective requirements through use of the urgent need criteria. Note that there is no change to the statutory requirement that at least 70 percent of a grantee’s funds CDBG-CV must benefit low- and moderate-income persons.
For economic development activities, HUD has provided relief by modifying public benefit criteria. Most notably, HUD is stating that when assistance is provided to businesses due to coronavirus-related disruption, public benefit is derived by stabilizing or sustaining businesses and assistance “may help to avoid complete economic collapse within the grantee’s jurisdiction.” Concurrently, HUD has temporarily increased both the per job CDBG investment cap to $85,000 and the goods and services investment cap to $1,700 per low- and moderate-income person benefitting.
When using CDBG-CV funds for economic development purposes, the Notice reminds grantees that they must “evaluate” such activities using HUD’s Guidelines and Objectives for Evaluating Project Costs and Financial Requirements.
An area of grantee concern that will warrant further HUD guidance relates to compliance with duplication of benefit (DoB) requirements. The CDBG-CV language in the CARES Act contains specific DoB language invoking both the Stafford Act and the Disaster Recovery Reform Act (DRRA). In brief, grantees must take care to avoid situations where a duplication of federal benefit may occur when providing assistance to an individual or entity. HUD skirts the issue by encouraging “each CDBG-CV grantee to become familiar with the range of available assistance and uses and apply its more flexible CDBG-CV assistance to unmet needs or to gaps with special attention to the coronavirus response, prevention, or preparation needs of Low-Middle Income (LMI) persons.” Many grantees have questions about exactly what the DoB standard will be in order to avoid potential audit findings and HUD will need to provide a more definitive response.
Stan Gimont is a Senior Advisor for Community Recovery with Hagerty. Stan joined Hagerty after 32 years of service with HUD. With Hagerty, Stan provides strategic advisory support focused on HUD Programs, housing issues, and long-term community recovery. From August 2016 through July 2019, Stan served as HUD’s Deputy Assistant Secretary for Grant Programs. In this role he provided management direction and oversight for all aspects of the CDBG Program, including long-term disaster recovery CDBG-DR, the HOME Investment Partnerships Program, the National Housing Trust Fund, as well as HUD’s environmental review responsibilities. From 2017 through 2019, his leadership helped to secure $40 billion in CDBG-DR funding in response to major disasters, such as hurricanes Harvey, Irma, and Maria. As Director of HUD’s Office of Block Grant Assistance from 2008-2016, Stan managed approximately $60 billion in federal funding to assist the nation’s communities in addressing housing, development, and disaster recovery needs. Among Stan’s notable achievements as Director is the implementation of the Neighborhood Stabilization Program in response to the 2008-2010 housing crisis, oversight of CDBG-DR funding for New Jersey and New York in response to Hurricane Sandy, and management of HUD’s National Disaster Resilience Competition in 2014-2015.