U.S. Department of Housing and Urban Development

Community Planning and Development

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Special Attention of:

**Notice**: CPD-07-08

All CPD Division Directors

All CDBG Grantees Issued: November 21, 2007

Expires: November 21, 2008

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SUBJECT: Use of Community Development Block Grant (CDBG) Program Funds
in Support of Housing

# Introduction

This notice describes ways in which grantees can use the CDBG program to
expand the development of decent, accessible, and affordable housing in
their communities. Many of these subjects are discussed further in the
Guide to National Objectives and Eligible Activities (the "Guide")
located on the web at
http://www.hud.gov/offices/cpd/communitydevelopment/library/deskguid.cfm.

This notice brings together ways to use CDBG funds for housing that are
supported in various sections of the CDBG regulations and the Guide.
These activities include but are not limited to the following:

-   Homeownership Assistance

-   Rehabilitation and Reconstruction

-   Conversion of Existing Structures for Housing

-   New Housing Construction and Related Activities

-   Tornado Safe Shelters

-   Housing Counseling

-   Fair Housing Activities

-   Housing Services and HOME Program Support

-   In Rem Housing

In all instances, a CDBG-assisted activity must meet one of three
national objectives: (1) benefiting low- and moderate-income persons,
(2) aiding in the prevention or elimination of slums or blight, or (3)
meeting a community development need having a particular urgency that a
community is unable to finance on its own. Activities may meet the
national objective of benefiting low- and moderate-income persons in one
of four ways: area benefit activities; limited clientele activities;
housing activities; and job creation or retention activities.
Housing-related activities will most often meet the low- and
moderate-income housing national objective at 24 CFR 570.208(a)(3) or 24
CFR 570.483(b)(3). Criteria for meeting a national objective are found
at 24 CFR 570.208 and 24 CFR 570.483 of the CDBG regulations. For the
purposes of this Notice, 24 CFR 570.208 refers to national objective
compliance for entitlement grantees, and 24 CFR 570.483 refers to
national objective compliance for the States. The Guide gives a
description of national objective requirements for eligible activities.

This Notice outlines eligible housing activities that may be assisted
with CDBG funds. Eligible CDBG-assisted activities are specified in
Title I of the Housing and Community Development Act (HCDA) of 1974, as
amended. Section 105(a) of the HCDA indicates that only those activities
described in Section 105(a) are eligible CDBG activities. For the
Entitlement program, the statutory language regarding eligibility is
implemented in 24 CFR Part 570, Subpart C. The State CDBG program does
not have similarly detailed regulations regarding eligible activities
(see 24 CFR 570.482), so eligible activities generally are determined by
reference to the language of Section 105(a). However, if the Entitlement
regulations have interpreted an activity to be eligible under the HCDA,
then a State may rely on that interpretation of eligibility in its CDBG
program.

In addition to using CDBG funds for the activities described in this
Notice, entitlement grantees and States in conjunction with
nonentitlement local governments may apply for Section 108 Loan
Guarantees to finance certain CDBG-eligible housing activities. The
final section of this Notice identifies the housing activities eligible
under the Section 108 program.

Grantees are encouraged to contact their field office CPD representative
to discuss this Notice in more detail.

# Homeownership Assistance

There are several ways to use CDBG funds for direct homeownership
activities.

-   Direct Homeowner Assistance. Title I of the Housing and Community
    Development Act (HCDA) of 1974 was amended by the Cranston-Gonzalez
    National Affordable Housing Act, which became law on November
    28, 1990. As a result, direct homeownership assistance was added as
    an eligible activity under Section 105(a) of the HCDA. Homeownership
    assistance is referenced at 24 CFR 570.201(n) of the regulations.
    This provision allows for direct assistance to facilitate and expand
    homeownership for low- and moderate-income households in accordance
    with Section 105(a). It is important to note, however, that the
    homeownership assistance provided under 24 CFR 570.201(n) is limited
    exclusively to meeting the low- and moderate-income housing national
    objective at 24 CFR 570.208(a)(3) or 24 CFR 570.483(b)(3). Under
    this authority, CDBG funds may be used to:

1.  Subsidize interest rates and mortgage principal amounts to make loan
    payments affordable, including the making of grants to reduce the
    effective interest rates charged on the loans. Low- or no-interest
    subordinate loans can also be used to reduce overall loan repayment
    amounts and thereby make the purchase price more affordable.

2.  Finance the cost of acquiring property already occupied by renter
    households at terms needed to make the purchase affordable.

3.  Pay all or part of the premium on behalf of the homebuyer for
    mortgage insurance required upfront by a private mortgagee.

4.  Pay any or all of the reasonable closing costs associated with the
    home purchase on behalf of the homebuyer.

5.  Pay up to 50 percent of the down payment required by the mortgagee
    for the purchase on behalf of the homebuyer.

-   Match Funding for Individual Development Accounts. Another way to
    assist a low- and moderate-income homebuyer is to use CDBG funds to
    provide match funding required by a Federal program providing funds
    to capitalize an Individual Development Account (IDA). IDAs are
    savings accounts established in the homebuyer's name, held at local
    financial institutions, and usually managed by a community
    organization. The homebuyer makes a contribution to their IDA
    account that is then matched with private and/or public resources.
    Under 24 CFR 570.201(g), CDBG funds can be used as the required
    match as long as the homebuyer qualifies as a low- and
    moderate-income household at the time CDBG assistance is provided.
    Additional information concerning the use of IDAs may be found in
    Notice CPD-01-12, Use of Community Development Block Grant Funds to
    Assist Individual Development Accounts.

-   Homeownership as a Public Service. Homeownership assistance in the
    form of downpayment assistance may also be eligible as a public
    service under 24 CFR 570.201(e). Under this provision, an amount
    greater than 50 percent of the required downpayment may be provided.
    However, the only low- and moderate-income national objective that
    homeownership assistance may meet is the housing national objective
    at 24 CFR 570.208(a)(3) and 24 CFR 570.483(b)(3), which generally
    provides that a single-unit residential structure must be occupied
    by a low- and moderate-income household.

-   For downpayment assistance to be provided as a public service to a
    non low- and moderate-income household, it must be provided by a
    qualified Community Based Development Organization \[CBDO, see 24
    CFR 570.204(c)\] and located in a Neighborhood Revitalization
    Strategy Area \[NRSA, see 24 CFR 91.215(g)\] or a Community
    Revitalization Strategy Area \[CRSA, see 24 CFR 91.315(g)\]. This is
    because in a NRSA the units for which assistance is obligated during
    a grantee's program year may be aggregated and treated as a single
    structure for purposes of determining compliance with the housing
    national objective; therefore, only 51 percent of the units in a
    NRSA need to be occupied by low- and moderate-income households to
    meet a national objective. Such activities by a CBDO can also be
    excluded from the 15 percent public service cap.

# Rehabilitation and Reconstruction

To support the preservation of affordable housing, CDBG funds may be
used to rehabilitate and reconstruct housing.

-   Rehabilitation. CDBG funds may be used in a variety of ways to
    rehabilitate publicly- and privately-owned buildings for residential
    purposes, including manufactured housing that is part of the
    community's permanent housing stock \[24 CFR 570.202\]. With CDBG
    funds providing a grant or a low-interest loan for rehabilitation,
    affordable housing can be maintained and improved without
    appreciably increasing an owner's or renter's housing costs.
    Assistance may also include refinancing, together with
    rehabilitation, which may have the effect of reducing monthly
    housing costs \[24 CFR 570.202(b)(3)\].

-   Use of Lump-Sum Accounts. For the purpose of financing the
    rehabilitation of residential properties (and subject to certain
    conditions), a grantee may draw as a single amount (lump sum) from
    its letter of credit to establish a rehabilitation loan fund with
    one or more lending institutions. These financial institutions must
    meet the requirements set forth in 24 CFR 570.513(b)(9) and enter
    into a lump-sum agreement that sets forth the benefits to the
    grantee. (See 24 CFR 570.513 or the Guide for details.) The fund may
    be used along with various financing mechanisms, including the
    making of grants, but only with the purpose of leveraging non-CDBG
    funds for rehabilitation of the same property. The lump-sum
    requirements limit the size of the drawdown and establish a time
    limit in which lending must take place. The requirements state that
    the lump-sum deposit must result in appropriate benefits in support
    of the grantee's rehabilitation program.

Under 24 CFR 570.202(b), the following are included as ways in which
CDBG funds may be used for housing rehabilitation:

1.  Direct loans and grants. Grantees may provide loans and/or grants to
    property owners for rehabilitation of residential dwelling units.

2.  Loan guarantees. Grantees may use CDBG funds as loan guarantees to
    encourage lending institutions to make loans available to homeowners
    for rehabilitation, to encourage them to lend in neighborhoods where
    they are not currently doing so, and to induce them to lend at more
    favorable rates. In guaranteeing loans, grantees may not deposit
    CDBG funds in the lending institution (unless it can be determined
    that without such a deposit the loans will not be made). Drawing
    funds from a letter of credit before such funds are needed to cover
    actual defaults must be supported by adequate documentation to
    demonstrate that no financial institutions in the area would
    participate in the lending program and accept a payment guarantee
    without having funds on deposit. The idea behind the guarantee
    provision is for the CDBG funds to be made available to the lender
    in the event the borrower defaults. If deposits are necessary,
    amounts must be limited to expected losses that should equal only a
    small percentage of the overall loan portfolio or amount loaned.

3.  Acquisition. CDBG funds may be used to provide assistance to
    individuals, for-profit entities, and nonprofit organizations to
    acquire property for the purpose of rehabilitating structures for
    use or resale for residential purposes.

4.  Refinancing. Grantees may make loans to refinance existing
    indebtedness secured by a property being rehabilitated with CDBG
    funds if such refinancing is determined by the grantee to be
    necessary or appropriate to achieve its community development
    objectives and to make rehabilitation affordable \[24 CFR
    570.202(b)(3)\]. The grantee's determination must be made in
    writing, as required at 24 CFR 570.200(e).

5.  Bonding. Grantees may pay, as part of rehabilitation services, the
    cost of a rehabilitation contractor's performance and payment
    bonding, as needed to carry out CDBG-assisted rehabilitation
    activities.

6.  Tools. CDBG funds may be used for the costs of acquiring tools to be
    lent to owners, tenants, or others who will use such tools to carry
    out rehabilitation.

7.  Water and Sewer. Grantees may pay the costs of connecting existing
    residential structures to water distribution lines or local sewer
    collection lines when it is done as part of the rehabilitation of
    the property. Similarly, the installation or replacement of a
    well-water system or septic waste-disposal system on private
    residential property is eligible as part of the rehabilitation cost
    of the dwelling \[24 CFR 570.202(b)(6)\].

8.  Removal of Architectural Barriers. Grantees may pay the costs to
    remove material and architectural barriers that restrict the
    mobility and accessibility of elderly and severely disabled persons
    to residential buildings and improvements that are eligible for
    rehabilitation under 24 CFR 570.202(a).

9.  Insurance. Grantees may pay for initial homeowner warranty premiums,
    hazard insurance premiums (except where assistance is provided in
    the form of a grant), and flood insurance premiums for properties
    covered by the Flood Disaster Protection Act of 1973, pursuant to 24
    CFR 570.605.

10. Safe Rooms. CDBG funds may be used to construct a safe room or
    storm-proof room for use as a tornado-safe shelter in a private home
    as a rehabilitation activity under 24 CFR 570.202.

-   Reconstruction. Reconstruction of housing became more readily
    eligible for CDBG assistance as a result of a legislative change
    under section 225 of the Omnibus Consolidated Rescissions and
    Appropriations Act of 1996. This change in Section 105(a)(4) of the
    Housing and Community Development Act of 1974, as amended, (the
    "HCDA") allows grantees to use CDBG funds for the reconstruction of
    properties. Although the CDBG regulations have not been amended to
    incorporate this change, it is available for use under the category
    of rehabilitation.

> As discussed in the Guide on page 2-83, reconstruction generally means
> the rebuilding of a structure on the same site in substantially the
> same manner. Grantees may reconstruct on the same site housing that is
> publicly or privately owned. Deviations from the original design are
> allowed for reasons of safety or if otherwise impractical. The number
> of dwelling units on a site may not be increased; but, the number of
> rooms per unit may be increased or decreased. Any decrease in the
> number of units on a site may require compliance with the one-for-one
> replacement of low-income dwelling units at 24 CFR 42.375.
> Reconstruction of residential structures also permits replacing an
> existing substandard unit of manufactured housing with a new or
> standard unit of housing, manufactured or otherwise.

[Conversion of Existing Structures for Housing]{.underline}

A community may increase its supply of housing by converting buildings
to housing units. Existing housing units may become more affordable when
grantees acquire those units and sell or lease them at reduced prices.
Grantees may use CDBG funds to finance conversions in the following
ways:

-   Renovation of Closed Buildings. The costs of converting existing
    non-residential structures to residential use is eligible as a
    rehabilitation activity \[24 CFR 570.202(e)\].

-   Acquisition for Rehabilitation. CDBG funds may be provided to
    private individuals, nonprofit organizations, and for-profit
    entities to acquire property for rehabilitation which is then used
    for residential housing \[24 CFR 570.202(b)(1)\].

-   Acquisition of Housing. Grantees and nonprofits may acquire housing
    units and either lease or sell them for residential purposes \[24
    CFR 570.201(a) and (b)\]. Manufactured homes may also be acquired
    for this purpose. As a general rule, newly constructed housing units
    may be acquired if the units will otherwise be available for rental
    or sale on the open market and to the extent that a grantee, prior
    to completing the construction, had not planned to use CDBG to
    assist the activity \[24 CFR 570.207(b)(3)\].

# New Housing Construction and Related Activities

Generally, the use of CDBG funds for new housing construction is
prohibited. However, there are two instances in which CDBG funds may be
used for new housing construction:

-   Construction by eligible Community-Based Development Organizations
    (CBDOs). The regulation at 24 CFR 570.204(a) allows for qualified
    CBDOs to use CDBG funds to construct housing. CBDOs are associations
    or corporations organized under State or local law to engage in
    community development activities primarily within an identified
    geographic area of operation. Organizations must meet the provisions
    of 24 CFR 570.204(c) in order to be an eligible CBDO. Two further
    requirements are imposed on CBDOs at 24 CFR 570.204(a):

1.  To receive CDBG assistance, eligible CBDOs must be undertaking one
    of three types of projects: (1) neighborhood revitalization, (2)
    community economic development, or (3) energy conservation; and

2.  A CBDO must carry out the project in is entirety. Although
    inexperienced CBDOs may need technical assistance from the grantee,
    the CBDO must actually conduct the management and implementation of
    the activity\
    \[24 CFR 570.204(a)(4)\].

-   Last resort housing. Under 24 CFR 42.1(a), grantees may construct
    housing of last resort (see 49 CFR 24.404). Grantees are limited to
    constructing housing for displacees of a CDBG-assisted activity,
    subject to the Uniform Relocation Act, when the project is prevented
    from proceeding because comparable replacement housing is not
    otherwise available \[24 CFR 570.207(b)(3)(i)\].

[Support of New Housing Construction]{.underline}

The use of CDBG funds in support of new housing construction is also
eligible under the following circumstances:

-   Acquisition. A grantee or nonprofit may acquire property and resell
    it to an affordable housing developer \[24 CFR 570.201(a) and (b)\].
    A CBDO may also acquire property for housing it will develop itself.

-   Clearance. Grantees may clear a site in preparation for housing \[24
    CFR 570.201(d)\].

-   Site improvements. Grantees can make public improvements on
    publicly-owned property \[24 CFR 570.201(c)\]. As examples, grantees
    can install water lines, sewer lines, and utility lines on public
    property in support of housing. Grantees may also install public
    improvements on privately-owned land, but only if they obtain an
    easement on the property before carrying out the improvements. The
    easement enables the grantee to carry out the improvements on what
    is considered publicly-owned property.

-   Street improvements. The construction or reconstruction of
    publicly-owned streets, bridges, and alleys is eligible as a public
    facilities and improvements activity \[24 CFR 570.201(c)\].

# Tornado-Safe Shelters for Residents of Manufactured Housing

Public Law 108-146, enacted December 3, 2003, otherwise known as the
Tornado Shelters Act, amended Title I of the HCDA of 1974 to make CDBG
eligible for the construction of tornado shelters in neighborhoods where
there are residents of manufactured housing.

Grantees can provide assistance to nonprofit and for-profit entities (as
loans or grants) for the purpose of constructing tornado-safe shelters.
The construction of tornado shelters may be carried out in neighborhoods
that may or may not contain a manufactured housing park, provided such a
neighborhood contains not less than 20 manufactured housing units and
the shelter is available to the manufactured housing residents.
Furthermore, a neighborhood or manufactured housing park that receives
assistance under this provision must meet the following criteria:

1.  Consist predominantly of low- and moderate-income persons;

2.  Be located in a state in which a tornado has occurred within the
    past three years;

3.  Have a warning siren in the neighborhood where the shelter will be
    located or, if the shelter is located in a manufactured housing
    park, within 1,500 feet of the park;

4.  Ensure the shelter is sufficient in size to accommodate all of the
    occupants of the manufactured housing units at the same time and be
    located in the neighborhood in which the shelter will be used; and

5.  Comply with the standards for construction as identified by the
    Federal Emergency Management Agency (FEMA) in Publication FEMA 361,
    Design and Construction Guidance for Community Shelters. This
    publication is available on FEMA's website at
    http://FEMA.gov/library/prepandprev.shtm#tornados.

The statute requires that shelter-assisted neighborhoods be comprised of
predominantly low- and moderate-income residents. A grantee must be able
to document that at least 51 percent of the residents of the tornado
shelter service area are low- and moderate-income persons. Grantees that
use an upper quartile percentage for area benefit activities will not be
able to do so under the Tornado Shelters Act provision.

Under certain circumstances, CDBG funds may be used to assist tornado
shelters under 24 CFR 570.201(c) (public facilities) or 24 CFR 570.202
(rehabilitation). The Tornado Shelters Act does not apply to either of
these eligibility categories; therefore such an activity would
ordinarily need to meet the national objective of benefiting low- and
moderate-income persons. A tornado-shelter public facility, constructed
on publicly-owned land that is near or within a neighborhood (or on an
easement), would need to meet the low- and moderate-income area benefit
national objective. In this instance, an exception grantee could use its
upper quartile percentage to meet the national objective.

# Housing Counseling

A community may support its efforts to expand affordable housing
opportunities by operating a housing counseling program. Such a program
provides information, advice, and assistance to homebuyers, homeowners,
and renters with the goal of preventing loan defaults, foreclosures, or
non-payment of rents. It is important to track performance against these
measures. These programs often complement local "bricks and mortar"
programs. If carried out as public services, these activities are
subject to the 15 percent (for most grantees) expenditure cap governing
public service activities.

The following are examples of housing counseling activities that may be
funded with CDBG as public service activities eligible under 24 CFR
570.201(e), provided a national objective is met:

-   Pre-purchase Housing Counseling. Grantees may fund, as a public
    service activity, counseling programs for those interested in
    purchasing a home. The counseling generally consists of information
    on financial responsibilities, budgeting, housing needs, housing
    quality, maintenance requirements, and other costs associated with a
    home purchase.

-   Homeownership Counseling. In a similar way, grantees may carry out
    homeownership counseling. Here, the emphasis is on financial
    management, debt management, and maintenance needs. Included are
    default counseling, foreclosure prevention counseling, and
    relocation counseling.

-   Renter Counseling. Grantees may provide counseling for delinquent
    renters, for tenants facing eviction, for landlord and tenant
    responsibilities, including repair and maintenance issues, and the
    availability of renter assistance.

-   Emergency Housing Counseling. Housing counseling may be provided for
    all employees and residents affected, or to be affected, by plant
    closings and/or acquisitions.

Housing counseling is also eligible as part of homeownership assistance
program carried out under 24 CFR 570.201(n). When housing counseling is
part of a homeownership program under this part of the regulations, it
is not subject to the public service cap.

# Fair Housing Activities

Communities may undertake fair housing activities with CDBG funds,
including actions to affirmatively further fair housing. These
activities are directed toward increasing housing choice and informing
the community about fair housing rights. Fair housing activities are
eligible as administrative activities (24 CFR 570.206), subject to the
20 percent planning and administration cap, but as an administrative and
planning activity, they do not have to meet a national objective.

The CDBG regulation at 24 CFR 570.904(c) sets out review criteria for
assessing a grantee's performance against its affirmatively furthering
fair housing responsibilities. The following are examples of fair
housing activities and of actions listed at 24 CFR 570.206(c) to
affirmatively further fair housing that may be supported by CDBG funds:

-   Outreach, Counseling, and Referral. CDBG funds may pay the costs of
    outreach, counseling, or referral services to assist persons seeking
    housing outside areas containing a high proportion of low-income
    persons.

-   Fair Housing Counseling. Grantees may fund fair housing counseling
    programs in the community. Such programs provide information on fair
    housing rights and on the availability of housing in a wide variety
    of locations, emphasizing housing choice.

-   Modification of Ordinances. CDBG funds may be used to pay the
    administrative costs of modifying local ordinances and/or land-use
    measures in the pursuit of housing opportunities.

-   Information Programs. Grantees may support training and education
    programs for real estate agents, housing managers, city officials,
    and others to increase knowledge of techniques for promoting
    economically and racially integrated housing. They may also carry
    out promotional activities to initiate housing proposals in areas
    outside those with a high proportion of lower-income persons.

-   Enforcement. Grantees may undertake efforts to improve the
    enforcement of fair housing laws and ordinances and in complaint
    resolution mechanisms.

-   Cooperation. As an administrative activity, grantees may enlist the
    participation of local real estate brokers and mortgage lenders in
    promoting open housing and in reviewing mortgage credit analysis and
    underwriting criteria to determine whether they may have an adverse
    impact on housing opportunities for minorities and women.

-   Testing. The use of testing may assist in the enforcement of fair
    housing laws, and in identifying the existence or extent of
    discriminatory housing practices in the community. Testing may
    include the use of testers to ensure that members of protected
    classes such as minorities, persons with disabilities, or families
    with children are not victims of housing discrimination and that
    there is full compliance with fair housing laws.

Fair housing counseling may be funded as an administrative activity
under 24 CFR 570.206(c) or also as a public service activity under 24
CFR 570.201(e), provided a national objective is met. Such eligible fair
housing activities would be subject to the 15 percent public service
cap.

# Housing Services and HOME Program Support

Section 105(a)(20) of the HCDA states that CDBG funds may be used to pay
for housing services in connection with activities assisted under Title
II of the Cranston-Gonzalez National Affordable Housing Act (the HOME
program). This includes housing services such as housing counseling in
connection with tenant-based rental assistance and affordable housing
programs, energy auditing, preparation of work specifications, loan
processing, inspections, tenant selection, management of tenant based
rental assistance, and other services related to assisting owners,
tenants, contractors, and other entities participating or seeking to
participate in housing projects assisted under the HOME program. This
provision is promulgated in the CDBG regulations at 570.201(k). (Please
note that the regulatory citation is outdated. The HCDA has been
amended, and housing services may now be found at Section 105(a)(20)
rather than 105(a)(21).)

Section 24 CFR 570.206 also provides that CDBG funds may be used to pay
for HOME program administration costs. However, grantees must ensure
that HOME administration costs paid with CDBG funds, together with
eligible CDBG administrative costs, do not exceed the 20 percent
administration cap imposed for the CDBG program.

CDBG funds may also be used to pay for activity delivery costs of an
affordable housing project assisted under the HOME program even if it is
not otherwise CDBG‑assisted. However, the activity must meet all CDBG
program requirements (eligibility, environmental review procedures, cost
principles outlined in OMB Circulars, and national objective
compliance).

# In Rem Housing

Section 105(a)(23) of the HCDA provides a separate category of
eligibility under the CDBG program regarding the provision of assistance
to housing units acquired through tax foreclosure proceedings (In Rem).
(In Rem is Latin for "against the thing" and is a proceeding against the
property directly, rather than against a person, and may be used for
taking land and property for nonpayment of taxes.) Specifically, this
provision authorizes the use of CDBG for essential repairs and payment
of operating expenses needed to maintain the habitability of housing
units acquired through tax foreclosure proceedings in order to prevent
abandonment and deterioration of such housing in primarily low- and
moderate-income neighborhoods.

Although the In Rem provision has not been incorporated into the CDBG
regulations, it is available to grantees for use. Since these expenses
are statutorily limited to housing located in primarily low- and
moderate-income neighborhoods, the national objective for In Rem
activities may be benefit to low- and moderate-income persons on an area
benefit basis or the grantee may claim such activities as qualifying
under the slum/blight national objective if the criteria to meet this
objective can be met. The In Rem improvements must be in a primarily
low- and moderate-income area, even if the slum/blight national
objective is used. The In Rem provision covers only those repairs that
are "essential." Activities more extensive than "essential repairs"
would need to qualify as "rehabilitation" activities under 24 CFR
570.202.

# National Objectives for Activities in Support of Housing

[Homeownership Assistance and IDAs for Homeownership
Assistance]{.underline} -- Since homeownership assistance and IDA
activities involve acquisition for housing, the low- and moderate-income
housing national objective applies under these eligibility categories.
This is the only national objective that may be used for homeownership
assistance and IDA activities \[24 CFR 570.208(a)(3); 24 CFR
570.483(b)(3)\].

[Rehabilitation, Reconstruction, New Housing Construction, Conversion of
Existing Structures for Housing]{.underline} -- For single unit housing,
100 percent of the units assisted must be occupied by low- and
moderate-income households. For a multi-unit structure, 51 percent of
the units must be occupied by low- and moderate-income households. (For
duplexes, one of the two units must be occupied by low- and
moderate-income households.) For rental properties, where two or more
rental buildings are located on the same or contiguous properties and
the buildings are under common ownership and management, the grouped
buildings may be considered a single structure, thus providing that not
less than 51 percent of all such units must be occupied by low- and
moderate-income households \[24 CFR 570.208(a)(3); 24 CFR
570.483(b)(3)\]; .

[Exceptions]{.underline} -- The regulations provide for several
exceptions to the requirements noted above. First, if the housing units
are located in a Neighborhood Revitalization Strategy Area (NRSA) or
Community Revitalization Strategy Area (CRSA), or if the housing
activity is carried out by a Community Development Financial Institution
(CDFI), units in single- and/or multi-unit buildings for which funds are
obligated in a program year may be aggregated and considered a single
structure, and thus only 51 percent of the units must be occupied by
low- and moderate-income households. \[24 CFR 570.208(d)(5)(ii); 24 CFR
570.483(e)(4)(ii) and 570.483(e) (5)(ii).\] Second, if the assistance is
for an eligible activity to reduce the development costs of new
construction of a multifamily, non-elderly rental housing project, less
than 51 percent of the units may be occupied by low-and moderate-income
households as follows:

-   not less than 20 percent of the units will be occupied by low- and
    moderate-income households at affordable rents, and

    -   the proportion of the total cost of developing the project to be
        supported by CDBG funds is no greater than the proportion of
        units in the project that will be occupied by low- and
        moderate-income households. \[24 CFR 570.208(a)(3)(i); 24 CFR
        570.483(b)(3)(i).\]

Because the above methodologies are not required by statute, HUD may
consider a waiver to permit the use of another methodology to meet the
housing national objective of benefiting low- and moderate-income
persons. In the case of mixed-income projects needing another
methodology, grantees should consult with their field office CPD
representatives in preparing a request for a waiver.

[Housing Counseling]{.underline} -- For housing counseling activities
carried out as eligible homeownership assistance activities under 24 CFR
570.201(n), the national objective is the low- and moderate-income
housing national objective activities \[24 CFR 570.208(a)(3); 24 CFR
570.483(b)(3)\]. However, housing counseling may also be carried out as
a public service activity in accordance with 24 CFR 570.201(e) or 24 CFR
570.482(d). As a public service activity, the national objective can be
benefit to low- and moderate-income persons on an area basis \[24 CFR
570.208(a)(1); 570.483(b)(1)\] or benefit to low- and moderate-income
persons of a limited clientele \[24 CFR 570.208(a)(2)(i)(A), (B) or (C);
24 CFR 570.483(b)(2)(ii)(A), (B), or (C)\].

[Fair Housing Activities]{.underline} -- Fair housing activities carried
out under the authority of 24 CFR 570.206(c) are not required to meet a
national objective \[24 CFR 570.200(a)(3)(i)\].

[Housing Services]{.underline} -- For housing services carried out under
the authority of

24 CFR 570.201(k), the low- and moderate-income housing national
objective categories \[24 CFR 570.208(a)(3); 24 CFR 570.483(b)(3)\] may
be used if the housing units served are HOME-assisted and the
affordability requirements of 24 CFR 92.252 or 92.254 under the HOME
program are met.

[In Rem]{.underline} -- For this activity, a national objective of
benefit to low- and moderate-income persons on an area basis can be used
\[24 CFR 570.208(a)(1); 570.483(b)(1)\]. In Rem activities may also
qualify under the slum/blight national objective in circumstances where
it can be demonstrated that the abatement factors meet the criteria for
addressing the noted conditions that caused the slums and blight \[24
CFR 570.208(b)(1) or (2)\]; 24 CFR 570.483(c)(1) or (2).

[Tornado Safe Shelters]{.underline} -- A tornado safe shelter that is
constructed under the authority of Public Law 108-146, enacted December
3, 2003, must meet the low- and moderate-income area benefit national
objective \[24 CFR 570.208(a)(1); 570.483(b)(1)\]. In this instance, an
exception grantee cannot use its upper quartile percentage to meet the
national objective. A tornado-shelter that is constructed as a public
facility under the authority of 24 CFR 570.201(c) would need to meet the
low- and moderate-income area benefit national objective \[24 CFR
570.208(a)(1); 570.483(b)(1)\]. In this instance, an exception grantee
could use its upper quartile percentage to meet the national objective.
A tornado safe shelter that is carried out as a rehabilitation activity
must meet the low- and moderate-income housing national objective \[24
CFR 570.208(a)(3); 24 CFR 570.483(b)(3)\].

[Section 108 Loan Guarantee Financing]{.underline}

In addition to using CDBG funds for the activities described above,
entitlement grantees and States in conjunction with nonentitlement local
governments may apply for Section 108 Loan Guarantees to finance certain
CDBG-eligible housing activities. Guaranteed loan funds may be used for
any of the housing rehabilitation activities that are eligible under 24
CFR 570.202 \[24 CFR 570.703(h)\]. Guaranteed loan funds may also be
provided to CBDOs to carry out community economic development projects
eligible under 24 CFR 570.204 and in that context may, in limited
circumstances, be used to fund new housing construction \[24 CFR
570.703(i)(2)\]. Other eligible uses of guaranteed loan funds to support
housing development (rehabilitation or new construction) include,
subject to certain limitations: acquisition \[24 CFR 570.703(a)\];
clearance \[24 CFR 570.703(e)\]; site preparation, improvements, and
utilities \[24 CFR 570.703(f)\]; and public facilities, public streets,
sidewalks, and other site improvements and public utilities \[24 CFR
570.703(l)\].

For inquiries relating to entitlement grantees, contact the Entitlement
Communities Division at (202) 708-1577; for those relating to
non-entitlement communities and States, contact the State and Small
Cities Division at (202) 708-1322. Section 108 inquiries may be directed
to the Financial Management Division at (202) 708-1871. For general
information on the Section 108 program or to discuss potential
applications for loan guarantee assistance, grantees are encouraged to
contact their field office CPD representatives.

Attachments

### Selected CDBG Funded Activities Related to Housing

**Entitlement Program**

+----------------------------------------+-----------------------------+
| # Eligible Activity:                   | **Entitlement               |
|                                        | Regulations:**              |
|                                        |                             |
|                                        | **24 CFR 570.201-.206**     |
+----------------------------------------+-----------------------------+
| Acquisition of Real Property           | 570.201(a)                  |
+----------------------------------------+-----------------------------+
| Counseling -- Homeowner & Tenant       | 570.201(e), 570.201(n),     |
|                                        | 570.201(k)                  |
+----------------------------------------+-----------------------------+
| Homeownership Assistance               | 570.201(n)                  |
+----------------------------------------+-----------------------------+
| Public Facilities and Improvements     | 570.201(c)                  |
+----------------------------------------+-----------------------------+
| Renovation of Closed Buildings         | 570.202(e)                  |
+----------------------------------------+-----------------------------+
| Housing Services/HOME Program Support  | 570.201(k),                 |
|                                        | 570.206(h)(i)(2)            |
+----------------------------------------+-----------------------------+
| Acquisition/Disposition of Property    | 570.201(a),(b)              |
| for Housing                            |                             |
+----------------------------------------+-----------------------------+
| Acquisition for Rehabilitation         | 570.202(b)(1)               |
+----------------------------------------+-----------------------------+
| Rehabilitation                         | 570.202                     |
+----------------------------------------+-----------------------------+
| Rehab -- Loan Guarantee                | 570.202(b)                  |
+----------------------------------------+-----------------------------+
| Rehab -- Subsidies/Reduction of        | 570.202(f)                  |
| Lead-Based Paint                       |                             |
+----------------------------------------+-----------------------------+
| Reconstruction                         | Will be codified under      |
|                                        | 570.202                     |
+----------------------------------------+-----------------------------+
| Construction                           | 570.204                     |
+----------------------------------------+-----------------------------+
| Match-IDA Homeownership Assistance     | 570.201(g,) 570.201(n)      |
+----------------------------------------+-----------------------------+
| In Rem                                 | Not in regulations; Section |
|                                        | 105(a)(23) of the HCDA      |
+----------------------------------------+-----------------------------+
| Fair Housing                           | 570.201(e), 570.206(c)      |
+----------------------------------------+-----------------------------+
| Tornado Safe Shelters                  | 570.201(c), 570.202         |
+----------------------------------------+-----------------------------+
| Homeownership Activities carried out   | 570.204(c), 570.201(e)      |
| by Community-Based Development         |                             |
| Organizations                          |                             |
+----------------------------------------+-----------------------------+
| Site Preparation (Public Improvements  | 570.201(c)(d)               |
| and Clearance)                         |                             |
+----------------------------------------+-----------------------------+

List of CDBG grantee contacts:

<http://www.hud.gov/offices/cpd/communitydevelopment/programs/contacts/index.cfm>

List of community planning and development office contacts:

<http://www.hud.gov/offices/cpd/about/local/index.cfm>

List of nationwide housing counseling agencies:

<http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm>

List of homebuying programs by state:

<http://www.hud.gov/buying/localbuying.cfm>

### Selected CDBG Funded Activities Related to Housing

**State Program**

+------------------------------------------+---------------------------+
| # Eligible Activity:                     | **State Program: HCDA     |
|                                          | 105(a)**                  |
+------------------------------------------+---------------------------+
| Acquisition of Real Property             | 105(a)(1)                 |
+------------------------------------------+---------------------------+
| Homebuyer Counseling                     | 105(a)(8), (20)           |
+------------------------------------------+---------------------------+
| Homebuyer Financial Assistance           | 105(a)(24)\*              |
+------------------------------------------+---------------------------+
| Public Facilities and Improvements       | 105(a)(2)                 |
+------------------------------------------+---------------------------+
| Acquisition for Rehabilitation           | 105(a)(4) 105(a)(1)(B)    |
|                                          | 105(a)(14)(A)             |
+------------------------------------------+---------------------------+
| Rehabilitation                           | 105(a)(4)                 |
+------------------------------------------+---------------------------+
| Rehabilitation -- Loan Guarantee         | 105(a)(4), (14)           |
+------------------------------------------+---------------------------+
| Rehabilitation -- Subsidies/ Reductions  | 105(a)(4)                 |
+------------------------------------------+---------------------------+
| Rehabilitation -- Lump Sum Accounts      | 105(a)(4)                 |
|                                          |                           |
|                                          | 24 CFR 570.513, 104(h)    |
+------------------------------------------+---------------------------+
| Reconstruction                           | 105(a)(4)                 |
+------------------------------------------+---------------------------+
| Construction                             | 105(a)(4)                 |
+------------------------------------------+---------------------------+
| Match-IDA Homeownership Assistance       | 105(a)(9), (24)           |
+------------------------------------------+---------------------------+
| Fair Housing                             | 105(a)(8), (13)           |
+------------------------------------------+---------------------------+
| Homeownership Activities carried out by  | 105(a)(15)                |
| Community-Based Development              |                           |
| Organizations                            |                           |
+------------------------------------------+---------------------------+
| In Rem                                   | 105(a)(23)                |
+------------------------------------------+---------------------------+
| Technical Assistance                     | 105(a)(19)                |
+------------------------------------------+---------------------------+
| Tornado Shelter                          | 105(a)(1), (2)            |
|                                          | 105(a)(24)\*              |
+------------------------------------------+---------------------------+
| Site Preparation (Public Improvements    | 105(a)(2), (4)            |
| and Clearance)                           |                           |
+------------------------------------------+---------------------------+
| Lead-Based Paint                         | 105(a)(25)                |
+------------------------------------------+---------------------------+

\*There are two paragraph 104(a)(24)s in the HCDA. The first paragraph
(24) concerns homeownership assistance; the second paragraph (24)
concerns tornado shelter.

List of CDBG grantee contacts:

<http://www.hud.gov/offices/cpd/communitydevelopment/programs/contacts/index.cfm>

List of homebuying programs by state:

<http://www.hud.gov/buying/localbuying.cfm>