# Presentation: 084871

## COMMUNITY DEVELOPMENT

**COMMUNITY DEVELOPMENT**
**BLOCK GRANT PROGRAM**

## APPLICABILITY FACTORSCDBG

-  Section 110 of the Housing and Community Development Act of 1974 determines the extent to which Davis-Bacon wage rates apply to construction activities.It states in part: 

## APPLICABILITY FACTORSCDBG

-  ..._provided_, that this section shall apply to the rehabilitation of residential property only if such property is designed for residential use for eight or more families....

## APPLICABILITY FACTORSCDBG

**HUD has a Dept of Justice ruling stating that the requirement for payment of prevailing wages only when federal funds are used to pay for “construction work.”**

## APPLICABILITY FACTORSCDBG

**Remember that Construction financing may not only be limited to the act of paying for the construction work directly. **
**-using CDBG assistance to pay the interest charged or ****- using CDBG funds to provide permanent financing (take-out loan)**** **

## APPLICABILITY FACTORSCDBG

**However, because of the DOJ ruling, the following CDBG activities or “soft costs” ****do not**** trigger Davis-bacon requirements:**
** ****Real property acquisition,**
** ****Purchase of equipment, (13% ruling regarding installation expenses)**
** ****Architectural and engineering fees**
** ****Other services (legal, accounting, construction management), and**

**Notes:**
In this case, we are concerned with this part of that quotation....

## APPLICABILITY FACTORSCDBG

**Other non-construction items (furniture, business licenses, real estate taxes, and/or tenant allowances for such items).**

**Notes:**
In this case, we are concerned with this part of that quotation....

## APPLICABILITY FACTORSCDBG

- Examples of “non residential” properties that may have less than 8 units, but trigger DBRA include:
- Conversion of a single family residence for transient use
- Conversion of a 2 unit townhouse for commercial use as a doctor’s offices

**Notes:**
Lets look at a couple of important points...

## APPLICABILITY FACTORSCDBG REVIEW

- ...Construction work financed “in whole or in part...”
- Construction work over $2,000
- Unit thresholds may also apply (8+ units)
- Soft costs generally _do not_ trigger DB
- Volunteers:  excluded  (defined later)

## HOME PROGRAM

**HOME PROGRAM**

## APPLICABILITY FACTORSHOME

- The standard for coverage is “***assisted”*** not ***financed*** . . .
- “Any **contract** for the construction of affordable housing with 12 or more units assisted with [HOME] funds . . .”

## APPLICABILITY FACTORSHOME

- Once triggered, DB requirements apply to the entire project, and (Refer to HUD Labor Relations Letter No. LR-96-02)
- Sweat equity participation is exempt

## VOLUNTEERSNational Affordable Housing Act ‘90

- Performs services voluntarily
- Do not receive compensation for services
- May be paid expenses, reasonable benefits, nominal fee for services
- Not otherwise employed at any time on the construction work

**[Section (b)’s]**

## YOUTHBUILD PROGRAM

- Youthbuild trainees performing work under CDBG-funded construction activity –
- Minimum wages
- If working on Public housing units – requires HUD determined wages

## Public Housing

-  Hope IV – Sec 12(a)
- Davis-Bacon rates apply to PH construction
- Preemption

## PUBLIC HOUSING APPLICABILITY FACTORS

**PUBLIC HOUSING APPLICABILITY FACTORS**

## PUBLIC HOUSINGOverview

- Construction, rehabilitation and maintenance work are covered by some type of prevailing wage requirement . . . .

- For properties subject to an Annual Contributions Contract,

## DEVELOPMENT

- U.S. Housing Act of 1937, Sec. 12(a)
- mandates the payment of Davis-Bacon prevailing wage rates to all laborers and mechanics engaged in the **development** of public housing

## DEVELOPMENT WORK IS

- Reconstruction;
- A substantial improvement in the quality or kind of original equipment and materials;
- Or remodeling that alters the nature or type of housing units falls within the purview of "development" (24 CFR 968.203).

## New construction

**New construction**

## A substantial improvement in the quality or kind of original equipment and materials 

## MAINTENANCE

- U.S. Housing Act of 1937, Sec. 12(a)
- Payment of not less than prevailing wages, as determined or adopted by HUD, to all maintenance laborers and mechanics engaged in the **operation** of low-income housing/affordable housing projects

## MAINTENANCE

- work that involves the regular upkeep and preservation of buildings, grounds, and facilities.

## NON-ROUTINE MAINTENANCE

- work items that ordinarily would be performed on a regular basis in the course of upkeep of a property
- but have become substantial in scope because they have been put off

## NON-ROUTINE MAINTENANCE

- and that involve expenditures that would otherwise materially distort the level trend of maintenance expenses.
- replacement of equipment and materials rendered unsatisfactory because of normal wear and tear by items of substantially the same kind

## PUBLIC HOUSINGSUMMARY

- Davis-Bacon
- 	Development & rehabilitation work
- HUD-Determined Non-Routine Maintenance
- 	Non-routine work, as defined in Labor Relations Letter LR 93-01
- HUD-Determined Maintenance
- 	Routine, day-to-day maintenance of units

## PUBLIC HOUSING

_**Applicability & Source of Funds**_
- The source of funding has no bearing on the applicability of prevailing wage requirements
- Insurance proceeds
- Grant or foundation funds
- City or State funding
- And more . . .

## PUBLIC HOUSINGExclusions from HUD-Determined requirements

- Periodic inspections or testing of equipment
- Testing for lead-based paint
- Installation, service or maintenance of leased equipment, fixtures or appliances
- Inspections, maintenance or service on equipment or fixtures owned by a utility