1746 Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 91, 570, and 1003 

[Docket No. FR–6148–P–01] 

RIN 2506–AC52 

Submission for Community 

Development Block Grant Program, 

Consolidated Plans, and Indian 

Community Development Block Grant 

Program Changes 

AGENCY: Office of Assistant Secretary for 

Community Planning and Development 

and Office of Assistant Secretary for 

Public and Indian Housing, HUD. 

ACTION: Proposed rule. 

SUMMARY: HUD is proposing to revise 

the Community Development Block 

Grant (CDBG) and related Section 108 

loan guarantee program regulations to 

make it easier for recipients to promote 

economic development and recovery in 

low- and moderate-income communities 

and support investments in underserved 

areas. This proposed rule also would 

revise provisions related to 

Consolidated Plan and citizen 

participation requirements for the CDBG 

program and institute quarterly 

reporting to improve performance with 

respect to timeliness. HUD is also 

proposing to make certain 

corresponding changes to the Indian 

Community Development Block Grant 

(ICDBG) program regulations to align 

the ICDBG program with the revisions 

being made to the CDBG program 

regulations. 

DATES: Comments are due by March 11, 

2024. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this rule. Communications must refer to 

the above docket number and title. 

There are two (2) methods for 

submitting public comments. All 

submissions must refer to the above 

docket number and title. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street SW, Room 10276, 

Washington, DC 20410–0500. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission of comments 

allows the commenter maximum time to 

prepare and submit a comment, ensures 

timely receipt by HUD, and enables 

HUD to make them immediately 

available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov website can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that website to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. 

No Facsimile Comments. Facsimile 

(Fax) comments are not acceptable. 

Public Inspection of Public 

Comments. All comments and 

communications properly submitted to 

HUD will be available for public 

inspection and copying between 8 a.m. 

and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at (202) 708– 

3055 (this is not a toll-free number). 

HUD welcomes and is prepared to 

receive calls from individuals who are 

deaf or hard of hearing, as well as 

individuals with speech or 

communication disabilities. To learn 

more about how to make an accessible 

telephone call, please visit https://

www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

Copies of all comments submitted are 

available for inspection and 

downloading at http://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Jessie Handforth Kome, Director, Office 

of Block Grant Assistance, Room 7282, 

U.S. Department of Housing and Urban 

Development, 451 7th Street SW, 

Washington, DC 20410; telephone (202) 

708–3587 (this is not a toll-free number) 

for the CDBG and Section 108 loan 

programs. Heidi Frechette, Deputy 

Assistant Secretary for Native American 

Programs, Room 4108 U.S. Department 

of Housing and Urban Development, 

451 7th Street SW, Washington, DC 

20410; telephone (202) 402–6321 (this is 

not a toll-free number) for the ICDBG 

program. HUD welcomes and is 

prepared to receive calls from 

individuals who are deaf or hard of 

hearing, as well as individuals with 

speech or communication disabilities. 

To learn more about how to make an 

accessible telephone call, please visit 

https://www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

Title I of the Housing and Community 

Development Act of 1974 (42 U.S.C. 

5301–5320) (hereinafter ‘‘the Act’’) 

establishes the CDBG and 

complementary Section 108 loan 

guarantee (Section 108) programs, and 

the ICDBG program. HUD’s regulations 

implementing: (1) the Consolidated Plan 

and citizen participation requirements 

governing the CDBG program are 

located at 24 CFR part 91, entitled, 

‘‘Consolidated Submissions for 

Community Planning and Development 

Programs;’’ (2) the CDBG program are 

located at 24 CFR part 570, entitled 

‘‘Community Development Block 

Grants;’’ and (3) the Section 108 

program are located at 24 CFR 570 

subpart M, entitled ‘‘Loan Guarantees.’’ 

The Consolidated Plan regulations were 

promulgated in 1994 and 1995 (60 FR 

1878 and 60 FR 1943; January 5, 1994, 

and January 5, 1995, respectively), and 

amended HUD’s existing regulations to 

replace the then-current Comprehensive 

Housing Affordability Strategies with a 

rule that combined into a single 

consolidated submission the planning 

and application aspects of, among 

others, the CDBG program. The 

Consolidated Plan regulations reflected 

HUD’s view that the purpose of the 

Consolidated Plan submission is to 

enable States and localities to examine 

their needs and design ways to address 

those needs that are appropriate to their 

circumstances. The ICDBG program 

regulations, which are located at 24 CFR 

part 1003, entitled ‘‘Community 

Development Block Grants for Indian 

Tribes and Alaska Native Villages,’’ 

were promulgated in 1996 (61 FR 40084, 

July 31, 1996), and set forth the 

requirements and procedures for 

awarding CDBG funds to Indian Tribes. 

II. Background 

The CDBG and Section 108 Programs 

The CDBG program and its loan 

guarantee component, the Section 108 

program, are some of the most potent 

Federal tools for local governments to 

assist community and economic 

development. State and local 

governments nationwide—each State, 

more than 1,200 cities and counties, the 

District of Columbia, Puerto Rico, and 

four U.S. territories—rely on annual 

formula CDBG funds to develop 

meaningful projects and provide 

essential services that create 

sustainable, healthy, and prosperous 

communities for primarily low- and 

moderate-income persons. The 

programs’ unique flexibility allows 

grantees to use CDBG funds, as well as 

Section 108 guaranteed loan proceeds 


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Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Proposed Rules 1747 

leveraged from their CDBG allocations, 

for projects and services that meet each 

community’s needs. As a grantee 

develops strategies for addressing its 

needs, however, it generally evaluates 

the viability of activities that it wishes 

to include in its program. It may, for 

example, decide that it wants to invest 

in an underserved area that it has 

determined to be a food desert. This 

investment could take the form of a loan 

to a business that would agree to 

construct a food store to serve residents 

of that area. Such assistance to a 

business would be subject to the CDBG 

national objectives criteria and public 

benefit standards. However, HUD has 

not substantively updated the national 

objectives criteria and public benefit 

standards for economic development 

activities carried out with CDBG, 

ICDBG, and Section 108 funds for over 

twenty years. Changes over time in 

market conditions, inflation, and 

evolving community development 

practices have effectively limited the 

types of activities grantees could carry 

out. As a consequence, the grantee’s 

plans could be short-circuited by the 

inability or unwillingness of a business 

to comply with the current 

requirements. 

The limitations under the current 

regulations have thus deprived grantees 

of viable alternatives when developing 

programs that would best address their 

needs, and in some cases prevented 

communities from using CDBG funds to 

stimulate potentially transformative 

economic revitalization outcomes. By 

removing the impediments and 

disincentives to the use of CDBG funds 

for economic development activities, 

the proposed changes could result in a 

greater proportion of available CDBG 

funds being used for economic 

development. It does not follow, 

however, that spending more on 

economic development must result in 

less spending on other activities, 

because the additional economic 

development spending could be funded 

with loans guaranteed under the Section 

108 program. For example, if a grantee 

wants to undertake an economic 

development activity but also wishes to 

carry out another activity, e.g., housing 

rehabilitation, it could use Section 108 

as the funding source for the economic 

development activity and its CDBG 

allocation for the other activity. If 

relatively more CDBG funds are 

expended for economic development 

purposes, however, it must be presumed 

that such increase is the result of 

grantees having determined that the 

higher spending level is necessary and 

prioritized to address their local 

community and economic development 

needs. 

The ICDBG Program 

Under the ICDBG program, HUD 

provides competitive grants annually to 

Indian Tribes to carry out eligible 

activities. The program regulations 

largely mirror the CDBG program 

regulations. 

Lessons Learned From the COVID–19 

Pandemic 

HUD and CDBG grantees experienced 

an unusual opportunity to employ new 

program policies before making them 

part of the CDBG program’s regulatory 

canon. The COVID–19 pandemic 

created a historical economic crisis 

resulting in the closure of small 

businesses, significant job loss, and 

other economic hardship with notable 

disparities in underserved communities. 

These exposed and exacerbated impacts 

and inequities that largely affected 

underserved persons and communities 

across the United States, particularly 

among low-income and underserved 

populations who were already 

economically marginalized and lacked 

housing security. Historically 

marginalized communities of color, 

particularly those in racially or 

ethnically concentrated areas of poverty, 

disproportionately experienced 

disinvestment and have been denied 

economic opportunities. In 2020, HUD 

oversaw the Community Development 

Block Grant CARES Act (CDBG–CV) 

program to provide grants to States, 

insular areas, and local governments to 

prevent, prepare for, and respond to the 

spread of COVID–19. Lessons learned 

from the quick deployment of CDBG–CV 

accelerated the grantees’ and HUD’s 

understanding of needed program 

improvements. 

The insights gleaned from the CDBG– 

CV Program informed this important but 

routine opportunity to update CDBG 

and ICDBG regulations to introduce pretested flexibilities, mainly related to 

economic development activities; is 

responsive to feedback from HUD 

communities; and is informed by the 

implementation of CDBG and ICDBG 

over the past several decades. The new 

regulatory flexibilities implemented 

with $5 billion in CDBG–CV for 

communities revealed longstanding 

hindrances to long-term economic 

growth, particularly for low- and 

moderate-income persons. 

The flexibilities, waivers and 

alternative requirements introduced 

through CDBG–CV for Economic 

Development Activities enabled 

grantees to move quickly to help small 

businesses, particularly for underserved 

communities while retaining sufficient 

regulatory controls to ensure program 

benefit is planned and delivered 

compliantly. This Proposed Rule 

enables the Federal Government to 

continue bolstering economic recovery 

through job creation while addressing 

economic inequities, by, for example, 

strengthening small businesses and 

investing in enduring job opportunities 

in underserved communities. On 

January 20, 2021, the President issued 

Executive Order 13985, Advancing 

Racial Equity and Support for 

Underserved Communities Through the 

Federal Government (86 FR 7009), and 

in February 2023, the President issued 

Executive Order 14091, Further 

Advancing Racial Equity and Support 

for Underserved Communities Through 

the Federal Government (88 FR 10825), 

both which call for a whole-ofgovernment effort to advance racial 

equity and support underserved 

communities. Further, through 

Executive Order 14002, Economic Relief 

Related to the COVID–19 Pandemic (86 

FR 7229), issued on January 22, 2021, 

the President directed Federal agencies 

to use their full resources to address the 

economic crisis, specifically to reduce 

unnecessary barriers and improve 

coordination among programs funded 

by the Federal Government. The 

approach seeks to create opportunities 

for the improvement of communities 

that have been historically underserved. 

III. This Proposed Rule 

Consistent with Executive Orders 

13985, 14002, and 14091 and in 

response to changed market conditions, 

HUD seeks to provide authority that 

would allow CDBG grantees and Section 

108 borrowers (hereinafter referred to 

collectively as ‘‘recipients’’) to 

implement funding more effectively and 

efficiently in their communities. 

The proposed changes also would 

enhance the CDBG program’s goal of 

primarily benefitting low- and 

moderate-income (‘‘LMI’’) persons while 

removing obstacles that prevent the use 

of the program in targeted areas and for 

economic development activities. The 

proposed changes will not have any 

impact on the allocation of CDBG funds 

among recipients. The changes would 

particularly benefit underserved 

communities, including historically 

marginalized communities of color 

experiencing disproportionate 

disinvestment and denial of economic 

opportunities. 

The proposed rule also aims to 

improve data collection to measure 

effectiveness and improve program 

outcomes through more effective use of 

CDBG funds, while ensuring CDBG and 


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1748 Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Proposed Rules 

1As the term ‘‘CDBG funds’’ is defined at § 570.3 

to include Section 108 guaranteed loan funds, 

references to use of ‘‘CDBG’’ funds or ‘‘CDBG’’- 

assisted activities in this preamble also applies to 

Section 108 guaranteed loan funds unless otherwise 

noted. 2An assisted business receives CDBG and/or 

Section 108 guaranteed loan funds from a recipient 

to carry out an eligible activity, and must comply 

with CDBG and/or Section 108 requirements. 

3This preamble divides the discussion of 

proposed changes to § 570.208 into multiple 

sections. In this ‘‘Targeting Resources Towards 

Communities with the Greatest Need’’ section, the 

preamble discusses proposed changes to 

§§ 570.208(a)(4) and (b) and 570.483(b)(4) and (c) 

because the proposed changes affect primarily 

economic development activities. 

4 24 CFR part 570 Subpart C—Eligible Activities 

(§§ 570.200–570.210) applies to CDBG entitlement 

recipients and Section 108 borrowers. 

5 24 CFR part 570 Subpart I—State Community 

Development Block Grant Program (§§ 570.480– 

570.497) applies to States, nonentitlement public 

entities receiving Section 108 guaranteed loan 

funds assistance, and units of general local 

government in a State’s nonentitlement areas that 

receive CDBG funds. 

6Nonentitlement public entities receiving Section 

108 guaranteed loan funds may be subject to 24 CFR 

570.480 through 24 CFR 570.497. 

7 24 CFR part 570, subpart I—State Community 

Development Block Grant Program (§§ 570.480– 

570.497) applies to States, Section 108 borrowers, 

and units of general local government that receive 

CDBG funds. 

Section 108 recipients use funds 

efficiently and in a timely manner to 

benefit their communities. The 

proposed rule would change national 

objectives criteria to remove 

impediments to carrying out economic 

development activities, update the 

public benefit standards to allow CDBG 

and Section 108 recipients greater 

flexibility in undertaking economic 

development activities, and incorporate 

several changes to eligible activities 

under the CDBG and Section 108 

programs. The proposed rule would also 

simplify regulations to encourage CDBG 

and Section 108 recipients to invest 

CDBG funds 1 in underserved 

communities. 

Further, the proposed rule would 

make corresponding changes to the 

ICDBG regulations in part 1003, where 

appropriate, to ensure that the CDBG 

and ICDBG regulations continue to 

[align. Finally, the proposed rule would 

remove outdated provisions and make 

technical corrections. 

The proposed rule could result in 

incentivizing investment in 

communities by streamlining and 

improving mechanisms for greater 

flexibility of funds to flow to 

economically distressed communities 

while signaling the Federal 

Government’s willingness to support 

these investments. These investments 

would enable communities to 

encourage, build, and expand activities 

that revitalize communities. 

A. Targeting Resources Towards 

Communities With the Greatest Need 

HUD wants CDBG and Section 108 

recipients to make greater use of CDBG 

funds in economically distressed 

communities, particularly those 

designated through other Federal or 

State programs. The proposed rule 

addresses aspects of 24 CFR part 570 

that HUD considers to be unnecessarily 

cumbersome to economic development 

activities and otherwise proposes to 

revise or add additional flexibility for 

CDBG and Section 108 recipients in 

facilitating economic development. The 

proposed rule would make it easier for 

CDBG and Section 108 recipients to 

carry out job creation and retention 

activities while reducing recordkeeping 

burdens on CDBG and Section 108 

recipients and assisted businesses 2

alike. HUD has re-envisioned the public 

benefit standard and proposes to 

simultaneously remove disincentives for 

economic development, add flexibility 

in demonstrating public benefit, and 

update standards to reflect current and 

future market conditions. HUD believes 

these proposed changes would provide 

CDBG and Section 108 recipients with 

a greater ability to support business 

development and assist States and local 

governments in bolstering job creation. 

National Objectives Criteria 3

HUD’s regulations at §§ 570.208,4

570.483,5 and 1003.208 provide the 

criteria for determining whether a 

CDBG-, Section 108–,6 or ICDBGassisted activity complies with one or 

more of the national objectives. CDBG 

recipients must use at least 70 percent 

of their CDBG funds for activities that 

benefit LMI persons. An activity may 

meet the LMI national objective through 

providing benefit to residents of a 

particular geographic area, serving a 

limited clientele, supporting housing 

activities, or creating or retaining 

permanent jobs. Additionally, CDBG 

and Section 108 recipients may meet a 

national objective by using funds for 

activities that aid in the prevention or 

elimination of slums or blight or that 

meet an urgent community development 

need. However, the current criteria, 

including presumptions, are 

unnecessarily complicated and outdated 

and can impose substantial burdens on 

prospective CDBG and Section 108 

recipients and assisted businesses. 

Similarly, the regulations for activities 

that assist in the prevention or 

elimination of slums or blight restrict 

the ability to use CDBG funds for certain 

types of activities in such areas. HUD 

therefore proposes the following 

changes. 

Low- and Moderate-Income Criteria— 

Creating or Retaining Jobs 

The most widely used national 

objective for economic development 

activities under the CDBG program is 

the creation or retention of permanent 

jobs where at least 51 percent of those 

jobs, computed on a full-time equivalent 

basis, involve the employment of LMI 

persons. To demonstrate compliance 

with the LMI job creation/retention 

national objective (§§ 570.208(a)(4), 

570.483(b)(4), and 1003.208(d)), the 

activity must be designed to create or 

retain jobs where at least 51 percent of 

those jobs are held by or made available 

to LMI persons. For the retention of 

jobs, the recipient must also 

demonstrate that the jobs would be lost 

without CDBG assistance, and the jobs 

are known to be held by LMI persons 

and/or the job(s) can reasonably be 

expected to turn over within the 

following two years and that steps will 

be taken to ensure that the job(s) will be 

filled by or made available to LMI 

persons upon turnover. The primary 

CDBG-assisted activity that uses these 

national objectives criteria is a special 

economic development activity carried 

out under § 570.203 for Entitlement 

Communities and activities under 

section 105(a)(17) of the Act by units of 

general local government in a State’s 

nonentitlement areas.7 These criteria 

may also be met by other CDBG-assisted 

activities, such as assistance to 

microenterprises under § 570.201(o) or 

§ 570.483(c)(1). 

Based on programmatic experience, 

documenting whether a job is held by or 

made available to an LMI person can 

present a financial and administrative 

burden on recipients due to the data 

that recipients must gather and collect 

from assisted businesses. To help 

alleviate this burden, HUD is proposing 

to make changes to the presumptions 

provided in current §§ 570.208(a)(4)(iv), 

570.483(b)(4)(iv), and 1003.208(d) (with 

references to, respectively, 

§§ 570.208(a)(4)(v) and 570.483(b)(4)(v)) 

to add a presumption based on the 

location of an assisted business. 

Revising the criteria for the presumption 

would significantly clarify the standards 

for recipients and encourage greater use 

of CDBG and ICDBG funds for job 

creation and retention activities in LMI 

areas. 

The proposed revised regulations 

accomplish these goals by: (1) 

standardizing the presumptive poverty 


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8Census tract poverty rate of 20 percent. 

9HUD chooses to use ACS data which provides 

poverty rates determined by Census Bureau data 

provided by HUD. This data set includes linkages 

between HUD’s administrative records and a range 

of information, spanning race to employment status. 

This enables HUD to use a more cost-effective 

approach to match its data assets. 

10These regulations implement the anti-pirating 

provisions in section 105(h) of the HCDA, added in 

1998. 

rate with the same standard as was 

generally required to designate areas as 

economically distressed 8 (2) requiring 

recipients to use poverty rates based on 

American Community Survey 9 (ACS) 

data, instead of only from the most 

recently available decennial census; and 

(3) removing the higher poverty 

requirement for central business 

districts, which is not required by 

statute; this will encourage investments 

in economically distressed 

communities, particularly with central 

business districts that serve as hubs of 

economic activity. Further, other 

proposed revisions to the LMI jobs 

national objective would improve 

readability and remove references to 

outdated programs. 

Question for comment #1: Would the 

proposed revised presumption 

encourage recipients to increase their 

use of funds for economic development 

activities? Would the reduced burden 

on businesses be a significant or 

decisive factor in encouraging them to 

use CDBG funds for projects in 

underserved communities? What is the 

anticipated effect of eliminating the 

higher poverty requirement and the 

other poverty-related policies on private 

business investment in communities 

that lack access to opportunity? What 

are the trade-offs between reaching more 

areas and having less targeting if the 

neighborhood poverty threshold is 

reduced from 30 percent to 20 percent? 

What other incentives could CDBG 

recipients establish that would 

encourage investment in communities, 

including historically marginalized 

communities of color, that have 

historically not received CDBG-funded 

investment or that experience relatively 

low private sector investment? How 

might HUD better encourage economic 

development in underserved 

communities, including historically 

marginalized communities of color, who 

have had disproportionately 

experienced disinvestment and have 

been denied economic opportunities? 

Modifying Prohibition on Assisting 

Relocation 

HUD proposes to revise the definition 

of labor market area (LMA) to allow 

CDBG grantees and Section 108 

recipients more flexibility in providing 

assistance to relocating businesses. 

Currently, §§ 570.210(a) (for CDBG 

entitlement recipients) and 570.482(h) 

(for States) prohibit grantees from 

directly assisting businesses that 

relocate from one LMA to another if the 

relocation is likely to result in a 

significant loss of employment in the 

LMA from which the relocation occurs. 

Sections 570.210(b)(2) and 

570.482(h)(2)(ii) also prevent 

communities from combining 

metropolitan LMAs or metropolitan 

LMAs with non-metropolitan LMAs so 

that they can provide assistance to a 

business that relocates within a 

(combined) LMA. This revision leaves 

the prohibition intact but provides 

CDBG and Section 108 recipients with 

greater flexibility (through revisions of 

§§ 570.210(b)(2) and 570.482(h)(2)(ii) 10

allowing combination of LMAs) to stay 

in compliance with requirements. 

While the prohibition in 

§§ 570.210(b)(2) and 570.482(h)(2)(ii) is 

intended to prevent communities from 

using CDBG funds to ‘‘shift’’ jobs from 

other communities, it has on balance 

made it unnecessarily difficult for 

grantees to provide assistance to 

businesses even when relocation would 

not necessarily cause job losses in 

another community. The definition of 

LMA (as defined by the Bureau of Labor 

Statistics) has changed multiple times 

since HUD instituted the prohibition in 

2006, the boundaries of LMAs have 

changed, and some communities have 

fallen outside the definitions of both 

metropolitan and non-metropolitan 

LMAs. Further, logistics and supply 

chain changes and developmental 

changes across communities could 

allow businesses to retain jobs within a 

newly defined LMA within commuting 

distance of the old location (thus not 

poaching jobs from another 

community). 

For example, a business with a 

processing plant in a metropolitan LMA 

received a code enforcement violation 

that required the business to either 

expand the plant to remedy the 

violation or relocate. Since the business 

was in a denser metropolitan area, it did 

not have the space to expand the plant. 

The business identified a location 

within commuting distance of the plant 

in an adjacent non-metropolitan LMA. 

The State CDBG grantee wanted to 

provide assistance through the nonentitlement unit of general local 

government to the business as part of 

the relocation but was prohibited by 

§ 570.482(h)(1) because the relocation 

would have resulted in job loss in the 

metropolitan LMA from which the 

relocation would have occurred. The 

business could not find other assistance 

to relocate the plant, and as a result had 

to close the plant and terminate the jobs 

at the plant. 

Therefore, HUD proposes to allow 

grantees to combine a metropolitan 

LMA and a non-metropolitan LMA if 

the relocation is necessary for business 

reasons such as code enforcement 

compliance, or expansion. This would 

allow CDBG grantees to provide 

assistance to businesses for relocation 

for valid business reasons while still 

preventing communities from poaching 

jobs from nearby communities. 

Prevention or Elimination of Slums or 

Blight 

HUD also proposes to revise the 

criteria for activities that address slums 

and blight on an area basis. Some of the 

criteria for activities to address slums or 

blight on an area basis are subjective 

and difficult for HUD to verify and 

monitor. The proposed revisions to 

§§ 570.208(b)(1)(ii) and 570.483(c)(1)(ii) 

would allow the recipient to determine 

the type of objectively verifiable data 

that demonstrates that the area is 

experiencing physical or economic 

distress, such as abandoned properties 

and properties with known or suspected 

environmental contamination. The 

proposed rule also would update 

recordkeeping requirements for this 

revision at § 570.506(b)(8)(ii). 

For activities that address slums or 

blight on a spot basis, the proposed 

revisions at §§ 570.208(b)(2) and 

570.483(c)(2) would remove the 

requirement that rehabilitation activities 

be limited to eliminating conditions 

detrimental to public health and safety. 

HUD has interpreted ‘‘detrimental to 

public health and safety’’ to mean that 

the condition must pose a threat to the 

general public. This requirement 

presents a major hurdle for recipients 

seeking to address slums and blight in 

their communities because it limits 

rehabilitation activities that recipients 

can carry out. 

For example, a recent Section 108 

applicant sought to redevelop a blighted 

former hotel into a modern mixed-use 

commercial and residential 

development; the project required 

extensive environmental remediation. 

However, the requirement that 

rehabilitation activities eliminate 

conditions detrimental to public health 

and safety prevented the applicant from 

allocating CDBG funds toward uses of 

the project because the conditions were 

contained within the blighted site and 

therefore did not pose a threat to the 

general public. Although the applicant 

was eventually able to allocate CDBG 


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11Such as, for example, evidence that might be 

brought to HUD’s attention based on audits or HUD 

monitoring. 

12This approach was pioneered in collaboration 

with the State of New York after 9/11/2001 and 

honed further in 2006 after Katrina with the five 

Gulf Coast States. It has remained in continuous use 

in CDBG–DR and CDBG–CV and reduced burden 

substantially for businesses and the grantee while 

enabling sufficient documentation to support 

conclusions that at least 51 percent of jobs created 

or retained are LMI. (It is key to note that 100 

percent is not the goal here.) Despite multiple OIG 

audits reviewing these programs, no findings have 

emerged bearing on issues with this approach. 

Given the track record, the main program has 

probably been overly conservative in not adopting 

this approach sooner. 

funds to meet the criteria, it was 

unnecessarily difficult, and the 

restriction threatened to prevent the 

applicant from being able to fill the 

project’s financing gap with Section 108 

funds. 

Question for comment #2: Relative to 

current requirements, would the 

proposed revision encourage recipients 

to carry out activities in underserved 

and blighted communities and therefore 

allow recipients to assist economic 

development in areas most in need of 

jobs and economic revitalization? If the 

proposed revision does not encourage 

recipients to carry out activities in 

underserved and blighted communities, 

please explain why and share possible 

alternative standards that might more 

effectively balance HUD’s goal of 

enabling recipients broader flexibility 

with using funds for remediation while 

still ensuring funds are allocated in a 

manner that broadly benefits the general 

public. 

Documentation of National Objectives 

Criteria Compliance—Creation or 

Retention of Jobs § 570.506 

Section 570.506 (for entitlement 

CDBG and Section 108 recipients) 

requires each recipient to establish and 

maintain records sufficient to enable 

HUD to determine whether the recipient 

has met applicable requirements, 

including whether activities meet the 

criteria for national objectives at 

§ 570.208. Recipients may meet those 

criteria by carrying out activities (e.g., 

economic development activities) that 

benefit LMI persons based on the 

creation or retention of jobs. The 

recipient must maintain information on 

the size and annual income of the 

person’s family, except for activities 

presumed to benefit LMI persons based 

upon the census tract where the person 

resides or in which a business is 

located. Currently, this information is 

gathered primarily by the assisted 

business from employees and their 

family members. HUD does not 

prescribe methods for documenting LMI 

status, so they will vary by grantee (as 

to the information it requires the 

business to collect) and by business 

(ranging from self-certification to 

externally provided information). 

The proposed rule would make two 

changes to the documentation 

requirements at § 570.506 to reduce the 

burden on businesses in documenting 

jobs held by or made available to LMI 

persons. First, HUD proposes to clarify 

that the recipient, instead of the assisted 

business, may collect information 

regarding the size and annual income of 

the person’s family to document 

compliance with the national objective 

for economic development activities 

(HUD notes that the recipient may still 

choose to require that the assisted 

business collect the data if it prefers). 

Second, HUD proposes to allow the 

recipient to substitute records (such as, 

for example, a certification by the 

assisted business) showing the annual 

wages or salary of the job claimed to be 

held by an LMI person in lieu of 

maintaining records of the person’s 

family size and income to reduce the 

information collection burden. Absent 

evidence to the contrary,11 HUD will 

consider a job applicant/taker incomequalified if the annual wages or salary 

of the job is at or under the HUDestablished income limit for a oneperson family. HUD already provides 

similar options to CDBG-Disaster 

Recovery (CDBG–DR) grantees.12

As an example of how this would 

change how potential LMI jobs are 

evaluated, under HUD’s current policy 

if an assisted business employed an 

individual at an LMI-eligible wage, but 

that individual lived in a family with 

multiple incomes that, in total, 

exceeded the LMI-eligibility threshold, 

then the recipient would not be able to 

claim that the individual was in an LMIcreated or retained job. However, under 

our proposal, a recipient would now be 

able to demonstrate eligibility simply 

through examining the income provided 

by the job instead of the income 

received by the job-holder’s family. As 

a result, the assisted business would 

now be able to claim this individual was 

in an LMI-created or retained job. HUD 

notes that while this may, on the 

margins, result in certain jobs being 

newly identified as LMI, overall HUD 

expects this change will substantially 

reduce burden on documenting these 

jobs while broadly still identifying the 

same set of jobs. Moreover, working at 

the business/position level has the 

added advantage for auditors of 

allowing cross checking with State labor 

databases, which may allow for 

improved oversight. 

This clarification and alternative 

method would streamline the 

documentation process, reduce the 

burden on assisted businesses, and 

remove a disincentive to use CDBG 

funds for job creation and retention 

activities. Presently, the burden of 

collecting information on family income 

often falls on the businesses assisted 

with CDBG funds. Recipients are 

typically more willing and better 

equipped than the assisted businesses to 

collect information regarding the size 

and annual income of the person’s 

family. This burden operates as a 

disincentive to many businesses that 

would otherwise be willing to partner 

with recipients to carry out job creation 

and retention activities. 

Other entities that receive funding 

from CDBG recipients to carry out 

activities, such as non-profit 

subrecipients, are typically viewed as 

‘‘standing in the shoes of the grantee’’ 

and, as such, are required to fulfill the 

responsibilities that would otherwise 

belong to the grantee. Businesses, on the 

other hand, are not subrecipients and 

typically are inexperienced in executing 

the functions required of a grantee or a 

subrecipient, such as collecting income 

data on family members (i.e., nonemployees). Because a business lacks 

such experience, it often views itself as 

ill-equipped to perform those functions 

and is more likely to decline 

participation in economic development 

projects. The changes to the 

documentation requirements for 

economic development activities 

address the unique status of businesses 

in the CDBG program’s compliance 

framework and increase the likelihood 

that grantees can successfully 

implement community and economic 

development strategies. 

Question for comment #3: Are the 

proposed changes to the regulations, 

such as simplifying recordkeeping 

requirements, enough of an incentive for 

recipients to use CDBG funds for 

economic development activities? 

Would the reduced burden on 

businesses encourage them to carry out 

economic development projects with 

CDBG funds in underserved 

communities? Because most grantees 

provide one-time assistance (such as a 

loan or grant) to each assisted business 

and because the wage for the job to be 

filled must be sufficient to allow the 

business to attract and retain the 

employee it needs, HUD does not 

anticipate this provision will produce 

any wage pressures. However, would 

the proposed change to substitute wage 

information for records of family size 

and income incentivize employers to 

keep wages at or below LMI levels in 


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13For recipients under subpart I, § 570.482(f) 

applies to activities pursuant to sections 105(a)(14), 

(15), and (17), and certain activities eligible under 

section 105(a)(2) of the Act. 

order to qualify for assistance? Are there 

alternative ways that might HUD better 

encourage economic development in 

underserved communities, including 

historically marginalized communities 

of color, particularly racially or 

ethnically concentrated areas of poverty, 

who have disproportionately 

experienced disinvestment and have 

been denied economic opportunities? 

Special Economic Development 

Activities § 570.203 

Section 570.203 governs the use of 

CDBG funds for special economic 

development activities and includes an 

illustrative list of eligible forms of 

assistance to private for-profit 

businesses. Section 570.203(b) already 

lists forms of support by which 

recipients can provide assistance to 

private, for-profit businesses where the 

assistance is appropriate to carry out an 

economic development project. HUD 

has previously interpreted this 

provision to allow CDBG assistance to 

New Markets Tax Credit (NMTC) 

investment vehicles. The proposed 

revisions would explicitly allow 

recipients to provide assistance to an 

economic development project through 

a for-profit entity that passes the funds 

through a financing mechanism (e.g., 

Qualified Opportunity Funds and 

NMTC investment vehicles). This 

clarification would make clear that such 

assistance through a financing 

mechanism is not limited to NMTC 

investment vehicles and is eligible 

under § 570.203(b). Many economic 

development activities are carried out in 

conjunction with other forms of 

assistance and Federal tax benefits that 

provide additional sources of financing 

for economic development, particularly 

in LMI areas. HUD wants to facilitate 

the use of CDBG funds by recipients to 

fill financing gaps that cannot be met by 

other sources and launch critical 

economic development projects, 

particularly in underserved 

communities with a history of 

disinvestment, by eliminating the time 

to seek additional clarification from 

HUD on activity eligibility for 

individual projects to streamline the 

process for use of CDBG funds. 

HUD proposes to clarify at 

§ 570.203(c) the types of eligible job 

training or employment services. 

Currently, to be eligible as an economic 

development service under § 570.203(c), 

the job training or employment support 

services must be provided to or involve 

specific job positions resulting from the 

assistance being provided. HUD has 

discovered numerous situations in 

which grantees have provided CDBG 

funds for general employment readiness 

programs (such as interviewing skills or 

resume-writing classes) and attempted 

to categorize such classes as economic 

development services. To be eligible 

economic development services, the 

beneficiaries must either have been 

selected for or be under active 

consideration for specific job positions. 

If the individuals are not receiving 

training for specific positions at a 

specific business, general employment 

readiness programs or trainings for 

individuals in career fields are eligible 

only as public service activities or, in 

limited cases, as part of a § 570.204 

community economic development 

project carried out by a CommunityBased Development Organization. 

HUD notes that it is not proposing any 

changes that would expand 

microenterprise assistance under 

§ 570.203. Section 570.201(o) of the 

Code of Federal Regulations and section 

105(a)(22) of the Act provide thorough 

avenues for CDBG grantees to assist 

microenterprise activities; likewise, 

sufficient authority currently exists for 

Section 108 borrowers to assist many 

microenterprise activities through 

economic development activities 

authorized under § 570.203(b). 

Public Benefit Standards § 570.209 

Section 570.209 contains guidelines 

and standards for carrying out economic 

development activities under § 570.203 

and, in some instances, § 570.204.13 The 

recipient is responsible for ensuring that 

at least a minimum level of public 

benefit is obtained from the expenditure 

of CDBG funds. HUD has discretion in 

identifying and determining the nature 

of the public benefit and their standards 

for measuring their acceptability. The 

changes proposed for the public benefit 

standards are based on feedback and 

experiences of recipients for the past 

thirty years. The public benefit 

standards set forth the types of public 

benefit that will be recognized and the 

minimum level of each that must be 

obtained for the amount of CDBG funds 

used. CDBG recipients must meet 

standards for their aggregated activities 

during the program year as well as for 

each individual activity. The current 

regulations provide two options for 

meeting the aggregate and individual 

standards: creating or retaining 

permanent jobs or providing goods or 

services to LMI residents of the area 

served by the activity. For activities 

addressing public benefit through 

creation/retention of jobs, the maximum 

amount of CDBG/Section 108 assistance 

per full-time equivalent (‘‘FTE’’) job for 

activities in the aggregate is $35,000; for 

individual activities, the maximum is 

$50,000. For activities providing goods 

or services to residents of an area (e.g., 

grocery stores, laundromats, food banks, 

pantry items, drug stories), the 

maximum amount of CDBG/Section 108 

assistance per LMI person served for 

activities in the aggregate is $350; for 

individual activities, the maximum is 

$1,000. 

HUD established these standards in 

1995 as required by section 806(a) of the 

Housing and Community Development 

Act of 1992 (the ‘‘1992 Act’’) (Pub. L. 

102–550, 106 Stat. 3672). This provision 

of the 1992 Act required HUD to 

establish by regulation guidelines to 

assist CDBG recipients to evaluate and 

select economic development activities 

for assistance with CDBG funds. 

Subsequent inflation has resulted in 

CDBG funds no longer supporting the 

same proportion of the costs of creating 

and retaining jobs as they did when 

HUD created the standards. This 

precludes recipients from using CDBG 

funds for some economic development 

activities and has made recipients 

increasingly less able to feasibly 

implement economic development 

activities. For example, in program year 

2012, approximately $238 million in 

CDBG funds were used to support 

almost 2,000 economic development 

activities, whereas, by 2022, only $69 

million in CDBG funds were used to 

support about 1,100 economic 

development activities. Further, HUD 

believes the two options do not provide 

recipients enough flexibility in 

demonstrating a public benefit. 

The proposed changes re-envision the 

public benefit standards for economic 

development activities and would allow 

recipients to better support business 

development, stimulate job growth, and 

provide needed goods and services to 

LMI persons. HUD can facilitate 

economic development while 

simultaneously furthering the purpose 

of the 1992 Act through the following 

proposed reforms to the public benefit 

standards: (1) eliminating the aggregate 

standard; (2) raising the individual 

standard to $100,00 per full-time 

equivalent, permanent job created or 

retained and $2,000 per LMI person to 

whom goods or services are provided by 

the activity; (3) adding an alternative 

standard which HUD must approve in 

writing whereby recipients can 

demonstrate that the activity would 

create a significant public benefit 

despite not meeting the jobs or services 

standards (such as being part of a hazard 

mitigation and climate change resilience 


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strategy for an LMI area, supporting 

critical infrastructure, or meeting a 

community benefit defined or described 

in the requirements governing another 

Federal program); and (4) providing 

Section 108 applicants the option to 

allow HUD to calculate the cost of an 

economic development activity on a net 

present value basis to more accurately 

reflect the lower cost of an activity 

funded with a loan (which generates a 

return of the original CDBG outlay) 

versus an activity that involves a grant 

or other form of subsidy. 

First, HUD’s proposal to eliminate the 

aggregate standard at §§ 570.209(b)(1) 

and 570.482(f)(2) stems from the 

disincentive it has created to use CDBG 

funds for economic development and 

because it is burdensome beyond any 

observed benefit. (The Public Benefit 

Standards are applied to the average of 

the expenditures for the activities 

funded over a 12-month period.) In 

particular, recipients with low-volume 

economic development programs 

effectively apply the aggregate standards 

to individual activities in an effort to 

reduce the risk of failing to comply. In 

other words, the original intention to an 

aggregate standard was to give 

recipients flexibility to occasionally 

target activities that were more costly. 

That flexibility has not worked out in 

practice. 

For example, a grantee may identify a 

high-impact project at the beginning of 

its program year that would create one 

job per $50,000 of CDBG assistance; 

however, local market conditions could 

make it difficult to predict how many 

other economic development activities 

would be assisted and how many jobs 

would be created. Faced with this 

uncertainty, the grantee may hesitate to 

provide funds to the high-impact project 

for fear of not meeting the aggregate 

standard. This scenario reflects how the 

aggregate standard restricts the ability of 

recipients to leverage CDBG funds for 

high-impact investments in their 

communities, particularly through 

Section 108 loan guarantees, because 

providing funds at the maximum level 

of the individual standard for one 

activity would require funding other 

economic development activities at 

public benefit levels significantly below 

the aggregate standard. 

Additionally, the number of 

exceptions from the aggregate standard 

creates confusion for borrowers in 

planning their economic development 

programs, making the standard overly 

burdensome. (See current 

§§ 570.209(b)(2)(v)(A) through (N) and 

570.482(f)(3)(v)(A) through (N)). 

Second, HUD proposes to raise the 

dollar thresholds at 

§§ 570.209(b)(3)(i)(A) and (B) and 

570.482(f)(4)(i)(A) and (B) for the 

individual standard. Maintaining the 

current standards would continue to 

hinder recipients’ ability to use CDBG 

funds for future economic development 

activities and limit recipients’ ability to 

leverage CDBG funds through revolving 

loan funds and Section 108 loan 

guarantees. The $100,000 and $2,000 

amounts approximate the inflationadjusted value of the current standards. 

HUD believes that updating these 

standards to reflect market conditions 

would allow CDBG funds to be more 

competitive for use in economic 

development activities. By comparison, 

the Small Business Administration 

(SBA) 504 Loan program allows a 

benefit of up to $100,000 per job created 

depending on the type of activity. HUD 

also proposes to include a provision at 

§§ 570.209(b)(5) and 570.482(f)(6) that 

would permit HUD to issue periodic 

notices to update those values (and the 

net present values for Section 108 

borrowers, as described below) to reflect 

inflation. 

Question for comment #4: Would the 

proposed changes encourage a recipient 

to target CDBG projects in underserved 

communities in their jurisdiction? 

Would the proposed individual 

standards more accurately reflect the 

amount of CDBG funds necessary to 

carry out job creating activities? What is 

the likely effect on investment in 

underserved areas? How might HUD 

better encourage economic development 

in underserved communities, including 

historically marginalized communities 

of color, particularly racially or 

ethnically concentrated areas of poverty, 

who have disproportionately 

experienced disinvestment and have 

been denied economic opportunities? 

How frequently should the standard be 

updated for inflation, and should HUD 

update the standard automatically with 

a self-executing inflation calculation? 

Third, the public benefit standards 

provide a narrow choice of two 

measures for determining a public 

benefit: amount of assistance per job 

created or retained or amount per LMI 

person served by the activity. HUD 

believes these measures provide 

insufficient options to measure the 

public benefit a project may provide. 

For example, the SBA 504 Loan program 

offers recipients who cannot meet the 

minimum jobs requirement an 

alternative of meeting one of eighteen 

community development, public policy, 

or energy reduction measures. While 

HUD understands the value of having 

objective and uniform benchmarks for 

demonstrating public benefit, the 

current standards unduly restrict 

recipients’ ability to demonstrate public 

benefit through use of CDBG funds for 

economic development activities. 

Further, CDBG assistance for small 

businesses may be used with funding 

under another Federal program (e.g., 

SBA) that has different standards. To 

provide flexibility to recipients in 

demonstrating such an alternative 

public benefit, proposed provisions at 

§§ 570.209(b)(3)(iii) and 

570.482(f)(4)(iii) would permit HUD to 

approve requests by recipients that an 

applicable activity demonstrates an 

acceptable public benefit if the activity 

would result in a significant 

contribution to the goals and purposes 

of the CDBG program. 

Question for comment #5: How can 

recipients demonstrate an alternative 

public benefit? For example, an 

increasing number of communities have 

either used or explored using CDBG 

funds for critical lifeline projects that 

have received funding from other 

Federal agencies, including the U.S. 

Department of Energy and the Federal 

Emergency Management Agency. Would 

it be appropriate to use objectives for 

other Federal programs to satisfy the 

CDBG program public benefit 

standards? Should there be additional 

criteria for what can be considered an 

alternative public benefit, and if so what 

might they be? 

Fourth, HUD proposes to add a new 

option for Section 108 applicants at 

§§ 570.209(b)(3)(ii) and 570.482(f)(4)(ii) 

that would address the concerns 

expressed by program participants 

regarding a disparity in treatment of 

economic development assistance in the 

form of a loan and other forms of 

assistance, such as grants, when 

measuring public benefit. When a 

recipient uses CDBG funds for an 

economic development activity in the 

form of a loan to a third party (e.g., a 

business), the loan is expected to be 

repaid over some term. Any repayment 

of that loan reduces the ultimate cost of 

that activity to the CDBG program. On 

the other hand, when a recipient uses 

CDBG funds to make grants to third 

parties, the cost to the CDBG program is 

the actual amount of the grant. The 

existing regulations Section 108 treat 

activities that involve loans in the same 

way they treat activities that involve 

grants: i.e., the cost of an activity is 

measured based on the nominal amount 

of the assistance provided to the third 

party. This treatment distorts the cost 

per unit of output (e.g., jobs) for an 

activity that provides assistance in the 

form of a loan because the standard fails 

to measure the actual cost of the activity 

accurately. Although HUD recognized 

this disparity when it first proposed the 


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public benefit regulations, it did not 

provide an alternative to use of the 

nominal amount of the loan for 

calculation of the public benefit due to 

the complexity of implementing an 

alternative methodology for use by 

recipients. Now, however, HUD could 

use the procedures and models 

prescribed by the Office of Management 

and Budget (OMB) for determining the 

‘‘credit subsidy cost’’ to the Federal 

Government of making direct Federal 

loans to determine the cost to a grantee’s 

CDBG program of carrying out activities 

that involve loans from Section 108 

recipients to third parties. These 

proposed procedures for determining 

the cost of such third-party loans 

through calculating the cost of the 

activity based on the net present value 

of the activity would address the 

concerns expressed to HUD by 

recipients regarding measuring the true 

cost to the CDBG program of an 

economic development activity that 

involves a loan to a third party. HUD 

can address its original concern about 

using an alternative methodology by 

reserving the use of an alternative 

measure of public benefit to Section 

108-funded activities when HUD can 

determine the cost of a loan to the CDBG 

program through using a methodology 

routinely applied under Federal credit 

programs. HUD will describe in a 

separate notice the procedures it will 

use in calculating the cost of a loan. 

Question for comment #6: Would the 

proposed option for measuring the 

public benefit for loan activities on a net 

present value basis facilitate the use of 

Section 108 financing for economic 

development activities? 

B. Improving Data Collection From the 

CDBG Program To Measure 

Effectiveness 

Revision of Consolidated Plan 

Publication Requirements as Identified 

in Citizen Participation Plans 

§§ 91.105(b), 91.115(b) 

Entitlement and State recipients must 

identify in their citizen participation 

plans how they will publish their 

Consolidated Plans in a manner that 

permits their residents, public agencies, 

and other interested parties an 

opportunity to examine their contents 

and submit comments. HUD expects 

each grantee to undertake a multifaceted 

approach to publication after 

considering the nature of the 

jurisdiction and its citizens. The 

principle for jurisdictions is to create 

and implement a citizen participation 

plan designed to get program-related 

information to and from persons who 

will be affected by the contents of the 

Consolidated Plan or who may seek to 

participate in the grantee’s programs. 

HUD proposes to amend 

§§ 91.105(b)(2) and 91.115(b)(2) to 

encourage grantees to use additional 

forms of communication to make 

citizens aware of publication of the 

Consolidated Plan. The proposal adds 

methods of making the Consolidated 

Plan publicly accessible to persons with 

disabilities and provide meaningful 

access to limited English proficient 

persons, such as: email; text message 

(SMS); social media; media 

advertisements; public service 

announcements; notifying neighborhood 

organizations; and placement of hard 

copies of the Plan in public places such 

as libraries and neighborhood centers, 

and notifications on grocery store 

bulletin boards. These sections illustrate 

new examples of optional publication 

methods but are not required. HUD 

already considers these proposed 

methods to be valid and useful methods 

of publishing Consolidated Plans and 

encourages grantees to update citizen 

participation plans to include these 

methods. Recipients are reminded that 

section 504 of the Rehabilitation Act of 

1973, 29 U.S.C. 794, and the 

implementing regulations at 24 CFR part 

8, which provides rights to persons with 

disabilities in HUD-funded programs 

and activities, continue to require 

grantees to ensure effective 

communication for persons with 

disabilities, and that Title VI of the Civil 

Rights Act of 1964, 42 U.S.C. 2000d et 

seq., and its implementing regulations, 

require a recipient to take reasonable 

steps to provide language assistance to 

ensure meaningful access to programs 

and activities for persons who are 

limited English proficient (LEP). 

Adding Substantial Amendment 

Criterion to the Citizen Participation 

Plan § 91.105(c) 

Section 91.105(c)(1) requires an 

entitlement grantee to identify in its 

citizen participation plan what it 

considers to be a substantial amendment 

to its Consolidated Plan. This provision 

also states that a recipient must consider 

a change in the use of CDBG funds from 

one eligible activity to another as a 

substantial amendment to its 

Consolidated Plan. However, the 

provision does not state that adding 

activities not previously listed in a 

recipient’s Consolidated Plan or Action 

Plan is a substantial amendment. 

Since a recipient is required to notify 

the public of all the activities it intends 

to carry out with CDBG funds, HUD 

proposes to clarify that adding an 

activity not previously identified in the 

Consolidated Plan or Action Plan must 

be considered a substantial amendment 

in the citizen participation plan. 

Setting Quantitative, Neighborhood 

Level Goals in the Consolidated Plan 

and Measuring Performance in Reports 

§§ 91.215, 91.520 

Section 91.215(a)(1) requires local 

government recipients to identify the 

general priorities for allocating 

investment geographically within the 

jurisdiction. HUD has observed that 

many grantees target some or all 

activities geographically. To the extent 

that a local government recipient 

chooses to target investment (as 

opposed to undertaking jurisdictionwide activities), HUD proposes to 

require recipients to set at least one 

quantitative, neighborhood-level 

outcome goal in their Consolidated Plan 

and to report performance in the 

Consolidated Annual Performance and 

Evaluation Reports (CAPERs). This 

would enable HUD to assess local 

government recipients’ progress in 

addressing housing, homeless 

assessment, and other identified needs 

on a sub-jurisdiction level and provide 

a richer understanding of how grant 

funds enable grantees to achieve local 

community development objectives. 

HUD proposes to change § 91.520(d) to 

require an entitlement grantee to report 

in the CAPER at least one quantitative, 

neighborhood-level outcome goal 

accomplishment related to one or more 

sub-jurisdiction priority, if established 

pursuant to § 91.215(a)(1). 

Section 91.215(g) encourages 

entitlement recipients, through the 

Consolidated Plan, to identify locally 

designated areas that are being targeted 

for neighborhood revitalization efforts 

that are carried out through multiple 

activities in a concentrated or 

coordinated manner. In this rule, HUD 

proposes to add examples of areas that 

may be targeted for neighborhood 

revitalization efforts. These areas can 

include areas that were designated as 

economically distressed areas by the 

Federal Government or the State that 

exhibit significantly high levels of 

poverty or low median income, 

including historically underserved and 

marginalized communities. HUD 

believes that encouraging entitlement 

recipients to consider targeting efforts in 

these areas during the planning process 

will result in recipients developing a 

more holistic understanding of the 

needs of these areas and how they can 

best use CDBG funds to revitalize such 

areas. 


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14CDBG grant funds not disbursed from the 

grantee’s line of credit after eight years will be 

cancelled and recaptured by the U.S. Department of 

Treasury at the end of the eighth Federal fiscal year 

due to statutory and regulatory requirements. 

C. Improving Program Outcomes 

Mixed-Use Properties §§ 570.3, 570.200 

Mixed-use properties have become 

increasingly popular as development 

trends across the country have 

encouraged locating residential units, 

office space, and/or commercial space 

on the same property and often in the 

same building. Section 570.200(b)(1) 

contains special policies governing 

facilities containing both eligible and 

ineligible uses. It allows recipients to 

provide funds for a public facility 

otherwise eligible for assistance under 

the CDBG program even if it is part of 

a multiple-use building containing 

ineligible uses. Recipients may also 

provide funds for an eligible activity in 

a multiple-use property (that is not a 

public facility), but the existing 

regulation lacks clarity on the 

circumstances when such use is 

permissible. This lack of clarity limits 

recipients from using CDBG funds for 

eligible activities in mixed-use 

properties. 

HUD proposes to revise 

§ 570.200(b)(1) to clarify that recipients 

can assist eligible activities if they are 

part of mixed-use properties that also 

contain ineligible uses, so long as the 

recipient expends CDBG funds only on 

the eligible use. The revised provision 

would continue to allow for CDBG and 

Section 108 guaranteed loan funds to be 

involved in such a project so long as 

there is an eligible activity that costs can 

be allocated to cover. While the 

prohibition on new housing 

construction is applicable for both 

Section 108 borrowers and CDBG 

recipients pursuant to § 570.207(b)(3), 

costs in mixed-use and mixed finance 

developments may be allocable under 

the new draft regulation and our current 

interpretation of the requirements. HUD 

expects this revision would facilitate 

economic development by expanding 

the scope of activities for which 

recipients can use CDBG funds. The 

proposed rule also would add a 

definition of ‘‘mixed-use property’’ at 

§ 570.3. 

Closeout § 570.509 

HUD proposes to amend the CDBG 

closeout regulations at § 570.509 to 

conform with 2 CFR 200.344 and with 

the proposed modifications to 

timeliness at § 570.902. Under this 

proposal, HUD would have the 

flexibility to separately cancel a 

grantee’s financial access to a grant and 

remove the grant’s availability from the 

line of credit while allowing some 

additional time, if needed, for a grantee 

to meet certain program requirements, 

such as meeting a national objective. 

HUD expects that each grantee will 

expend all funds and close out each 

grant financially by the end of the 

eighth program year of the grant.14

Further, the proposed rule would make 

clear that certain requirements survive 

grant closeout, such as but not limited 

to record retention responsibilities and 

property management. Although the 

proposed changes would explicitly 

separate the grant programmatic 

closeout procedures from financial 

account cancellation procedures, they 

would not change the requirement that 

final annual performance reports are 

due within 90 days after the close of the 

jurisdiction’s program year. 

For example, a grantee uses the 

remainder of one grant’s funds to 

acquire a school to convert to housing. 

The grantee uses funds from other 

sources for construction costs. Under 

this proposal, HUD could cancel the 

financial account while explicitly 

retaining the ability to enforce 

compliance with all program 

requirements related to the activity 

underway, particularly those bearing on 

national objectives. The regulations 

would continue to govern change of use 

requirements (e.g., investments such as 

community centers or parks). 

HUD recognizes that there are many 

things that could disrupt a grantee’s 

intended timeline for activity 

completion: litigation, disasters, limited 

construction seasons due to weather, or 

other extenuating circumstances. To 

complete all program activities, 

including, but not limited to, meeting 

national objectives and satisfying 

reporting requirements, grantees are 

permitted to request an extension of up 

to two years of the six-year period of 

performance proposed in the Continuing 

Capacity section of this rule. 

Question for comment #7: Would 

other or additional modifications to the 

closeout process ease grantee burden 

and ensure that HUD can confirm that 

grantees have met programmatic 

requirements prior to closeout? 

D. Addressing Poor Performance 

Repayment of CDBG Funds for 

Disallowed Costs §§ 570.495, 570.910 

Sections 570.495 (for State recipients) 

and 570.910 (for entitlement recipients) 

provide corrective and remedial actions 

that HUD may impose on recipients 

when HUD identifies deficiencies in 

recipient performance. HUD may 

disallow costs if recipients expend 

CDBG funds for ineligible activities or 

for activities that do not meet a national 

objective, or do not comply with 2 CFR 

part 200, subpart E, cost principles. 

Currently, HUD advises recipients to 

reimburse their CDBG program account 

or letter of credit with non-Federal 

funds based on 2 CFR 200.405(c), which 

states that any cost allocable to a 

particular Federal award (or cost 

objective) under the principles provided 

for in 2 CFR part 200 may not be 

charged to other Federal awards to 

overcome fund deficiencies, to avoid 

restrictions imposed by Federal statutes, 

regulations, or terms and conditions of 

the Federal awards, or for other reasons. 

However, this prohibition would not 

preclude the non-Federal entity from 

shifting costs that are allowable under 

two or more Federal awards in 

accordance with existing Federal 

statutes, regulations, or the terms and 

conditions of the Federal awards. In 

addition, 2 CFR 200.441 states that costs 

resulting from non-Federal entity 

violations of, alleged violations of, or 

failure to comply with, Federal, State, 

Tribal, local or foreign laws and 

regulations are unallowable, except 

when incurred as a result of compliance 

with specific provisions of the Federal 

award, or with prior written approval of 

the Federal awarding agency. 

However, part 570 does not clearly 

state the source of repayments as the 

result of such violations. The proposed 

rule would explicitly do so in 

§§ 570.495(a)(4) and 570.910(b)(5) and 

would also make clear that recipients 

must make repayments for disallowed 

costs with non-Federal funds. In lieu of 

such repayments, HUD proposes to 

revise § 570.495(a)(4) and add 

§ 570.910(c) to permit a recipient to 

request a voluntary grant reduction 

(VGR) from a current or future year’s 

allocation of funds. VGRs have long 

been used in lieu of repayment, and this 

proposed rule would codify the policy 

and the procedure for requesting a VGR. 

Timely Performance § 570.902 

This rule proposes to revise § 570.902 

to institute regular quarterly public 

reporting by HUD on grant progress for 

entitlement grantees, with each grant 

labeled (e.g., ‘‘first year,’’ ‘‘on track,’’ or 

‘‘under target’’) based on the pace of 

expenditure necessary to achieve grant 

closeout by the target date at the end of 

the period of performance. HUD’s 

increase in frequency of public reports 

will use existing grant data to provide 

grantees with additional time to make 

adjustments to their respective 

programs. The public report may be 

used by citizens for information, 

grantees for management information, 


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and HUD for risk assessment, oversight, 

and as a signal for technical assistance 

needs. HUD believes this would 

improve the current system of only 

providing timeliness feedback to 

grantees and HUD Field offices 

annually. With more frequent progress 

information, grantees should be able to 

adjust their programs more nimbly and 

avoid timeliness issues. 

Section 104(e)(1) of the Act requires 

that HUD annually determine whether 

each CDBG grantee has carried out its 

activities in a timely manner. HUD must 

also assess whether each grantee has 

continuing capacity to carry out 

activities in a timely manner. Under the 

existing entitlement regulations at 

§ 570.902, HUD measures timely 

performance at a single, annual point in 

time and communicates any issues to a 

grantee via letter. In accordance with 

the existing regulations, an entitlement 

grantee must meet an ‘‘all open CDBG 

grants’’ portfolio standard, requiring it 

to have a total undisbursed portfolio 

balance no greater than 1.5 times its 

most recent annual grant amount 

remaining in the line of credit. HUD 

conducts this test 60 days prior to the 

end of the grantee’s program year, and 

in recent years, HUD has put increased 

emphasis on enforcing timely 

expenditure using this standard. 

HUD considers a grantee to have 

timely performance issues if its portfolio 

balance exceeds 1.5 times its most 

recent annual grant amount for two 

years in a row. If this happens, HUD 

first offers the grantee a chance for an 

informal consultation with program 

officials prior to determining a 

corrective action or sanction. A common 

course of action for HUD in cases of 

continued grantee timeliness issues is 

reducing the next year’s grant allocation 

of a grantee. 

Although the timeliness regulations 

and procedures comply with the 

statutory direction, the combination of 

the annual 1.5 standard with the 

adoption of grant-based accounting and 

stagnant CDBG grant amounts appears 

to have created an unintended—and 

undesired—consequence. HUD has 

observed grantees budget and use more 

funds for annual ‘‘soft’’ expenditures, 

such as code enforcement, 

administration, planning, public 

services, and salaries for activity 

delivery, and less funds directly 

assisting major brick-and-mortar 

activities. HUD’s observations and 

grantee feedback indicate that HUD’s 

enforcement of the existing timeliness 

standard has resulted in pressuring 

grantees’ local funding decisions away 

from large brick-and-mortar activities, 

which characteristically deliver greater 

benefits but require longer expenditure 

timeframes. Grantees are making 

funding and priority decisions based 

less on long-term community needs 

than on a need to comply with the 

portfolio balance requirement. For 

example, a large Midwest city recently 

identified the need to comply with the 

1.5 requirement as the reason for its 

choice to assist an activity providing 

sidewalk improvements in low-income 

neighborhoods even though it believed 

a better fit for its community 

development priorities would be a 

significant multi-unit, multi-structure, 

housing rehabilitation project. HUD has 

noted numerous other similar examples 

during informal timeliness 

consultations. 

This concerns HUD because the 

objectives of the CDBG program at 

section 101(c) of the Act emphasize 

development of viable urban 

communities by providing suitable 

living environments. If the timeliness 

enforcement standard is causing 

grantees to shift funding decisions away 

from activities generating long-lasting 

improvements, the standard undercuts 

the purposes of the Act. 

Further, the current timeliness 

standard incorrectly captures both highand low-capacity grantees. An adjusted 

line of credit balance in excess of 1.5 

times the grant amount, measured at a 

point in time in the grantee’s program 

year, is not always an indicator of poor 

performance. Higher-capacity grantees 

who try to budget substantial portions of 

two or more grants for a major local 

project are identified incorrectly by the 

existing standard as low-performing. 

These grantees do not typically exhibit 

non-compliance in other areas of their 

portfolio and their HUD Field office 

grant managers frequently vouch for 

their capacity to deliver the expected 

project benefits. Current timeliness 

requirements can discourage activities 

that if not for these requirements would 

otherwise advance statutory program 

objectives. Conversely, low-capacity 

grantees with known problems across a 

decade or more, have sometimes not 

been captured under this current 

requirement. 

Lessons learned from implementation 

of other programs incorporating the 

CDBG framework, including the 

Neighborhood Stabilization Program 

(NSP) and other CDBG–DR 

appropriations, helped inform this 

proposal. Several versions of obligation, 

expenditure, and other progress 

standards have existed in these 

programs, with mixed results. For 

example, obligation deadlines in the 

first NSP funding round and some early 

CDBG–DR grants caused grantees to 

select some projects less aligned with 

community needs and goals. Recent 

CDBG–DR rules, which combine a 

period of performance based on actual 

community development practice with 

public tracking reports, have provided a 

simple, workable standard that enables 

local choices while enhancing 

transparency and accountability. The 

takeaway from HUD’s experience with 

timeliness is that the enforcement 

mechanism influences local choices 

towards or away from significant 

construction activities and may affect 

the pace of grant disbursement, and that 

applying a new standard for CDBG 

grantees will better serve the purpose of 

the Act. 

This proposal seeks to enhance 

oversight of timeliness while reducing 

pressure on grantees to fund minor, 

quickly implementable activities or soft 

costs rather than providing assistance 

for larger projects with more significant 

local community development 

outcomes. This approach would set a 

standard for a clear lack of continuing 

capacity for timely implementation, 

comply with the Act, and better 

accommodate eligible major 

construction activities. The rule would 

also set, for the first time, a separate 

standard for grantee continuing capacity 

(see below for further detail). 

Timeliness and Program Income 

§§ 570.489, 570.504 

Note that the rules related to the 

intersection of timeliness and program 

income would not change under this 

proposal. The Act and the current 

regulations provide that program 

income received by a grant recipient or 

subrecipient is additional CDBG funds. 

The regulations would continue to 

require that grantees use available 

program income prior to additional 

drawdown of line of credit funds. 

However, revolving funds are a special 

case. This proposed rule addresses 

revolving funds because some grantees 

have inappropriately used these 

accounts to simply hold program 

income, effectively evading timely 

expenditure requirements. The 

proposed timely expenditure standard 

for revolving funds is that grantees use 

at least one half of a fund’s balance 

(taken at the beginning of the program 

year) for eligible revolving fund 

activities or re-program the unused 

amount each year. The proposed rule 

seeks to prevent grantees from placing 

program income in revolving funds 

indefinitely with new language at 

§ 570.504(f) that would permit HUD to 

take corrective actions against 

entitlement grantees with inactive or 

excessive revolving funds. HUD also 


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15This data is based on the American Community 

Survey 2011–2015 5-year estimates and may be 

found at https://www.hudexchange.info/programs/ 

acs-low-mod-summary-data/. 

proposes to hold States accountable for 

ensuring that revolving funds remain 

active adding a new § 570.489(f)(4). 

Continuing Capacity § 570.902 

The current regulations do not 

provide a standard for determining that 

a grantee no longer has the continuing 

capacity to carry out activities in a 

timely manner. Although this proposed 

rule does not change HUD’s ability to 

assess capacity on a case-by-case basis 

to determine capacity, it would add a 

data-driven measure of lack of capacity: 

a portfolio consideration of a grantee’s 

continuing capacity to deliver activities 

in a timely manner based on overall 

progress under multiple grants over a 

rolling four-quarter period rather than 

by a single annual snapshot of the 

aggregate balance. At any given time, 

each grantee will have up to six grants 

(or up to eight if a period of 

performance waiver is provided) 

available in its CDBG line of credit. 

Proposed § 570.902(a)(4) would provide 

that if any three or more of those grants 

are simultaneously identified as Slow 

Spenders for four or more consecutive 

quarters, HUD would determine that the 

grantee lacks the continuing capacity to 

undertake timely program activities, 

will provide an opportunity for an 

informal consultation meeting, and will 

then take appropriate action, including 

corrective action or sanction up to and 

including a reduction to the grant 

amount for the succeeding program 

year. 

Question for comment #8: In 

proposing this shift, HUD is aware that 

the overall balance of funds in CDBG 

lines of credit may increase. Given the 

commitment to quarterly public status 

reports at the grant level, is this 

problematic? If yes, how? Also, if yes, 

suggest an alternate approach. If you are 

a grantee, will the timeliness proposal 

affect your local activity choices in favor 

of transformative or major construction 

projects? Additionally, the Department 

seeks feedback from the public, 

including from States, on whether it 

would be appropriate to apply the 

proposed new timeliness requirements 

for entitlements to States. 

Criteria for National Objectives— 

Meeting a National Objective, 

Appropriate Data Source §§ 570.200, 

570.208, 570.483 

The proposed rule would add a time 

period for CDBG-assisted activities to 

meet one of the three national objectives 

of the CDBG program. Currently, there 

is no time period in which CDBGassisted activities must meet a national 

objective. This lack of a defined period 

of time for an activity to meet a national 

objective undercuts the primary purpose 

of the Act because recipients cannot 

demonstrate that they are using CDBGfunded activities to develop viable 

urban communities by providing decent 

housing, a suitable living environment, 

and expanding economic opportunities, 

principally for LMI persons. 

To ensure that recipients fulfill the 

purpose of the Act and that CDBGassisted activities benefit LMI persons 

and households, HUD proposes that 

activities be given six years from the 

initial drawdown of CDBG funds to 

meet a national objective or the length 

of the period of performance and any 

extension permitted under § 570.509, 

whichever is shorter. HUD believes that 

six years is an adequate time period for 

recipients to demonstrate that an 

activity will meet a national objective. 

HUD proposes to revise § 570.200(a)(2) 

requiring recipients to demonstrate that 

activities carried out under Subpart C 

meet a national objective within six 

years of the initial drawdown of CDBG 

funds for an activity. 

HUD also proposes to remove 

multiple references in §§ 570.208(a) (for 

entitlement recipients) and 570.483 (for 

State recipients) to sources of data 

recipients should use in determining 

income characteristics, such as poverty 

and income levels, of potential 

beneficiaries or areas served. Notice 

CPD–19–02, published February 14, 

2019 (https://www.hud.gov/sites/dfiles/ 

OCHCO/documents/19-02cpdn.pdf), 

provides recipients guidance on using 

data for compliance with CDBG, CDBG– 

DR, and NSP grant requirements.15 The 

proposed rule would direct recipients to 

use information provided by HUD to the 

fullest extent feasible as opposed to the 

most recently available decennial 

census data, which may have become 

outdated and difficult to locate. 

Question for comment #9: Is six years 

from the initial drawdown of CDBG 

funds an adequate time period to 

demonstrate that activities have met a 

national objective? 

E. Clarifying the Eligible Uses of CDBG 

Definitions §§ 570.3, 570.206, 570.481 

Activity Delivery Costs 

Recipients and subrecipients may 

incur costs related to carrying out 

specific activities eligible under 

§§ 570.201–570.204 and 570.703, which 

are typically referred to as ‘‘activity 

delivery costs.’’ Unlike program 

administrative costs that are eligible 

under § 570.206 for overall program 

management, coordination, monitoring, 

and evaluation, a recipient incurs 

activity delivery costs on an activity-byactivity basis. The regulations do not 

specifically define this term; therefore, 

HUD proposes to add a definition at 

§ 570.3. HUD proposes to define activity 

delivery costs as the allowable costs of 

work performed by a recipient, 

subrecipient, or contractor in carrying 

out specific activities eligible under 

§§ 570.201–570.204 (for CDBG 

entitlement recipients) and 570.703 (for 

Section 108 borrowers). For example, 

under this proposal, a grantee could 

charge 20 percent of an employee’s 

salary and related expenses (e.g., fringe 

benefits) to an activity provided it 

maintains records that support the 

allocation of costs to the activity. Some 

grantees would choose to maintain such 

records to ensure they do not exceed the 

cap on program administrative costs. 

Recipients, subrecipients, and 

contractors must use the cost principles 

at 2 CFR part 200, subpart E in 

determining the allowability of the 

costs. In particular, recipients, 

subrecipients, and contractors must 

ensure that activity delivery costs 

consisting of staff salaries are allocable 

to the specific activity and adequately 

documented. HUD proposes a new 

reference in the introductions to 

§ 570.206 to emphasize that activity 

delivery costs for CDBG entitlement 

recipients are separate from program 

administrative costs. 

Elderly 

CDBG recipients and subrecipients 

carry out public services that 

specifically benefit elderly persons. 

Recipients across the United States have 

widely varying definitions of ‘‘elderly’’ 

that they use for CDBG-assisted 

activities that specifically target this 

population. Because part 570 does not 

define the term ‘‘elderly,’’ HUD has 

received requests for guidance regarding 

the definition of elderly. Although 

‘‘elderly person’’ is defined at § 5.100, 

HUD believes including the definition at 

§ 570.3 would make clear the definition 

of ‘‘elderly’’ for certain CDBG-assisted 

activities. HUD proposes to add the 

definition of elderly at § 570.3 that 

states that for activities pursuant to 

§ 570.202, ‘‘elderly’’ means a person 62 

years of age or older. This definition 

would align CDBG-assisted housing 

activities with other HUD programs. 

However, HUD would continue to 

permit CDBG recipients and 

subrecipients to define ‘‘elderly’’ 

consistent with State law to permit 

recipients the flexibility to carry out 

non-housing activities that benefit 

elderly persons. 


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16Under the CDBG program, long-term leases of 

15 years are considered acquisition for URA 

purposes and subject the URA’s 49 CFR part 24, 

subpart B, real property acquisition requirements. 

See HUD Handbook 1378 Chapter 1–4.I.7 page 1– 

8 for more details. 

Entitlement Amount 

The definition of entitlement amount 

contains a reference to ‘‘a metropolitan 

city and an urban county.’’ Periodically, 

OMB issues bulletins that contain 

revised delineations of metropolitan 

statistical areas, micropolitan statistical 

areas, and combined statistical areas. 

These bulletins update OMB’s 

designations of metropolitan areas, 

counties included in metropolitan areas, 

and principal cities of those 

metropolitan areas. These principal 

cities usually have populations below 

the statutory threshold of 50,000 to 

become a metropolitan city but are 

considered principal cities of the 

metropolitan areas in which they are 

located. Therefore, HUD proposes to 

add the term ‘‘principal cities’’ as 

designated by OMB in the definition of 

‘‘entitlement amount’’ at § 570.3 because 

HUD considers principal cities 

entitlement recipients that will receive 

a CDBG grant if they accept entitlement 

status. 

Period of Performance 

HUD proposes to add a definition of 

‘‘period of performance’’ in §§ 570.3 and 

570.481(a)(4) that would provide 

recipients a six-year time period to 

expend a grant’s funds or the length of 

the origin year grant’s period of 

availability for expenditure in 

accordance with §§ 570.200(k) or 

570.480(h), whichever is shorter, 

beginning on HUD’s approval of a grant 

agreement for a given grant. The 

proposed definition would apply to the 

proposed closeout procedures at 

§ 570.509 and timeliness requirements 

at § 570.902. For Section 108 loan 

guarantees, the period of performance 

begins on the date of HUD’s guarantee 

of a promissory note or other obligation 

and confers the same six-year time limit. 

Under the Federal financial rules at 2 

CFR 200.211(b)(5) every Federal grant 

must have a designated period of 

performance. For CDBG grants, HUD 

began adopting these rules in 2015. 

Under CDBG appropriations, HUD has 

allowed the period of performance to be 

the statutory availability of grant funds. 

In general, HUD has up to three years to 

obligate grants, and there are five 

additional years of funding availability. 

For example, grants from the 2014 

appropriation are no longer available for 

expenditure after September 30, 2021. 

Drawing from lessons learned, HUD 

looked to CDBG–DR grantees’ fund 

expenditure patterns. In developing the 

CDBG–DR timely expenditure 

expectations, HUD reviewed the 

spending performance of CDBG–DR 

grants awarded in response to disasters 

in 2006 and 2008. In May 2013, HUD 

reviewed historical data on quarterly 

disbursements of funds from these 

appropriations. This analysis concluded 

that most CDBG–DR-funded recovery 

activity is completed within three to 

four years, and the recovery of CDBG– 

DR grantees is largely complete after six 

years. For an average grant, the third 

year following grant agreement 

execution typically shows the peak 

amount of expenditures. Program 

experience with annual CDBG grantees, 

who generally have fewer challenging 

programs than do CDBG–DR grantees, 

indicates that a six-year period of 

performance would be generous for both 

entitlements and State grantees. 

Question for comment #10: Is the 

proposed six-year period of performance 

an appropriate period of time to expend 

funds for activities under a given grant? 

Overall Benefit Requirement § 570.200 

Section § 570.200(a)(3) currently 

states that entitlement recipients, nonentitlement CDBG recipients in Hawaii, 

and recipients of insular area funds 

must ensure that over a period of time 

specified in their certification, not to 

exceed three years, not less than 70 

percent of the aggregate of CDBG fund 

expenditures shall be for activities 

meeting the criteria under § 570.208(a), 

(d)(5), or (6) for benefiting LMI persons. 

These recipients must ensure that 

during their chosen period of 

certification not less than 70 percent of 

the aggregate of CDBG funds expended 

during that period benefit LMI persons. 

This requirement is identified in the Act 

at section 101(c) and cannot be waived. 

Therefore, HUD proposes to revise 

§ 570.200(a)(3) to reinforce that 

recipients may not expend more CDBG 

funds in a subsequent certification 

period to meet the statutory 

requirement. 

Eligible and Ineligible Activities 

§§ 570.200, 570.201, 570.202, 570.206, 

570.207, 570.703 

Applicable Environmental Review 

Procedures in Part 58 

HUD proposes to make a slight 

revision to § 570.200(h)(1)(iii), which 

requires that costs and activities funded 

are in compliance with the 

environmental review procedures stated 

in 24 CFR part 58. There has been some 

confusion whether the intent of this 

provision is just to apply whatever part 

58 requirements would otherwise apply, 

or to actually extend applicability of 

part 58 choice-limiting prohibitions 

even to pre-application activities that 

aren’t prohibited under Part 58 itself. In 

order to clarify that this provision is not 

meant to add a prohibition on 

reimbursement of expenses for activities 

that began before application for CDBG, 

where the pre-application activities 

commenced prior to a completed 

environmental review and Release of 

Funds, the revision would refer to 

compliance with ‘‘applicable’’ 

environmental review procedures in 24 

CFR part 58. 

Acquisition of Real Property 

Section 570.201(a) currently permits 

grantees to use CDBG funds to acquire 

real property by long-term lease. 

However, it does not specify the length 

of time that constitutes a long-term lease 

for the purpose of compliance with 

§ 570.201(a). ‘‘Long-term lease’’ has 

been interpreted in various ways. The 

1998 Guide to National Objectives and 

Eligible Activities for Entitlement 

Communities defines a long-term lease 

as 15 years or more. Consistent with this 

guidance, HUD proposes to add a 

parenthetical statement to § 570.201(a) 

that would clearly define a ‘‘long-term 

lease’’ as 15 years or more.16

Tornado Safe Shelters 

Section 2 of the Tornado Shelters Act 

(Pub. L. 108–146; 117 Stat. 1883, 

enacted December 3, 2003) amended 

section 105(a) of the Act to permit the 

construction or improvement of tornado 

shelters for residents of manufactured 

housing in certain neighborhoods as an 

eligible activity under the CDBG 

program. The Tornado Shelters Act 

permits tornado shelters as an eligible 

activity if they are located in a 

neighborhood that (1) contains at least 

20 manufactured housing units within 

such proximity to the shelter that the 

shelter is available to the resident in the 

event of a tornado, (2) consists 

predominantly of persons of low and 

moderate income (i.e., recipients must 

be able to document that at least 51 

percent of the residents of the service 

area of the tornado shelter are of low 

and moderate income); and (3) is 

located within a State in which a 

tornado has occurred during the fiscal 

year for which with amounts to be used 

were made available or the preceding 3 

fiscal years, as determined by the 

Secretary in consultation with the 

Administrator of the Federal Emergency 

Management Agency. HUD has not 

codified this use of CDBG funds in the 

regulations, but recipients may use such 

funds for the construction of tornadoVerDate Sep<11>2014 17:54 Jan 09, 2024 Jkt 262001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 E:\FR\FM\10JAP2.SGM 10JAP2

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safe shelters under the authority 

provided by statute. HUD proposes to 

add a provision at § 570.201(r) that 

would codify the use of CDBG funds for 

tornado safe shelters as an eligible 

activity in accordance with the statute. 

Since the statute requires that 

neighborhoods where tornado shelters 

are constructed or improved with CDBG 

funds be predominantly LMI, recipients 

must be able to document that at least 

51 percent of the residents of the service 

area of the tornado shelter are of low 

and moderate income. 

Ineligible Activities 

HUD proposes at § 570.207(a)(4) to 

explicitly list general administrative and 

operating expenses of public or 

nonprofit entities as an ineligible 

activity. HUD’s experience is that these 

entities believe that general 

administrative costs and operating 

expenses are eligible activities under 

§§ 570.201–570.206. However, while 

recipients may use CDBG funds for 

program administrative costs, the 

regulations do not allow public or 

nonprofit entities to do so. HUD 

believes that the proposed addition of 

this ineligible activity, in addition to the 

proposed addition of the definition of 

‘‘activity delivery costs’’ in § 570.3, 

would provide greater clarity to public 

and nonprofit entities and encourage 

them to use CDBG funds directly for 

activities (as well as for activity delivery 

costs). Public and nonprofit entities also 

cannot categorize these ineligible 

expenses as providing technical 

assistance; the proposed rule would 

revise the definition of ‘‘technical 

assistance’’ at § 570.201(p) to reflect that 

prohibition. 

Use of CDBG Grant Funds for Section 

108 Activities 

HUD proposes to clarify eligible uses 

of CDBG funds for loan repayment, 

issuance, underwriting, servicing, and 

other cost associated with Section 108 

activities. Although already described at 

§ 570.705(c), HUD believes that adding 

a cross-reference in subpart C (with a 

new § 570.201(s)) may provide potential 

borrowers a better understanding of 

their ability to finance Section 108 

activities with CDBG funds. 

Reconstruction Under § 570.202 

Reconstruction of buildings or 

structures has been eligible for CDBG 

assistance since 1996. Section 105(a)(4) 

of the Act states that clearance, removal, 

reconstruction, and rehabilitation of 

buildings and improvements (including 

interim assistance and financing public 

or private acquisition for reconstruction 

or rehabilitation, and reconstruction or 

rehabilitation of privately owned 

properties, and including the renovation 

of closed school buildings) is an eligible 

CDBG-assisted activity. Buildings 

reconstructed with CDBG funds may be 

publicly or privately owned and 

residential or non-residential. 

Unlike other parts of the CDBG 

regulations that explicitly state that 

recipients and subrecipients may use 

CDBG funds to reconstruct public 

facilities and improvements 

(§ 570.201(c)), privately owned utilities 

(§ 570.201(l)), and commercial/ 

industrial structures as part of a special 

economic development activity 

(§ 570.203(a)), § 570.202 does not clearly 

identify reconstruction as an eligible 

activity related to housing. To make 

clear that reconstruction is an eligible 

activity under § 570.202, HUD proposes 

to add the words ‘‘and reconstruction’’ 

to the introductory language at 

§ 570.202(a). 

Administrative Expenses To Facilitate 

Housing 

The provision at § 570.206(g), 

Administrative expenses to facilitate 

housing, is no longer an eligible activity 

in the CDBG program because the 

provision applied only to units 

identified in a grantee’s Housing 

Assistance Plan (HAP). HUD 

discontinued use of the HAP by CDBG 

grant recipients in the mid-1990s. 

Section 570.206(g) cannot be read to just 

substitute costs related to the 

Consolidated Plan for costs formerly 

eligible in connection with the HAP. 

Therefore, HUD proposes to remove 

§ 570.206(g) and replace it with a 

provision addressing how CDBG funds 

may be used to support eligible 

administrative and planning costs for 

the HOME Investment Partnerships 

Program (HOME). 

Section 17 of the United States Housing 

Act of 1937 

Section 570.206(h) refers to the Rental 

Rehabilitation and the Housing 

Development programs that were 

authorized by Section 17 of the United 

States Housing Act of 1937 (‘‘the 1937 

Act’’), Public Law 75–412, 50 Stat. 888. 

Congress repealed Section 17 in Section 

289 of the Cranston-Gonzalez National 

Affordable Housing Act of 1990 (42 

U.S.C. 12839) and terminated assistance 

to these programs. HUD therefore 

proposes to remove and reserve 

§ 570.206(h). HUD similarly proposes to 

remove and reserve § 570.201(m), which 

allowed CDBG funds to be used for 

construction of housing under Section 

17 of the 1937 Act, as well as to remove 

a corresponding cross-reference to 

§ 570.201(m) at § 570.207(b)(3)(ii). 

Section 108 Eligible Activities 

Section 108 borrowers can undertake 

site preparation activities related to 

redeveloping real property that 

borrowers have acquired or rehabilitated 

with Section 108 funds or that is for an 

economic development purpose. The 

wording of § 570.703(f) makes it unclear 

that all such site preparation activities 

must relate to either of those two 

purposes. This proposed rule would 

clarify this requirement. 

Finally, the proposed rule would 

remove and reserve an eligible activity, 

§ 570.703(j), related to activities 

authorized under section 17(d) of the 

1937 Act (42 U.S.C. 1437o(d)); such 

authorized activities are no longer 

carried out since the repeal of the 

statute in 1991. 

Criteria for National Objectives 

§§ 570.208, 570.483 

Timeline To Meet a National Objective 

HUD seeks to ensure that the 

recipients use CDBG–funded activities 

to develop viable urban communities by 

providing decent housing, a suitable 

living environment, and expanding 

economic opportunities, principally for 

LMI persons. CDBG-funded activities 

that fail to meet a national objective 

within a reasonable timeframe undercut 

the purpose of the Act. HUD proposes 

to require at § 570.200(a)(2) that 

recipients demonstrate that the 

acquisition meets a national objective 

within six years of the date of the initial 

drawdown of CDBG funds for the 

activity or the length of the period of 

performance and any extension 

permitted under 24 CFR 570.509, 

whichever is shorter. To reinforce this 

requirement in the national objectives 

criteria sections of part 570, HUD 

proposes to insert the six-year 

timeframe to meet a national objective at 

§§ 570.208(e) and 570.483(g). 

For example, recipients may acquire 

real property but fail or struggle to meet 

a national objective based on unforeseen 

circumstances. The recipient or 

subrecipient may acquire property with 

the intention of constructing a public 

facility such as a recreation center on 

the site or making infrastructure 

improvements where affordable housing 

will later be developed, but unforeseen 

circumstances prevent the proposed 

activity from occurring as planned. 

Rather than change the use of the real 

property for a purpose that will meet the 

planned or other national objective, the 

recipient or subrecipient may simply 

hold the property indefinitely. In this 

circumstance, Office of Inspector 

General audits have documented that 

the length of time between acquiring 


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17 In 2014, the HUD OIG sampled CDBG projects 

and audited corresponding activities. OIG found the 

possibility that stalled activities did not meet a 

national objective compliance due to reporting 

problems or delayed implementation (resulting in 

stalled status). For reference, this is an example 

report: https://www.hudoig.gov/sites/default/files/ 

documents/2014-LA-1007_0.pdf. 

18HUD issued technical assistance for conducting 

local income surveys. For more information, please 

visit https://www.hudexchange.info/programs/ 

cdbg/cdbg-income-survey-toolkit/. 

property and meeting a national 

objective will be excessively long.17 The 

proposed change would ensure that 

activities meet a national objective in a 

timely manner to meet the purpose of 

the Act. 

Low and Moderate Income—Area 

Benefit 

To demonstrate compliance with the 

national objective of benefit to LMI 

persons on an area basis 

(§§ 570.208(a)(1) and 570.483(b)(1)), a 

CDBG-assisted activity must have a 

defined service area. The service area 

must be primarily residential, and at 

least 51 percent of the residents in this 

service area must be LMI persons. 

Certain exception requirements at 

§ 570.208(a)(1)(ii) allow a threshold of 

lower than 51 percent in limited 

circumstances. When designating the 

service area for a CDBG-assisted 

activity, the service area should be 

accurately described and proportionate 

to the size of the CDBG-assisted activity. 

For example, a recipient cannot 

automatically presume a large park 

serves just the neighborhood in which it 

is located; it may serve the entire 

jurisdiction of the recipient. To meet the 

criteria at § 570.208(a)(1) or 

§ 570.483(b)(1), the recipient must use 

the most recent Census Bureau data 

provided by HUD or conduct a survey 

to determine if a minimum of 51 percent 

of the residents in the defined service 

area are LMI.18 CDBG-assisted activities 

that often use this national objective 

include water/sewer installation and/or 

improvements, rehabilitation or 

construction of public facilities and 

improvements, acquisition and/or 

disposition of real property, clearance 

and remediation activities, and some 

public service activities. 

Low- and Moderate-Income—Limited 

Clientele 

To demonstrate compliance with the 

national objective of benefit to LMI 

persons-limited clientele 

(§§ 570.208(a)(2) and 570.483(b)(2)), a 

CDBG-assisted activity must: (1) benefit 

members of a group presumed to be 

LMI, as such groups are described in 

§ 570.208(a)(2)(i)(A) and 

§ 570.483(b)(2)(ii)(A); (2) require 

information on family size and income 

to demonstrate that not less than 51 

percent of the beneficiaries are LMI; (3) 

be restricted to low- and moderateincome persons; or (4) be of such nature 

and be in such location that it may be 

concluded that the beneficiaries of the 

CDBG-assisted activity are low and 

moderate income, as such nature and 

locations are described in 

§§ 570.208(a)(2)(i)(D) and 

570.483(b)(2)(ii)(D). The LMI limited 

clientele national objective is often met 

by CDBG-assisted activities that are: 

restricted to children, such as tutoring 

and recreation programs; senior 

services, such as Meals on Wheels; the 

removal of architectural barriers; and 

public facilities for special populations 

such as the homeless and domestic 

violence shelters. 

HUD proposes revisions to the limited 

clientele provision that would state the 

requirements more clearly and that 

would provide better guidance to 

recipients. In addition to the proposed 

definition of ‘‘elderly’’ at § 570.3, HUD 

proposes references to that definition at 

§§ 570.208(a)(2)(i)(A) and 

570.483(b)(2)(ii)(A) with parenthetical 

statements after ‘‘elderly persons.’’ 

Further, HUD proposes to clarify the 

presumed LMI group of ‘‘illiterate 

adults.’’ Some CDBG recipients have 

interpreted the term ‘‘illiterate adults’’ 

to mean illiterate in a person’s native 

language, while other recipients have 

interpreted it to mean adults that are 

illiterate in English. Neither the Act nor 

part 570 define illiteracy. HUD’s 

position at one time was that, for the 

CDBG program, an illiterate adult is one 

who is unable to read or write in any 

language. However, HUD has 

reconsidered that definition and 

proposes to codify HUD’s current 

interpretation at §§ 570.208(a)(2)(i)(A) 

and 570.483(b)(2)(ii)(A) that illiterate 

adults are adults unable to read and 

write in English and in their first 

language, if the adult’s first language is 

not English. 

Question for comment #11: Would the 

proposed definition for adult illiteracy 

accurately reflect the presumed LMI 

group of ‘‘illiterate adults’’? 

HUD also proposes to broaden the 

application of the presumed LMI group 

of ‘‘battered spouses’’ to cover all 

survivors of domestic violence. 

Survivors of dating violence, sexual 

assault, and stalking are categories 

included in survivors of domestic 

violence. The current category of 

‘‘battered spouses’’ limits the 

presumption to spouses. However, 

unmarried survivors of violence may be 

presumed to be LMI. Therefore, HUD 

proposes to remove ‘‘battered spouses’’ 

from the presumed categories of LMI 

persons and replace it with ‘‘survivors 

of domestic violence’’ at 

§§ 570.208(a)(2)(i)(A) and 

570.483(b)(2)(ii)(A). HUD interprets 

‘‘battered spouses’’ to be a subcategory 

of ‘‘survivors of domestic violence’’ still 

presumed to be LMI under those 

provisions. 

Furthermore, HUD proposes to 

interpret survivors of human trafficking 

to be a subcategory of homeless persons, 

which is presumed to be LMI under 

these provisions. HUD considers human 

trafficking, including both labor and sex 

trafficking, to be ‘‘other dangerous or 

life-threatening conditions that relate to 

violence against the individual or family 

member’’ under paragraph 4 of the 

definition of ‘‘homeless’’ at § 578.3. 

Where an individual or family is fleeing, 

or is attempting to flee human 

trafficking, that has either taken place 

within the individual’s or family’s 

primary nighttime residence or has 

made the individual or family afraid to 

return to their primary nighttime 

residence; and the individual or family 

has no other residence; and the 

individual or family lacks the resources 

or support networks to obtain other 

permanent housing; HUD would 

consider that individual or family to 

qualify as ‘‘homeless’’ under the 

definition. By including survivors of 

human trafficking as a subcategory of 

homeless, HUD would be better able to 

ensure that they have access to the 

benefits and services necessary for their 

safety, protection, and basic well-being. 

Finally, HUD proposes to add 

categories of groups of persons at 

§§ 570.208(a)(2)(i)(A) and 

570.483(b)(2)(ii)(A) that, when served 

exclusively or in combination with 

groups of persons in other listed 

categories, may be presumed to benefit 

persons, 51 percent of whom are LMI, 

barring any evidence to the contrary: 

persons who meet the Federal poverty 

guidelines and persons who are insured 

by Medicaid. The Federal poverty 

guidelines, established by the 

Department of Health and Human 

Services based on poverty thresholds 

published by the Census Bureau, 

estimate the minimum amount of 

income needed to cover basic needs. 

Medicaid coverage varies by State and 

other eligibility requirements, but 

income qualification is generally less 

than four times the Federal poverty 

guidelines. Further, while nearly all 

jurisdictions in the U.S. have more LMI 

persons than persons in poverty, in a 

small number of jurisdictions more 

persons are in poverty than are LMI. 

Allowing grantees to presume that 

persons in poverty are LMI will address 


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19Available at: https://www.hud.gov/sites/dfiles/ 

OCHCO/documents/2023-02cpdn.pdf. 

such anomalies and simplify 

requirements across other Federal 

programs that also provide benefits to 

persons who meet the Federal poverty 

guidelines. 

Low and Moderate Income—Housing 

Activities 

To demonstrate compliance with the 

LMI housing national objective 

(§§ 570.208(a)(3) and 570.483(b)(3)), a 

CDBG-assisted residential structure 

must be occupied by predominantly 

LMI households. Unlike the other LMI 

national objectives, meeting the LMI 

housing national objective is based on 

households rather than individuals or 

families. A household is all the persons 

that occupy a housing unit, whether 

related or unrelated. Meeting the LMI 

housing national objectives criteria is 

also based on the number of housing 

units. Each single-unit structure must be 

occupied by an LMI household. In a 

two-unit structure, one unit must be so 

occupied. Where there are three or more 

units in a structure, a minimum of 51 

percent of the households must be 

occupied by LMI households. CDBGassisted activities that may meet this 

national objective include 

homeownership assistance, housing 

rehabilitation (single and multifamily), 

and acquisition of real property where 

a recipient or subrecipient will 

construct housing units using another 

funding source. Pursuant to 

§ 570.207(b)(3), recipients or 

subrecipients may not use CDBG or 

Section 108 funds for new housing 

construction unless it is provided under 

the last resort housing provisions of the 

Uniform Relocation Assistance and Real 

Property Acquisition Policies Act of 

1970 (42 U.S.C. 4601 et seq.) (URA) 

regulations at 49 CFR part 24, it is 

authorized as part of direct 

homeownership assistance for LMI 

households under § 570.201(n), or a 

qualified Community-Based 

Development Organization is carrying 

out the activity under § 570.204. 

Some exceptions permit eligible 

activities to meet the LMI housing 

national objective where less than 51 

percent of multifamily units are 

occupied by LMI households. Such 

activities include assistance for an 

eligible activity to reduce the 

development cost of the new 

construction of a multifamily, nonelderly rental housing project where not 

less than 20 percent of the units will be 

occupied by LMI households at 

affordable rents. In addition, the 

proportion of the total cost of 

developing the project to be paid with 

CDBG funds must be no more than the 

proportion of units in the project that 

will be occupied by LMI households 

(§§ 570.208(a)(3)(i) and 570.483(b)(3)(i)). 

The proposed rule would add as 

additional exceptions substantial 

rehabilitation (as defined at § 5.100) and 

conversion of a nonresidential structure 

to a multifamily, non-elderly rental 

housing project. This change would 

align treatment of substantial 

rehabilitation with new construction for 

purposes of meeting the national 

objectives criteria for housing activities. 

HUD Review of Consolidated Plan 

§ 91.500 

Some recipients believe that a 

Consolidated Plan that is not 

disapproved by HUD pursuant to 

§ 91.500(a) constitutes an approval of 

the eligibility of the activities for the 

applicable programs identified in the 

plan. Because the Consolidated Plan is 

a planning document, HUD is unable to 

determine that a grantee will carry out 

the activity in compliance with program 

requirements, including eligible activity 

requirements. Grantees may amend 

plans, including planned activities, at 

any time and amendments are not 

subject to HUD review. However, 

because the Plan describes a substantial 

number of activities for many different 

CPD programs; reviewing each 

individual activity within the plan for 

compliance would be burdensome for 

CPD field offices and significantly 

lengthen review of the Consolidated 

Plan and delay grantees’ ability to carry 

out activities. CPD seeks to ensure the 

eligibility of activities through risk 

analysis and monitoring after grantees 

have carried out activities. Therefore, 

HUD proposes to add language to 

§ 91.500(a) stating that the fact that HUD 

has not disapproved the Consolidated 

Plan does not constitute approval of the 

activities identified in the Plan as being 

compliant with relevant program 

requirements and does not confer a 

determination of the eligibility of the 

activities in the Consolidated Plan. 

Urban County Qualification/ 

Requalification Process § 570.307 

Currently, § 570.307 requires the 

Secretary to determine, after reviewing 

qualification documentation from an 

urban county, whether the county is 

qualified to receive CDBG funds. Each 

year, HUD publishes a notice, 

Instructions for Urban County 

Qualification for Participation in the 

Community Development Block Grant 

(CDBG) Program,19 setting forth the 

qualification process, which generally 

runs from May to September. Once 

urban counties complete the 

qualification/requalification process, 

they remain qualified for three 

successive Federal fiscal years, as stated 

in § 570.307(d). However, the CDBG 

urban county qualification process does 

not have a statutory or regulatory 

completion date. Therefore, HUD 

proposes to insert a provision at 

§ 570.307(h) that would require urban 

counties to complete the urban county 

qualification or requalification process 

no later than September 30 of the year 

of qualification or requalification. 

Section 217(b)(3) of title II of the 

Cranston-Gonzalez National Affordable 

Housing Act, as amended (NAHA) (42 

U.S.C. 12747(b)(3)), and §§ 92.50(a) and 

92.101(a)(1) require that, in order to 

receive a HOME formula allocation for 

a fiscal year as a consortium, units of 

general local government be qualified/ 

requalified as consortia in accordance 

with HOME requirements by the last 

day of the prior fiscal year, which is 

September 30 of each year. Most urban 

counties and HOME consortia select the 

same three-year qualification period to 

simplify the qualification process for 

both entities, and HOME consortia may 

change their three-year qualification 

cycles so that they coincide with the 

urban county’s three-year qualification 

period. Because the CDBG program does 

not currently have a deadline to 

complete the process, however, an 

urban county that is also a HOME 

consortium may not complete the 

qualification process for the consortium 

by September 30 because of an issue 

that arises with a participating unit of 

local government with regard to its 

participation in the urban county’s 

CDBG program. While this will not 

affect a consortium’s CDBG funding, 

such an action may result in a loss of 

its HOME funding for that fiscal year. 

Therefore, a September 30 deadline for 

the urban county qualification process 

may help align the programs and 

eliminate problems that arise regarding 

a consortium’s timely completion of its 

qualification or requalification as a 

HOME consortium under the 

requirements in 24 CFR part 92. 

Exclusion of Section 108-Generated 

Revenue From Program Income 

§ 570.500 

HUD proposes to remove language 

from § 570.500(a)(4)(ii) that excludes 

from the definition of ‘‘program 

income’’ revenues generated by certain 

activities financed by a Section 108 loan 

guarantee. HUD adopted 

§ 570.500(a)(4)(ii) to promote the use of 

Section 108 financing for economic 

development activities. However, the 

regulations are confusing to recipients 


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who want to use Section 108-generated 

revenue for other eligible activities 

because the recipients may infer that 

such revenue is not subject to any 

restrictions. That inference would be 

incorrect, however, because significant 

restrictions on the use of the program 

income do exist. Access to the revenue 

is restricted because it is by default 

pledged as security for repayment of the 

guaranteed loan for the term of the loan, 

which may be up to 20 years. Further, 

some recipients have noted that the 

requirement to use miscellaneous 

revenue for activities located in a HUDapproved Neighborhood Revitalization 

Strategy Area (NRSA) limits the 

provision’s utility when implementing 

an NRSA would not be practicable for 

them. Given these problems and given 

that this exclusion has not provided any 

apparent benefits to Section 108 

borrowers, HUD proposes to remove this 

provision. HUD believes that other 

proposed changes to the regulations will 

promote the increased use of CDBG and 

Section 108 funding for economic 

development more effectively and 

efficiently than maintaining the program 

income exclusion. 

Treatment of Excess Program Income 

§ 570.504 

Currently, § 570.504(b)(2)(iii) requires 

each recipient to calculate the amount 

of program income cash balances on 

hand at the end of each program year 

(except those needed for immediate 

cash needs, cash balances of a revolving 

loan fund, cash balances in lump sum 

drawdown accounts, and cash and 

investments held for Section 108 loan 

guarantee security needs). After all 

deductions, the recipient must 

determine if the cash balances as of the 

end of the program year exceed 1⁄12 of 

the most recent annual grant. The 

recipient must remit any excess amount 

to HUD as soon as practicable after the 

end of the program year. The regulations 

provide for the excess amount to be 

placed in the recipient’s line of credit. 

HUD has determined that it cannot 

place the excess program income in a 

line of credit. Therefore, HUD proposes 

to require that the recipient send such 

excess program income to the United 

States Treasury. Note that the amount to 

be remitted to HUD does not include 

program income cash balances needed 

for various program purposes, e.g., 

amount pledged as security for a Section 

108 loan. 

Definition of Program Income—State 

CDBG Program § 570.489 

In the definition of program income 

for the State CDBG program at 

§ 570.489(e)(2)(iv)(C), an exclusion 

allows a unit of general local 

government funded by a State to retain 

up to $100 per year in interest on 

deposit of grant funds before 

disbursement of the funds for activities 

for CDBG administrative expenses. The 

amount of $100 previously aligned with 

§ 85.21(h)(2)(i), which has been replaced 

by 2 CFR 200.305(b)(9), and which 

currently allows a unit of general local 

government funded by a State to retain 

up to $500 per year. Therefore, HUD 

proposes to update § 570.489(e)(2)(iv)(C) 

by replacing the dollar amount with a 

reference to 2 CFR 200.305(b)(9). 

Reporting Data on Use of CDBG Funds 

§ 570.507 

HUD proposes to add a requirement at 

§ 570.507(d) to require a recipient to 

collect and report data on its use of 

CDBG funds in the Integrated 

Disbursement and Information System 

(IDIS). HUD has required recipients to 

report program activity and expenditure 

data in IDIS since 1996, but part 570 

requires only that recipients must 

generally ‘‘submit such other reports 

and information as HUD determines are 

necessary.’’ The revision would make it 

clear to recipients that they must use 

IDIS to submit such reports as required 

by § 570.507. 

Conflict of Interest Public Disclosure 

Requirements §§ 570.489, 570.611 

Currently, §§ 570.489(h)(4)(i) (for 

State recipients) and 570.611(d)(1)(i) 

(for entitlement recipients) require that 

when recipients request that HUD 

consider an exception to the conflict-ofinterest requirements, recipients must 

have documentation of disclosure of the 

nature of the conflict accompanied by 

an assurance that there has been a 

public disclosure of the conflict and a 

description of how the public disclosure 

was made. The regulations do not make 

clear what ‘‘public disclosure’’ means. 

Some recipients define public 

disclosure as public hearings or 

publication in a newspaper of general 

local circulation; others believe that 

posting it on the recipient’s website is 

sufficient. To clarify and make standard 

what public disclosure means, HUD 

proposes to add language to 

§§ 570.489(h)(4)(i) and 570.611(d)(1)(i) 

that would define public disclosure as 

disclosure through any of the following 

media: publication on the recipient’s 

website, including social media; 

electronic mailings; media 

advertisements; public service 

announcements; and display in public 

areas such as libraries, grocery store 

bulletin boards, and neighborhood 

centers. HUD also clarifies the existing 

requirement to make it explicit that 

grantees must provide HUD evidence of 

the public disclosure. 

Section 108 Loan Guarantees 

§§ 570.704, 570.705 

Application Requirements 

The Section 108 application 

submission requirements at § 570.704(b) 

state that an applicant should provide 

the application ‘‘to the appropriate HUD 

Office,’’ but do not distinguish whether 

the application should go to the 

applicant’s local HUD Field office or 

Headquarters. The proposed rule would 

explicitly state that applicants should 

submit applications for Section 108 loan 

guarantee assistance to HUD 

Headquarters, ensuring that HUD 

Headquarters can promptly review such 

applications concurrently with HUD 

Field office staff. 

Prior to 2015, the regulations implied, 

but did not clearly state, that HUD Field 

offices reviewed applications first and 

then forwarded the application together 

with its recommendation for approval or 

disapproval to HUD Headquarters. HUD 

removed this provision in a 2015 

rulemaking, leaving the rule silent as to 

which HUD office(s) applicants should 

submit an application. In concert with 

the 2015 rulemaking, CPD’s Financial 

Management Division (FMD) at HUD 

Headquarters (which administers the 

Section 108 program) implemented a 

concurrent review process with CPD 

Field office staff. However, some 

applicants have continued to submit 

applications only to HUD Field offices. 

HUD Field office staff are responsible 

for many CPD programs and may not 

review a submitted application as 

promptly as FMD or notify FMD that 

they have received a new application. 

Applications submitted only to HUD 

Field offices may therefore result in a 

delay in the start of the concurrent 

review process. 

The submission requirements also do 

not clearly reiterate the basic 

information an applicant needs to 

include in an application: specifically, 

the proposed eligible activity under 

§ 570.703 and the source of the payment 

of fees under § 570.712 (in addition to 

the national objectives criteria at 

§ 570.208, which is already identified in 

the current program regulation at 

§ 570.704(b)(1)). Other parts of subpart 

M include these requirements, but the 

proposed rule would reiterate those 

requirements to clearly identify what 

information the Section 108 application 

must contain. HUD proposes to add 

these references to § 570.704(b)(1) and 

(2), respectively. 

Finally, HUD proposes to better 

organize the submission requirements at 


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1762 Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Proposed Rules 

§ 570.704(b) pertaining to necessary 

certifications. The proposed revisions 

would reorganize the required 

certifications in a format better suited 

for applicants to understand. HUD 

believes such clarity will help 

applicants prepare an application 

correctly and ensure that requests for 

missing certifications do not delay 

HUD’s review. Another revision would 

correct an error in the current regulation 

and would require Section 108 

applicants to certify that they must 

impose assessments on properties 

owned and occupied by moderateincome persons, to recover the nonguaranteed loan funded portion of the 

capital cost without paying such 

assessments on their behalf from 

guaranteed loan funds, instead of the 

current language which discusses only 

the ‘‘guaranteed’’ loan funded portion of 

the capital cost. 

Loan Requirements 

The limitations on commitments at 

§ 570.705(a)(1)(iii) permit HUD to place 

a higher priority on applications 

containing activities to be carried out in 

areas designated as empowerment 

zones/enterprise communities by the 

Federal Government or a State. 

Statutory authorization for such 

activities has lapsed, removing the need 

to place a higher priority on activities 

carried out in such areas. Therefore, 

HUD proposes to delete the language in 

§ 570.705(a)(1)(iii) referring to 

empowerment zones/enterprise 

communities and replace it with 

language describing areas designated as 

economically distressed by the Federal 

Government or by any State. 

Security Requirements 

Security requirements outlined in 

§ 570.705(b) list examples of acceptable 

forms of additional security (other than 

CDBG funds) for loan guarantees that 

the loan guarantee contract between 

HUD and a borrower will specify. 

However, the limited examples of 

security may mislead potential 

applicants into believing that the 

regulations limit the security pledged 

for loan guarantees to the listed types of 

security. Publishing such information 

through guidance documents and 

marketing materials and engaging in 

direct outreach to potential applicants 

are clearer and more effective ways to 

communicate the types of security that 

a borrower may pledge. Therefore, HUD 

proposes to remove and reserve the 

examples of security HUD may accept at 

§ 570.705(b)(3)(i) through (iv). 

Additionally, HUD proposes to delete 

subsections that are unnecessary or 

inconsistent with other provisions. 

Section 570.705(a)(2)(iii)(A) through (C) 

appear to provide three methods of 

calculating limitations on commitments 

to guarantee loans for recipients that 

receive grants under subpart F. 

However, paragraph (a)(2)(iii)(A) is 

duplicative of 570.705(a)(2)(iii), and 

paragraphs (a)(2)(iii)(B) and (C), which 

allow for using an average of the three 

most recent grants, are inconsistent with 

§ 570.705(a)(2)(iii). 

F. ICDBG Program 

HUD also proposes certain 

corresponding changes to Part 1003, 

where appropriate, that are intended to 

align the ICDBG program with the CDBG 

program. 

Definitions § 1003.4 

HUD proposes amending the 

Definitions section to include ‘‘activity 

delivery costs.’’ Similar to CDBG 

recipients and subrecipients, ICDBG 

recipients and subrecipients may incur 

costs typically referred to as ‘‘activity 

delivery costs’’ related to carrying out 

specific ICDBG eligible activities. The 

ICDBG regulations do not specifically 

define this term; therefore, HUD 

proposes to add a definition at § 1003.4. 

This addition makes clear that 

recipients and subrecipients must use 

the cost principles at 2 CFR part 200, 

subpart E, in determining the 

allowability of the costs. In particular, 

recipients and subrecipients must 

ensure that activity delivery costs 

consisting of staff salaries are allocable 

to the specific activity and adequately 

documented. 

Eligible Activities §§ 1003.201, 

1003.202, 1003.203 

Basic Eligible Activities 

HUD proposes to add a new 

§ 1003.201(r) to clarify that recipients 

can assist eligible activities if they are 

part of mixed-use properties that also 

contain ineligible uses, so long as the 

recipient expends ICDBG funds only on 

the eligible use. The proposed rule also 

would add a definition of ‘‘mixed-use 

property’’ to the new § 1003.201(r). This 

is a conforming change to the ICDBG 

regulations to align them with the 

proposed changes to the CDBG 

regulations in this proposed rule. 

Additionally, the Tornado Shelters 

Act (Pub. L. 108–146; 117 Stat. 1883, 

enacted December 3, 2003) (42 U.S.C. 

5301, note), authorized the construction 

or improvement of tornado shelters in 

certain neighborhoods and 

manufactured housing communities as 

an eligible activity under the CDBG 

program. Consistent with the change to 

§ 570.201, HUD proposes to insert a 

provision at § 1003.201(p) that would 

codify the use of ICDBG funds for 

tornado safe shelters as an eligible 

activity under certain conditions. As 

discussed above with respect to CDBG, 

this activity is already eligible under 

ICDBG. HUD is simply codifying in 

regulations a statutory change that has 

been codified in law for many years. 

Finally, consistent with CDBG, HUD 

proposes to add a new paragraph (q) to 

clarify that essential repairs and 

operating expenses necessary to 

maintain the habitability of housing 

units acquired through tax foreclosures 

is also an eligible activity. 

Eligible Rehabilitation and Preservation 

Activities 

HUD proposes to amend § 1003.202(a) 

to clarify that reconstruction of housing 

is an eligible ICDBG activity. 

Reconstruction of buildings or 

structures, including housing, has been 

an eligible ICDBG activity since 1996. 

However, the program regulations do 

not clearly and expressly identify 

reconstruction as an eligible activity 

related to housing. To make clear that 

reconstruction is an eligible activity 

under § 1003.202(a), HUD proposes to 

add the words ‘‘and reconstruction’’ to 

the introductory language at 

§ 1003.202(a). This update will be a 

conforming change for the ICDBG 

regulations to align them with the same 

proposed changes to the CDBG 

regulations in this proposed rule. 

Special Economic Development 

Activities 

HUD proposes to amend § 1003.203(b) 

governing special economic 

development activities. Section 

1003.203 governs the use of ICDBG 

funds for special economic development 

activities and includes an illustrative 

list of eligible forms of assistance to 

private for-profit businesses. The ICDBG 

regulations already list forms of support 

by which recipients can provide 

assistance to private, for-profit 

businesses where the assistance is 

appropriate to carry out an economic 

development project. HUD has 

previously interpreted this provision to 

allow ICDBG assistance to New Markets 

Tax Credit (NMTC) investment vehicles. 

The proposed revisions would explicitly 

indicate that ICDBG recipients are 

allowed to provide assistance to an 

economic development project through 

a for-profit entity that passes the funds 

through a financing mechanism (e.g., 

Qualified Opportunity Funds and 

NMTC investment vehicles). This 

update is a conforming change to the 

ICDBG regulations to align them with 

the same proposed changes to the CDBG 

regulations in this proposed rule. 


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Program Administration Costs 

§ 1003.206 

HUD proposes to amend § 1003.206 to 

add a reference to the new proposed 

definition of ‘‘activity delivery costs’’ in 

§ 1003.4 to help ICDBG recipients 

distinguish between administrative 

costs and activity delivery costs. This 

update is a conforming change to the 

ICDBG regulations to align them with 

the proposed changes to the CDBG 

regulations in this proposed rule. 

Criteria for Compliance With the 

Primary Objective § 1003.208 

HUD’s regulation at § 1003.208 

provides the criteria for determining 

whether an ICDBG-assisted activity 

complies with one or more of the 

national objectives. HUD proposes 

conforming changes to paragraphs (b), 

(c), and (d) Limited Clientele activities, 

Low- and Moderate-Income Housing 

Activities, and Job creation or retention 

activities. This update is a conforming 

change to the ICDBG regulations to align 

them with the proposed changes to the 

CDBG regulations in this proposed rule. 

With respect to Limited Clientele 

activities, HUD proposes revisions to 

paragraph (b) to clarify requirements 

and provide better guidance to 

recipients. Consistent with the reasons 

stated above in section III.E with respect 

to the CDBG program, HUD proposes to 

clarify in the ICDBG program that the 

presumed LMI group of ‘‘illiterate 

adults’’ means adults unable to read and 

write in English and in their first 

language, if the adult’s first language is 

not English. HUD also proposes to 

broaden the application of the presumed 

LMI group of ‘‘battered spouses’’ to 

cover all survivors of domestic violence. 

The current category of ‘‘battered 

spouses’’ limits the presumption to 

spouses. However, unmarried survivors 

of violence may be presumed to be LMI. 

Therefore, HUD proposes to remove 

‘‘battered spouses’’ from the presumed 

categories of LMI persons and replace it 

with ‘‘survivors of domestic violence.’’ 

HUD interprets ‘‘battered spouses’’ to be 

a subcategory of ‘‘survivors of domestic 

violence’’ still presumed to be LMI 

under the ICDBG regulations. As stated 

earlier, HUD also proposes to interpret 

survivors of human trafficking to be a 

subcategory of homeless persons, which 

is presumed to be LMI under these 

provisions, in order to ensure that they 

have access to the benefits and services 

necessary for their safety, protection, 

and basic wellbeing. 

Finally, HUD proposes to add 

categories of groups of persons at 

§ 1003.208(b)(1)(i) that, when served 

exclusively or in combination with 

groups of persons in other listed 

categories, may be presumed to benefit 

persons, 51 percent of whom are LMI, 

barring any evidence to the contrary: 

persons who meet the Federal poverty 

guidelines and persons who are insured 

by Medicaid. As stated in reference to 

the same changes being proposed in 

CDBG in §§ 570.208(a)(2) and 

570.483(b)(2), the Federal poverty 

guidelines, established by the 

Department of Health and Human 

Services based on poverty thresholds 

published by the Census Bureau, 

estimate the minimum amount of 

income needed to cover basic needs. 

Medicaid coverage varies by State and 

other eligibility requirements, but 

income qualification is generally less 

than four times the Federal poverty 

guidelines. Further, while nearly all 

jurisdictions in the U.S. have more LMI 

persons than persons in poverty, in a 

small number of jurisdictions more 

persons are in poverty than are LMI. 

Allowing ICDBG grantees to presume 

that persons in poverty are LMI will 

address such anomalies and simplify 

requirements across other Federal 

programs that also provide benefits to 

persons who meet the Federal poverty 

guidelines. 

With respect to the Low- and 

Moderate-Income Housing activities in 

paragraph (c), to demonstrate 

compliance with the LMI housing 

national objective, an ICDBG-assisted 

residential structure must be occupied 

by LMI households. Meeting the LMI 

housing national objective is based on 

households rather than individuals or 

families. A household is all the persons 

that occupy a housing unit, whether 

related or unrelated. Meeting the LMI 

housing national objectives criteria is 

also based on the number of housing 

units. Generally, ICDBG funds may only 

be used to assist housing units occupied 

by LMI households. Accordingly, in 

order for an activity to meet the LMI 

housing national objective, each singleunit structure that is assisted with 

ICDBG funds must be occupied by an 

LMI household. When ICDBG funds are 

used to assist a two-unit structure, to 

meet the LMI housing national 

objective, at least one unit must be so 

occupied. Where there are three or more 

units in a structure, a minimum of 51 

percent of the units must be occupied 

by LMI households. ICDBG-assisted 

activities that may meet this national 

objective include homeownership 

assistance, housing rehabilitation (single 

and multifamily), and acquisition of real 

property where a recipient or 

subrecipient will construct housing 

units using another funding source. 

Some exceptions permit eligible 

activities to meet the LMI housing 

national objective where less than 51 

percent of multifamily units are 

occupied by LMI households. Such 

activities include assistance for an 

eligible activity to reduce the 

development cost of the new 

construction of a multifamily, nonelderly rental housing project where not 

less than 20 percent of the units will be 

occupied by LMI households at 

affordable rents. In addition, the 

proportion of the total cost of 

developing the project to be paid with 

ICDBG funds must be no more than the 

proportion of units in the project that 

will be occupied by LMI households. 

The proposed rule would add as 

additional exceptions substantial 

rehabilitation and conversion of a 

nonresidential structure to a 

multifamily, non-elderly rental housing 

project. This change would align 

treatment of substantial rehabilitation 

with new construction, as is also 

proposed in the CDBG section 24 CFR 

570.208(a)(3)(i) and 570.483(b)(3) of this 

rule for purposes of meeting the 

national objectives criteria for housing 

activities. 

Finally, with respect to job creation or 

retention activities in paragraph (d), 

documenting whether a job is held by or 

made available to an LMI person can 

present a financial and administrative 

burden on ICDBG recipients due to the 

data that recipients must gather and 

collect from assisted businesses. This 

aligns with changes proposed in CDBG 

regulations at 24 CFR 570.208(a)(4) and 

570.483(b)(4) above. As noted there, to 

help alleviate this burden, HUD is 

proposing to revise the regulations to 

add a presumption based on the 

location of an assisted business and 

based on where the person holding the 

job resides. The revised regulation 

would provide that, for purposes of 

determining whether a job is held by or 

made available to a low or moderate 

income person, the person may be 

presumed to be a low or moderate 

income person if: he/she resides within 

a census tract where not less than 70 

percent of the residents have incomes at 

or below 80 percent of the area median; 

or, if he/she resides in a census tract 

designated as economically distressed 

by the Federal Government; or, if the 

assisted business is located in and the 

job under consideration is to be located 

in such a tract or area. Revising the 

criteria for the presumption would 

significantly clarify the standards for 

recipients and encourage greater use of 

ICDBG funds for job creation and 


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retention activities in many Tribal 

communities. 

Reports § 1003.506 

HUD is proposing to amend the due 

dates for annual status and evaluation 

reports (ASERs) in § 1003.506(a) to 

accommodate ICDBG grantees that have 

a Tribal program year different than the 

Federal Fiscal year. The term ‘‘Tribal 

program year’’ is defined in the Indian 

Housing Block Grant (IHBG) regulations 

at § 1000.10 as the fiscal year of the 

IHBG recipient. Under the proposed 

rule, ASERs would be due 90, rather 

than 45 days, after the end of the 

grantee’s Tribal program year, or after 

the end of the Federal fiscal year if the 

grantee has a Tribal program year that 

ends on the same date the Federal fiscal 

year ends. The amendment would align 

the ASER due dates with the due dates 

for Annual Performance Reports under 

the IHBG program to assist grantees of 

both programs to more easily track and 

schedule submission of reports due to 

HUD. ASERs would also continue to be 

required at grant close-out in 

accordance with the requirements of 

§ 1003.508. 

HUD also proposes to revise the 

language in § 1003.506(a) with respect 

to the form of ASER reports. The current 

regulation requires a narrative for the 

ASER which has resulted in significant 

variations in the reports submitted as 

well as difficulty in capturing relevant 

and useful data. HUD intends in the 

future, through the PRA process, to 

develop and promulgate a standardized 

ASER form with drop down boxes and 

set data points to assist recipients in 

meeting the reporting requirements in a 

consistent manner, which will both 

improve the usefulness of the data 

received and facilitate data retention 

and analysis. The proposed revision to 

the current language will make it easier 

for HUD to implement such a form in 

the future. 

Conflict of Interest § 1003.606 

To clarify and standardize the 

meaning of the term ‘‘public 

disclosure,’’ HUD proposes to add 

language to § 1003.606 that would 

define public disclosure as disclosure 

through any of the following media: 

publication on the recipient’s website, 

including social media; electronic 

mailings; media advertisements; public 

service announcements; and display in 

public areas such as libraries, grocery 

store bulletin boards, and neighborhood 

centers. Currently, § 1003.606 requires 

that when recipients request that HUD 

consider an exception to the conflict-ofinterest requirements, recipients must 

have documentation of disclosure of the 

nature of the conflict accompanied by 

an assurance that there has been a 

public disclosure of the conflict and a 

description of how the public disclosure 

was made. The regulations do not make 

clear what ‘‘public disclosure’’ means. 

Some recipients define public 

disclosure as public hearings or 

publication in a newspaper of general 

local circulation; others believe that 

posting it on the recipient’s website is 

sufficient. This update will clarify the 

meaning of the term and is a conforming 

change for the ICDBG regulations to 

align them with the proposed changes to 

the CDBG regulations in this proposed 

rule. HUD also clarifies the existing 

requirement to make it explicit that 

grantees must provide HUD evidence of 

the public disclosure. 

G. Technical Corrections and Outdated 

Provisions 

HUD proposes the following technical 

corrections: 

Sections 91.225(b)(2) (for entitlement 

recipients) and 91.325(b)(3) (for State 

recipients) refer to § 570.2 in certifying 

the consolidated housing and 

community development plan; however, 

§ 570.2 was removed from the 

regulations in 1996. The provisions 

should instead refer to implementing 

the primary objective of the Act at 

§ 570.200(a)(3). Therefore, HUD 

proposes to replace the citation to 

§ 570.2 with a citation to § 570.200(a)(3). 

HUD proposes to correct a 

typographical error in § 570.201(k), 

which refers to section 105(a)(21) of the 

Act concerning assistance to institutions 

of higher education but should instead 

refer to housing services activities under 

section 105(a)(20) of the Act. 

HUD proposes to redesignate 

§ 570.205(a)(6) as § 570.205(b), as HUD 

originally intended policy, planning, 

management, and capacity building 

activities to be a subheader for the 

activities below and separate from 

paragraph (a). 

HUD proposes to correct a reference 

in § 570.207 to a non-existent section of 

§ 570.3. The definitions in section 570.3 

are undesignated; however, 

§ 570.207(a)(1) contains a reference to 

§ 570.3(d), which does not exist. 

HUD proposes to correct 

§ 570.208(d)(5), which refers to 

§ 91.215(e) in discussing area 

revitalization strategy areas, but should 

refer to § 91.215(g), which discusses 

neighborhood revitalization. 

HUD proposes to correct references in 

§ 570.307 to non-existent sections of 

§ 570.3. The definitions in section 570.3 

are undesignated; however, 

§ 570.307(b)(1) and (d)(1) both contain 

references to § 570.3(3), which does not 

exist. 

HUD proposes to correct 

§§ 570.482(c)(1) and 570.482(c)(2)(i), 

which cite to section 105(a)(23) of the 

Act, which concerns treatment of 

property acquired in tax foreclosure 

proceedings; but should instead cite to 

section 105(a)(22) of the Act, which 

discusses microenterprise assistance 

activities. 

HUD proposes to restore 

§ 570.489(e)(3)(ii)(C), which was 

mistakenly omitted from the Code of 

Federal Regulations in 2015. 

HUD proposes to correct the citation 

in § 570.490(a)(2) to § 91.320(j)(1), 

which should instead be to CDBG 

requirements in the action plan at 

§ 91.320(k)(1). 

HUD proposes to correct § 570.504(c) 

regarding the disposition of program 

income by subrecipients, which states 

that subrecipients holding program 

income after the expiration of a 

subrecipient agreement shall pay such 

funds to the recipient as required by 

§ 570.503(b)(8). However, the correct 

citation is to § 570.503(b)(7). 

The proposed rule would delete 

subparts E and G of part 570. Subpart E 

governs a variety of special purpose 

grants that no longer exist. Subpart G 

governs Urban Development Action 

Grants, which likewise no longer exist. 

In concert, HUD proposes revisions to 

remove references to subparts E and G 

in the definition of ‘‘CDBG funds’’ at 

§ 570.3; the conflict-of-interest 

requirements at § 570.611(a)(2); and 

subpart K applicability at § 570.600(a). 

The proposed rule would also remove 

§ 570.613, ‘‘Eligibility restrictions for 

certain resident aliens.’’ This section 

provides restrictions for ‘‘certain newly 

legalized aliens’’ as they were described 

in 24 CFR part 49, which no longer 

exists. The rule was intended to address 

the 1986 amendments to the 

Immigration and Naturalization Act of 

1952, which prohibited certain 

noncitizens from receiving Federal 

financial assistance furnished on the 

basis of financial need for a period of 

five years. (Section 245A(h) of the 

Immigration and Nationality Act, 8 

U.S.C. 1255a(h)). As this provision 

applied to newly legalized aliens that 

entered the country before January 1, 

1982, and admitted for lawful residence 

in accordance with the 1986 

amendments, HUD has removed 24 CFR 

part 49, which described this 

population, and is now removing the 

regulation that referenced this statutory 

requirement. 

HUD proposes to revise Uniform 

Relocation Act (URA) citations in the 

CDBG and ICDBG program regulations 


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Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Proposed Rules 1765 

(§§ 570.606 and 1003.602) to update an 

outdated URA regulatory citation (49 

CFR 24.2(g)(2)). The URA regulatory 

citation changed to 49 CFR 24.2(a)(9)(ii) 

in the 2005 URA final rule but was 

never updated in the CDBG and ICDBG 

program regulations. 

H. Interaction of This Proposed Rule 

With HUD’s Proposed Rule on 

Affirmatively Furthering Fair Housing 

HUD acknowledges that this proposed 

rule proposes to amend sections of the 

Code of Federal Regulations that HUD 

has also previously proposed to amend 

in its Affirmatively Furthering Fair 

Housing (AFFH NPRM), published 

February 9, 2023 (88 FR 8516). Both 

rules propose amendments to 

§§ 91.105(b)(2) and (c) and 91.115(b)(2). 

The AFFH NPRM and this NPRM 

propose to amend these provisions in 

different ways that do not conflict with 

each other. 

HUD will consider public comments 

received on each proposed rule. The 

public comment period on the AFFH 

NPRM closed on April 24, 2023, and 

HUD is considering the public 

comments received on the AFFH 

NPRM’s proposed changes to the 

referenced provisions as part of that 

rulemaking. HUD invites the public to 

comment on the revisions and additions 

proposed as part of this rulemaking. 

Although the proposed regulatory 

amendments in this NPRM do not 

reflect the amendments proposed in the 

AFFH NPRM, HUD intends this rule to 

ultimately be consistent with a final 

AFFH rule. HUD will consider all 

relevant comments received on the 

AFFH NPRM, as well as on this NPRM. 

HUD will reconcile the regulatory 

language in its final rules, ensuring that 

the final version of this rule, if 

published after a final AFFH rule is 

codified, is consistent with all changes 

made in that published final AFFH rule. 

For example, both NPRMs propose to 

add new language to 24 CFR 

91.115(b)(2). The AFFH NPRM proposes 

to apply certain requirements of this 

provision to the Equity Plans that could 

be established by an AFFH final rule. 

The proposed language in this NPRM 

does not account for such Equity Plan 

requirements since that is not the 

subject of this rulemaking. However, if 

HUD adds Equity Plan requirements to 

24 CFR 91.115(b)(2) in its AFFH final 

rule, a subsequent final rule published 

as part of this rulemaking will include 

that change, and appropriately reconcile 

the additions made in each rule. 

IV. Findings and Certifications 

Regulatory Review (Executive Orders 

12866, 13563, and 14094) 

Pursuant to Executive Order 12866 

(Regulatory Planning and Review), a 

determination must be made whether a 

regulatory action is significant, and 

therefore, subject to review by OMB in 

accordance with the requirements of the 

order. Executive Order 13563 

(Improving Regulations and Regulatory 

Review) directs executive agencies to 

analyze regulations that are ‘‘outmoded, 

ineffective, insufficient, or excessively 

burdensome, and to modify, streamline, 

expand, or repeal them in accordance 

with what has been learned.’’ Executive 

Order 13563 also directs that, where 

relevant, feasible, and consistent with 

regulatory objectives, and to the extent 

permitted by law, agencies are to 

identify and consider regulatory 

approaches that reduce burdens and 

maintain flexibility and freedom of 

choice for the public. Executive Order 

14094 entitled ‘‘Modernizing Regulatory 

Review’’ (hereinafter referred to as the 

‘‘Modernizing E.O.’’) amends section 

3(f) of Executive Order 12866 

(Regulatory Planning and Review), 

among other things. 

HUD believes that this proposed rule, 

by revising the Community 

Development Block Grant (CDBG) and 

related Section 108 loan guarantee 

program regulations to make it easier for 

recipients to promote economic 

development and recovery in low- and 

moderate-income communities and 

support investments in underserved 

areas, together with corresponding 

changes in the ICDBG program, will 

increase the effectiveness of these grant 

programs. The proposed rule has been 

determined to be a ‘‘significant 

regulatory action,’’ as defined in section 

3(f) of Executive Order 12866, but not 

economically significant under section 

3(f)(1) of the Order. The docket file is 

available for public inspection online at 

www.regulations.gov. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule are 

currently approved by OMB and have 

been given OMB Control Numbers 

2506–0077, 2506–0085, and 2577–0191. 

In accordance with the Paperwork 

Reduction Act, an agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless the collection 

displays a currently valid OMB control 

number. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.), generally requires an 

agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This analysis 

also considers the potential impact on 

Indian Tribes. 

As discussed in the preamble, the 

proposed rule would update CDBG’s 

and ICDBG’s economic development 

regulations to make it easier for 

recipients to promote economic 

development and recovery in low- and 

moderate-income communities and 

support investments in underserved 

areas. Because the CDBG economic 

development regulations and standards 

have not been updated since 1995, the 

proposed rule would provide a muchneeded update to ease the expenditure 

of funds for economic development 

activities. The proposed rule would 

lessen the economic impact on grantees, 

small entities and recipients by 

reducing eligibility and recordkeeping 

burdens. This would likely result in 

increased economic development 

activities and the associated creation of 

economic opportunities principally for 

low- and moderate-income persons. 

The proposed rule would primarily 

impact CDBG, Section 108 borrowers, 

and ICDBG grantees. CDBG grantees and 

section 108 borrowers are State and 

local governments, some of which are 

small government entities, and ICDBG 

grantees are Indian Tribes and Tribal 

organizations which are eligible under 

Title I of the Indian Self-Determination 

and Education Assistance Act. These 

grantees administer the CDBG, section 

108, and ICDBG programs, are familiar 

with the regulatory requirements, and 

are ultimately responsible for program 

compliance. While some impacts may 

filter down to smaller governmental and 

non-governmental entities, the expected 

impact would be a decrease in economic 

burden, as discussed above. As such, 

the proposed rule would likely have a 

positive impact on small businesses and 

entities. The purpose of the proposed 

rule would be to make more funding 

available for all types of economic 

development projects. For small 

entities, including small governments, 

the lessening of regulatory burden 

would likely benefit those that receive 

CDBG, ICDBG, and section 108 funds. 

Accordingly, it is HUD’s 

determination that this proposed rule 

will not have a significant economic 

impact on a substantial number of small 


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entities. Notwithstanding HUD’s 

determination that this proposed rule 

will not have a significant effect on a 

substantial number of small entities, 

HUD specifically invites comments 

regarding any less burdensome 

alternatives to this proposed rule that 

will meet HUD’s objectives as described 

in this preamble. 

Environmental Review 

A Finding of No Significant Impact 

with respect to the environment has 

been made in accordance with HUD 

regulations at 24 CFR part 50, which 

implement section 102(2)(C) of the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4332(2)(C)). The 

Finding of No Significant Impact is 

available for public inspection between 

the hours of 8 a.m. and 5 p.m. weekdays 

in the Regulations Division, Office of 

General Counsel, Room 10276, 

Department of Housing and Urban 

Development, 451 Seventh Street SW, 

Washington, DC 20410–0500. The 

FONSI is also available through the 

Federal eRulemaking Portal at http://

www.regulations.gov. 

Federalism (Executive Order 13132) 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either: imposes 

substantial direct compliance costs on 

State and local governments and the Act 

does not require those costs; or the rule 

preempts State law, unless the agency 

meets the consultation and funding 

requirements of section 6 of the 

Executive Order. This proposed rule 

does not have federalism implications 

and does not impose substantial direct 

compliance costs on State and local 

governments nor preempt State law 

within the meaning of the Executive 

Order. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531– 

1538) (UMRA) establishes requirements 

for Federal agencies to assess the effects 

of their regulatory actions on State, 

local, and Tribal governments, and on 

the private sector. This proposed rule 

does not impose any Federal mandates 

on any State, local, or Tribal 

governments, or on the private sector, 

within the meaning of UMRA. 

Consultation With Indian Tribes 

(Executive Order 13175) 

HUD strives to strengthen its 

government-to-government relationship 

with Indian Tribes through a 

commitment to consultation with Indian 

Tribes and recognition of their right to 

self-governance and Tribal sovereignty. 

HUD has evaluated this proposed rule 

under the Department’s consultation 

policy and under the criteria in 

Executive Order 13175 and has 

determined that Tribal consultation is 

necessary regarding the proposed 

changes. A Dear Tribal Leader was sent 

out to Indian Tribes on November 15, 

2021, seeking comments on the 

proposed changes to the ICDBG 

regulations in this proposed rule. HUD 

received comments from two Tribes and 

one grant writer with experience 

providing grant writing services to 

Tribes under the ICDBG program. The 

three Tribal commenters were generally 

supportive of the proposed rule. Two of 

the three commenters did suggest 

additional areas for expansion of the 

proposed rule and/or areas that may be 

appropriate for separate rulemaking. 

Among the suggestions were 

clarification of the term ‘‘economically 

distressed’’ as it relates to census tracts 

and overall improvements to the ICDBG 

application process. One Tribal 

commenter expressed general agreement 

with the proposed changes but went on 

to comment that the entire ICDBG 

regulation is overdue for an overhaul. 

Among this commenter’s specific 

concerns were rules governing the use 

of ICDBG funds for new housing 

construction and rehabilitation, as well 

as HUD’s weighting of criteria in 

Notices of Funding Opportunity. In 

developing this proposed rule, HUD 

considered all Tribal feedback provided 

and HUD will conduct additional 

consultation before issuing a final rule. 

List of Subjects 

24 CFR Part 91 

Aged, Grant programs—housing and 

community development, Homeless, 

Individuals with disabilities, Low- and 

moderate-income housing, Reporting 

and recordkeeping requirements. 

24 CFR Part 570 

Administrative practice and 

procedure; American Samoa; 

Community development block grants; 

Grant programs—education; Grant 

programs—housing and community 

development; Guam; Indians; Loan 

programs—housing and community 

development; Low- and moderateincome housing; Northern Mariana 

Islands; Pacific Islands Trust Territory; 

Puerto Rico; Reporting and 

recordkeeping requirements; Student 

aid; Virgin Islands. 

24 CFR Part 1003 

Alaska; Community development 

block grants; Grant programs—housing 

and community development; Grant 

programs—Indians; Indians; Reporting 

and recordkeeping requirements. 

Accordingly, for the reasons described 

in the preamble, HUD proposes to 

amend 24 CFR parts 91, 570, and 1003 

as follows: 

PART 91—CONSOLIDATED 

SUBMISSIONS FOR COMMUNITY 

PLANNING AND DEVELOPMENT 

PROGRAMS 

■ 1. The authority citation for part 91 

continues to read as follows: 

Authority: 42 U.S.C. 3535(d), 3601–3619, 

5301–5315, 11331–11388, 12701–12711, 

12741–12756, and 12901–12912. 

■ 2. Amend § 91.105 by revising 

paragraphs (b)(2) and (c)(1) to read as 

follows: 

§ 91.105 Citizen participation plan; local 

governments. 

* * * * * 

(b) * * * 

(2) The citizen participation plan 

must require the jurisdiction to publish 

the proposed consolidated plan in a 

manner that affords its residents, public 

agencies, and other interested parties a 

reasonable opportunity to examine its 

content and to submit comments. The 

citizen participation plan must set forth 

how the jurisdiction will publish the 

proposed consolidated plan and give 

reasonable opportunity to examine the 

document’s content. The requirement 

for publishing may be met by 

publication of a summary of the 

document in one or more newspapers of 

general circulation or on the 

jurisdiction’s official government 

website. The summary must describe 

the content and purpose of the 

consolidated plan and must include a 

list of the locations where copies of the 

entire proposed document may be 

examined. Such listings of locations 

shall include libraries and government 

offices. A jurisdiction is encouraged to 

use all available social media and 

electronic communication at its disposal 

to make citizens and residents aware of 

the availability of the proposed 

consolidated plan for comment and to 

include such methods in its citizen 

participation plan, as appropriate. This 

includes but is not limited to: emails; 

text messaging (SMS); media 

advertisements; public service 

announcements made through broadcast 

media or through a pre-recorded 

message delivered by using an 

automatic telephone dialing system; and 

electronic notifications to public and 

private agencies identified in 

accordance with § 91.100. A jurisdiction 

may also make citizens and residents 


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aware of the availability of the proposed 

consolidated plan for comment through 

postings in public places, such as 

grocery store bulletin boards and 

neighborhood centers. Publications 

must be accessible to persons with 

disabilities. Publications must also 

provide meaningful access to limited 

English proficient persons as more fully 

described in paragraph (a)(4) of this 

section. In addition, the jurisdiction 

must provide a reasonable number of 

free hardcopies of the plan to residents 

and groups that request it. 

* * * * * 

(c) * * * 

(1) The citizen participation plan 

must specify the criteria the jurisdiction 

will use for determining what changes 

in the jurisdiction’s planned or actual 

activities constitute a substantial 

amendment to the consolidated plan. 

(See § 91.505.) The citizen participation 

plan must include, among the criteria 

for a substantial amendment, changes in 

the use of CDBG funds from one eligible 

activity to another and adding an 

activity not previously identified in the 

Consolidated Plan or Action Plan. 

* * * * * 

■ 3. Amend § 91.115 by revising 

paragraph (b)(2) to read as follows: 

§ 91.115 Citizen participation plan; States. 

* * * * * 

(b) * * * 

(2) The citizen participation plan 

must require the State to publish the 

proposed consolidated plan in a manner 

that affords residents, units of general 

local governments, public agencies, and 

other interested parties a reasonable 

opportunity to examine the document’s 

content and to submit comments. The 

citizen participation plan must set forth 

how the State will make publicly 

available the proposed consolidated 

plan and give reasonable opportunity to 

examine the document’s content. To 

ensure that the consolidated plan and 

the PHA plan are informed by 

meaningful community participation, 

program participants should employ 

communications means designed to 

reach the broadest audience. The 

requirement for publishing may be met 

by publication of a summary of the 

document in one or more newspapers of 

general circulation or on the State’s 

official government website. The 

summary must describe the content and 

purpose of the consolidated plan and 

must include a list of the locations 

where copies of the entire proposed 

document may be examined. Such 

listings of locations shall include 

libraries and government offices. A State 

is encouraged to use all available social 

media and electronic communication at 

its disposal to make citizens and 

residents aware of the availability of the 

proposed consolidated plan for 

comment and to include such methods 

in its citizen participation plan, as 

appropriate. This includes but is not 

limited to, emails, text messaging 

(SMS); media advertisements, public 

service announcements made through 

broadcast media or through a prerecorded message delivered by using an 

automatic telephone dialing system, and 

electronic notifications to public and 

private agencies identified in 

accordance with § 91.100. A State may 

also make citizens and residents aware 

of the availability of the proposed 

consolidated plan for comment through 

postings in public places such as 

grocery store bulletin boards and 

neighborhood centers. Publications 

must be accessible to persons with 

disabilities. Publications must also 

provide meaningful access to limited 

English proficient persons as more fully 

described in paragraph (a)(4) of this 

section. In addition, the State must 

provide a reasonable number of free 

copies of the plan to its residents and 

groups that request a copy of the plan. 

* * * * * 

■ 4. Amend § 91.205 by revising 

paragraph (a) to read as follows: 

§ 91.205 Housing and homeless needs 

assessment. 

(a) General. The consolidated plan 

must provide a concise summary of the 

jurisdiction’s estimated housing needs 

(including manufactured housing) 

projected for the ensuing five-year 

period. Housing data included in this 

portion of the plan shall be based on 

U.S. Census data, as provided by HUD, 

as updated by any properly conducted 

local study, or any other reliable source 

that the jurisdiction clearly identifies 

and should reflect the consultation with 

social service agencies and other entities 

conducted in accordance with § 91.100 

and the citizen participation process 

conducted in accordance with § 91.105. 

For a jurisdiction seeking funding on 

behalf of an eligible metropolitan 

statistical area under the HOPWA 

program, the needs described for 

housing and supportive services must 

address the unmet needs of low-income 

persons with HIV/AIDS and their 

families throughout the eligible 

metropolitan statistical area. 

* * * * * 

■ 5. Amend § 91.210 by revising 

paragraph (a)(1) to read as follows: 

§ 91.210 Housing market analysis. 

(a) * * * 

(1) Based on information available to 

the jurisdiction, the plan must describe 

the significant characteristics of the 

jurisdiction’s housing market, including 

the supply, demand, and condition and 

cost of housing and the housing stock 

(including manufactured housing) 

available to serve persons with 

disabilities, and to serve other lowincome persons with special needs, 

including persons with HIV/AIDS and 

their families. 

* * * * * 

■ 6. Amend § 91.215 by revising 

paragraphs (a)(1) and (g) to read as 

follows: 

§ 91.215 Strategic plan. 

(a) * * * 

(1) Indicate the general priorities for 

allocating investment geographically 

within the jurisdiction and among 

different eligible activities and needs. 

Also provide quantitative, 

neighborhood-level outcome goal 

accomplishments in the performance 

report as required at § 91.520. 

* * * * * 

(g) Neighborhood revitalization. 

Jurisdictions are encouraged to identify 

locally designated areas where 

geographically targeted revitalization 

efforts are carried out through multiple 

activities in a concentrated and 

coordinated manner. Such areas may 

include those designated as 

economically distressed by the Federal 

Government or by the State that exhibit 

significantly high levels of poverty or 

low median income. In addition, a 

jurisdiction may elect to carry out a 

HUD-approved neighborhood 

revitalization strategy that includes the 

economic empowerment of low-income 

residents with respect to one or more of 

its areas. If HUD approves such a 

strategy, the jurisdiction can obtain 

greater flexibility in the use of the CDBG 

funds in the revitalization area(s) as 

described in 24 CFR part 570, subpart C. 

This strategy must identify long-term 

and short-term objectives (e.g., physical 

improvements, social initiatives and 

economic empowerment), expressing 

them in terms of measures of outputs 

and outcomes the jurisdiction expects to 

achieve in the neighborhood through 

the use of HUD programs. 

* * * * * 

§ 91.225 [Amended] 

■ 7. Amend § 91.225 in paragraph (b)(2) 

by removing ‘‘24 CFR 570.2’’ and adding 

in its place ‘‘24 CFR 570.200(a)(3)’’. 

■ 8. Amend § 91.305 by revising 

paragraph (a) to read as follows: 


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§ 91.305 Housing and homeless needs 

assessment. 

(a) General. The consolidated plan 

must provide a concise summary of the 

State’s estimated housing needs 

(including manufactured housing) 

projected for the ensuing five-year 

period. Housing data included in this 

portion of the plan shall be based on 

U.S. Census data, as provided by HUD, 

as updated by any properly conducted 

local study, or any other reliable source 

that the State clearly identifies and 

should reflect the consultation with 

social service agencies and other entities 

conducted in accordance with § 91.110 

and the citizen participation process 

conducted in accordance with § 91.115. 

For a State seeking funding under the 

HOPWA program, the needs described 

for housing and supportive services 

must address the unmet needs of lowincome persons with HIV/AIDS and 

their families in areas outside of eligible 

metropolitan statistical areas. 

* * * * * 

■ 9. Amend § 91.310 by revising 

paragraph (a)(1) to read as follows: 

§ 91.310 Housing market analysis. 

(a) * * * 

(1) Based on data available to the 

State, the plan must describe the 

significant characteristics of the State’s 

housing markets (including such aspects 

as the supply, demand, condition, cost, 

and type of housing, including 

manufactured housing). 

* * * * * 

§ 91.325 [Amended] 

■ 10. Amend § 91.325 in paragraph 

(b)(3) by removing ‘‘24 CFR 570.2’’ and 

adding in its place ‘‘24 CFR 

570.200(a)(3)’’. 

■ 11. Amend § 91.500 by revising the 

section heading and adding a sentence 

at the end of paragraph (a) to read as 

follows: 

§ 91.500 HUD Review of consolidated plan. 

(a) * * * The fact that HUD has not 

disapproved the plan does not 

constitute approval of the activities 

identified therein as meeting the 

applicable statutory and regulatory 

requirements. 

* * * * * 

■ 12. Amend § 91.520 by adding a 

sentence at the end of paragraph (d) to 

read as follows: 

§ 91.520 Performance reports. 

* * * * * 

(d) * * * Except for States, the report 

shall also identify quantitative, 

neighborhood-level outcome goal 

accomplishments related to one or more 

non-jurisdiction-wide activities. 

* * * * * 

PART 570—COMMUNITY 

DEVELOPMENT BLOCK GRANTS 

■ 13. The authority citation for part 570 

continues to read as follows: 

Authority: 12 U.S.C. 1701x, 1701 x–1; 42 

U.S.C. 3535(d) and 5301–5320. 

■ 14. Amend § 570.3 as follows: 

■ a. Add in alphabetical order a 

definition for ‘‘Activity delivery costs’’; 

■ b. Revise the definition of ‘‘CDBG 

funds’’; 

■ c. Add in alphabetical order a 

definition for ‘‘Elderly’’; 

■ d. Revise the definition for 

‘‘Entitlement amount’’; and 

■ e. Add in alphabetical order 

definitions for ‘‘Mixed-use property’’ 

and ‘‘Period of performance’’. 

The additions and revisions read as 

follows: 

§ 570.3 Definitions. 

* * * * * 

Activity delivery costs means the 

allowable costs of work performed by a 

recipient or subrecipient in carrying out 

specific activities eligible under 

§§ 570.201 through 570.204 and 

570.703. The cost principles at 2 CFR 

part 200, subpart E, must be used in 

determining the allowability of the 

costs. 

* * * * * 

CDBG funds means Community 

Development Block Grant funds, 

including funds received in the form of 

grants under subpart D or F of this part, 

funds awarded under section 108(q) of 

the Housing and Community 

Development Act of 1974, guaranteed 

loan funds under subpart M of this part, 

urban renewal surplus grant funds, and 

program income as defined in 

§ 570.500(a). 

* * * * * 

Elderly means, for activities pursuant 

to § 570.202, a person 62 years of age or 

older. For all other activities, CDBG 

recipients and subrecipients are 

permitted to define ‘‘elderly’’ consistent 

with State law. 

Entitlement amount means the 

amount of funds which a metropolitan 

city, urban county, or principal city as 

designated by OMB is entitled to receive 

under the Entitlement grant program, as 

determined by formula set forth in 

section 106 of the Act. 

* * * * * 

Mixed-use property means a property 

containing multiple uses, at least one of 

which must be eligible to be assisted 

with CDBG funds. 

* * * * * 

Period of performance means the time 

period beginning on HUD’s approval of 

a grant agreement for a given grant and 

ending six years from that date. For loan 

guarantees issued pursuant to subpart M 

of this part, the period of performance 

means the time period beginning on the 

date of HUD’s guarantee of a promissory 

note or other obligation and ending six 

years from that date. 

* * * * * 

■ 15. Amend § 570.200 by revising 

paragraphs (a)(2) and (3), (b)(1), and 

(h)(1)(iii) to read as follows: 

§ 570.200 General policies. 

(a) * * * 

(2) Compliance with national 

objectives. Grant recipients under the 

Entitlement and HUD-administered 

Small Cities programs and recipients of 

insular area funds under section 106 of 

the Act must certify that their projected 

use of funds has been developed so as 

to give maximum feasible priority to 

activities which will carry out one of the 

national objectives of benefit to lowand moderate-income families or aid in 

the prevention or elimination of slums 

or blight. The projected use of funds 

may also include activities that the 

recipient certifies are designed to meet 

other community development needs 

having a particular urgency because 

existing conditions pose a serious and 

immediate threat to the health or 

welfare of the community where other 

financial resources are not available to 

meet such needs. Consistent with the 

foregoing, each recipient under the 

Entitlement or HUD-administered Small 

Cities programs, and each recipient of 

insular area funds under section 106 of 

the Act must ensure and maintain 

evidence that each of its activities 

assisted with CDBG funds meets one of 

the three national objectives contained 

in its certification. A recipient must 

demonstrate that each activity meets a 

national objective within six years of the 

date of the initial drawdown of CDBG 

funds for that activity or the length of 

the period of performance and any 

extension permitted under § 570.509, 

whichever is shorter. Criteria for 

determining whether an activity 

addresses one or more of these 

objectives are found in § 570.208. 

(3) Compliance with the primary 

objective. The primary objective of the 

Act is described in section 101(c) of the 

Act. Consistent with this objective, 

entitlement recipients, non-entitlement 

CDBG grantees in Hawaii, and 

recipients of insular area funds under 

section 106 of the Act must ensure that, 

over a period of time specified in their 

certification not to exceed three years, 

not less than 70 percent of the aggregate 


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of CDBG fund expenditures shall be for 

activities meeting the criteria under 

§ 570.208(a) or (d)(5) or (6) for benefiting 

low- and moderate-income persons. 

Grantees are not permitted to expend 

more CDBG funds for activities that 

benefit low- and moderate-income 

persons during the following 

certification period to meet this 

requirement. For grants under section 

107 of the Act, insular area recipients 

must meet this requirement for each 

separate grant. See § 570.420(d)(3) for 

additional discussion of the primary 

objective requirement for insular areas 

funded under section 106 of the Act. 

The requirements for the HUDadministered Small Cities program in 

New York are at § 570.420(d)(2). In 

determining the percentage of funds 

expended for such activities: 

* * * * * 

(b) * * * 

(1) Mixed-use properties containing 

both eligible and ineligible uses. CDBG 

funds may be used to assist eligible 

activities even if the assisted activity is 

part of a multiple-use property 

containing one or more ineligible uses, 

if: 

(i) The assisted activity is eligible and 

will occupy a designated and discrete 

area within the larger property; and 

(ii) The recipient can determine the 

costs attributable to the eligible activity 

as separate and distinct from the overall 

costs of the multiple-use property. 

(iii) Allowable costs are limited to 

those allocable to the eligible activity. 

* * * * * 

(h) * * * 

(1) * * * 

(iii) The costs and activities funded 

are in compliance with the requirements 

of this part and with applicable 

Environmental Review Procedures in 24 

CFR part 58. 

* * * * * 

■ 16. Amend § 570.201 as follows: 

■ a. Revise paragraph (a) and paragraph 

(e) introductory text; 

■ b. Redesignate paragraphs (e)(1) and 

(2) as (e)(2)(i) and (ii), paragraphs 

(e)(2)(i) and (ii) as (e)(2)(ii)(A) and (B); 

and paragraphs (e)(2)(ii)(A) through (D) 

as (e)(2)(ii)(B)(1) through (4); 

■ c. Add new paragraph (e)(1) and new 

paragraph (e)(2) introductory text; 

■ d. Remove the ‘‘(a)(21)’’ and add in its 

place ‘‘(a)(20)’’ in paragraph (k); 

■ e. Remove and reserve paragraph (m); 

■ f. Revise paragraph (p); and 

■ g. Add paragraphs (r) and (s); 

The revisions and additions to read as 

follows: 

§ 570.201 Basic eligible activities. 

* * * * * 

(a) Acquisition. Acquisition in whole 

or in part by the recipient, or other 

public or private nonprofit entity, by 

purchase, long-term lease (defined as a 

lease with a term of 15 years or more), 

donation, or otherwise, of real property 

(including air rights, water rights, rightsof-way, easements, and other interests 

therein) for any public purpose, subject 

to the limitations of § 570.207. 

* * * * * 

(e) Public services. Provision of public 

services (including labor, supplies, and 

materials) including but not limited to 

those concerned with employment, 

crime prevention, child care, health, 

drug abuse, education, fair housing 

counseling, energy conservation, 

welfare (but excluding the provision of 

income payments identified under 

§ 570.207(b)(4)), homebuyer 

downpayment assistance, or 

recreational needs. If housing 

counseling, as defined in 24 CFR 5.100, 

is provided, it must be carried out in 

accordance with 24 CFR 5.111. 

(1) To be eligible for CDBG assistance, 

a public service must either be a new 

service or provide a quantifiable 

increase in the level of an existing 

service above that which has been 

provided by or on behalf of the unit of 

general local government (through funds 

raised by the unit or received by the 

unit from the State in which it is 

located) in the 12 calendar months 

before the submission of the action plan. 

(An exception to this requirement may 

be made if HUD determines that any 

decrease in the level of a service was the 

result of events not within the control 

of the unit of general local government.) 

(2) The amount of CDBG funds used 

for public services shall not exceed the 

amounts outlined in paragraph (e)(2)(i) 

or (ii) of this section, as applicable: 

* * * * * 

(p) Technical assistance. Provision of 

technical assistance to public or 

nonprofit entities to increase the 

capacity of such entities to carry out 

specific eligible neighborhood 

revitalization or economic development 

activities. (The recipient must 

determine, prior to the provision of the 

assistance, that the activity for which it 

is attempting to build capacity would be 

eligible for assistance under this subpart 

C, and that the national objective 

claimed by the grantee for this 

assistance can reasonably be expected to 

be met within six years of the date of the 

initial drawdown of CDBG funds for the 

purpose of the entity receiving the 

technical assistance and undertaking the 

activity.) General administrative and 

operating costs of a public or nonprofit 

entity are not eligible under this 

paragraph. Capacity building for private 

or public entities (including grantees) 

for other purposes may be eligible under 

§ 570.205. 

* * * * * 

(r) Tornado-safe shelters. CDBG funds 

may be used by the recipient or 

provided as loans or grants to non-profit 

and for-profit entities, including owners 

of manufactured housing communities, 

for the construction or improvement of 

tornado-safe shelters for manufactured 

housing residents in accordance with 

section 105(a) of the Act. Activities 

pursuant to this paragraph may be 

located only in a neighborhood 

(including a manufactured housing 

community) that— 

(1) Contains at least 20 manufactured 

housing units within such proximity to 

the shelter that the shelter is available 

to the resident in the event of a tornado, 

(2) Consists predominantly of persons 

of low and moderate income 

(3) Is located within a State in which 

a tornado has occurred during the fiscal 

year for which with amounts to be used 

were made available or the preceding 3 

fiscal years, as determined by the 

Secretary in consultation with the 

Administrator of the Federal Emergency 

Management Agency. 

(s) Use of grants for loan repayment, 

issuance, underwriting, servicing, and 

other costs. CDBG funds may be used 

for payment of costs pursuant to 

§ 570.705(c), including the payment of 

fees in accordance with § 570.712, for 

loan guarantees issued pursuant to 

subpart M of this part. 

■ 17. Amend § 570.202 by revising 

paragraph (a) introductory text to read 

as follows: 

§ 570.202 Eligible rehabilitation and 

preservation activities. 

(a) Types of buildings and 

improvements eligible for rehabilitation 

and reconstruction assistance. CDBG 

funds may be used to finance the 

rehabilitation and reconstruction of: 

* * * * * 

■ 18. Amend § 570.203 by revising 

paragraphs (b) and (c) to read as follows: 

§ 570.203 Special economic development 

activities. 

* * * * * 

(b) The provision of assistance to a 

private for-profit business, including, 

but not limited to, grants, loans, loan 

guarantees, interest supplements, loan 

participations, technical assistance, and 

other forms of support (including use of 

pass-through financing structures), for 

any activity where the assistance is 

appropriate to carry out an economic 

development project, excluding those 

described as ineligible in § 570.207(a). 


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In selecting businesses to assist under 

this authority, the recipient shall 

minimize, to the extent practicable, 

displacement of existing housing, 

community amenities, businesses, and 

jobs in neighborhoods. 

(c) Economic development services in 

connection with activities eligible under 

this section, including, but not limited 

to, outreach efforts to market available 

forms of assistance; screening of 

applicants; reviewing and underwriting 

applications for assistance; preparation 

of all necessary agreements; 

management of assisted activities; the 

screening, referral, and placement of 

applicants for employment 

opportunities generated by CDBGeligible economic development 

activities and the costs of providing 

necessary training for persons filling 

those specific positions. Training 

connected with job placement in 

specific businesses is considered an 

economic development activity and not 

a public service under § 570.201(e). If 

individuals are not receiving training for 

specific positions at a specific business, 

general employment readiness programs 

or trainings for individuals in career 

fields are only eligible as public service 

activities under § 570.201(e) or, in 

limited cases, as part of a community 

economic development project under 

§ 570.204. 

§ 570.205 [Amended] 

■ 19. Amend § 570.205 by redesignating 

paragraph (a)(6) as paragraph (b) 

introductory text. 

■ 20. Amend § 570.206 by revising the 

introductory text and paragraph (g) 

introductory text and removing 

paragraphs (h) and (i). 

The revisions read as follows: 

§ 570.206 Program administrative costs. 

Payment of reasonable program 

administrative costs and carrying 

charges related to the planning and 

execution of community development 

activities assisted in whole or in part 

with funds provided under this part. 

This does not include activity delivery 

costs as defined at § 570.3. 

* * * * * 

(g) HOME Program. Whether or not 

such activities are otherwise assisted by 

funds provided under this part, 

reasonable costs equivalent to those 

described in paragraphs (a), (b), (e), and 

(f) of this section for overall program 

management of the HOME program 

under title II of the Cranston-Gonzalez 

National Affordable Housing Act (42 

U.S.C. 12701, et seq.) if those costs are 

allowable costs under 24 CFR part 92. 

* * * * * 

■ 17. Amend § 570.207 as follows: 

■ a. Remove in paragraph (a)(1) 

‘‘§ 570.3(d)’’ and add in its place 

‘‘§ 570.3’’; 

■ b. Add paragraph (a)(4); and 

■ c. Remove in paragraph (b)(3)(ii) 

‘‘§ 570.201 (m) or (n)’’ and add in its 

place ‘‘§ 570.201(n)’’. 

The addition reads as follows: 

§ 570.207 Ineligible activities. 

* * * * * 

(a) * * * 

(4) Operating expenses. General 

administrative costs and operating 

expenses of public or nonprofit entities 

are ineligible except where such costs 

represent general administrative costs 

pursuant to § 570.206 or activity 

delivery costs of carrying out specific 

eligible activities under §§ 570.201 

through 570.204. 

* * * * * 

■ 18. Revise and republish § 570.208 to 

read as follows: 

§ 570.208 Criteria for national objectives. 

The following criteria shall be used to 

determine whether a CDBG-assisted 

activity complies with one or more of 

the national objectives as required 

under § 570.200(a)(2): 

(a) Activities benefiting low- and 

moderate-income persons. Activities 

meeting the criteria in this paragraph (a) 

will be considered to benefit low-and 

moderate-income persons unless there 

is substantial evidence to the contrary. 

In assessing any such evidence, the full 

range of direct effects of the assisted 

activity will be considered. (The 

recipient shall appropriately ensure that 

activities that meet these criteria do not 

benefit moderate-income persons to the 

exclusion of low-income persons.) 

(1) Area benefit activities. (i) An 

activity, the benefits of which are 

available to all the residents in a 

primarily residential area, where at least 

51 percent of the residents are low- and 

moderate-income persons. The activity 

must serve the entire area, but the area 

served need not be coterminous with 

census tracts or other officially 

recognized boundaries. 

(ii) For metropolitan cities and urban 

counties, an activity, the benefits of 

which are available to all the residents 

in a primarily residential area, where 

less than 51 percent of the residents are 

low- and moderate-income persons, but 

where the proportion of such low- and 

moderate-income persons residing in 

the area is within the highest quartile of 

all areas in the recipient’s jurisdiction in 

terms of the degree of concentration of 

residents who are low- and moderateincome persons. In applying this 

exception, HUD will determine the 

lowest proportion a recipient may use to 

qualify an area for this purpose, as 

follows: 

(A) All census block groups in the 

recipient’s jurisdiction shall be rank 

ordered from the block group of highest 

proportion of low and moderate income 

persons to the block group with the 

lowest. For urban counties, the rank 

ordering shall cover the entire area 

constituting the urban county and shall 

not be done separately for each 

participating unit of general local 

government. 

(B) In any case where the total 

number of a recipient’s block groups 

does not divide evenly by four, the 

block group which would be 

fractionally divided between the highest 

and second quartiles shall be considered 

to be part of the highest quartile. 

(C) The proportion of low- and 

moderate-income persons in the last 

census block group in the highest 

quartile shall be identified. Any service 

area located within the recipient’s 

jurisdiction and having a proportion of 

low- and moderate-income persons at or 

above this level shall be considered to 

be within the highest quartile. 

(D) If block group data are not 

available for the entire jurisdiction, 

other data acceptable to the Secretary 

may be used in the above calculations. 

(iii) An activity to develop, establish, 

and operate for up to two years after the 

establishment of, a uniform emergency 

telephone number system serving an 

area having less than the percentage of 

low- and moderate-income residents 

required under paragraph (a)(1)(i) or (as 

applicable) paragraph (a)(1)(ii) of this 

section, provided the recipient obtains 

prior HUD approval. To obtain such 

approval, the recipient must: 

(A) Demonstrate that the system will 

contribute significantly to the safety of 

the residents of the area. The request for 

approval must include a list of the 

emergency services that will participate 

in the emergency telephone number 

system; 

(B) Submit information that serves as 

a basis for HUD to determine whether at 

least 51 percent of the use of the system 

will be by residents who are low- and 

moderate-income persons. As available, 

the recipient must provide information 

that identifies the total number of calls 

actually received over the preceding 12- 

month period for each of the emergency 

services to be covered by the emergency 

telephone number system and relates 

those calls to the geographic segment 

(expressed as nearly as possible in terms 

of census tracts, block groups, or 

combinations thereof that are contained 

within the segment) of the service area 

from which the calls were generated. In 

analyzing this data to meet the 


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requirements of this section, HUD will 

assume that the distribution of income 

among the callers generally reflects the 

income characteristics of the general 

population residing in the same 

geographic area where the callers reside. 

If HUD can conclude that the users have 

primarily consisted of low- and 

moderate-income persons, no further 

submission is needed by the recipient. 

If a recipient plans to make other 

submissions for this purpose, it may 

request that HUD review its planned 

methodology before expending the effort 

to acquire the information it expects to 

use to make its case; 

(C) Demonstrate that other Federal 

funds received by the recipient are 

insufficient or unavailable for a uniform 

emergency telephone number system. 

For this purpose, the recipient must 

submit a statement explaining whether 

the lack of funds is due to the 

insufficiency of the amount of the 

available funds, restrictions on the use 

of such funds, or the prior commitment 

of funds by the recipient for other 

purposes; and 

(D) Demonstrate that the percentage of 

the total costs of the system paid for by 

CDBG funds does not exceed the 

percentage of low- and moderateincome persons residing in the service 

area of the system. For this purpose, the 

recipient must include a description of 

the boundaries of the service area of the 

emergency telephone number system, 

the census divisions that fall within the 

boundaries of the service area (census 

tracts or block groups), the total number 

of persons and the total number of lowand moderate-income persons residing 

within each census division, the 

percentage of low- and moderateincome persons residing within the 

service area, and the total cost of the 

system. 

(iv) An activity for which the 

assistance to a public improvement that 

provides benefits to all the residents of 

an area is limited to paying special 

assessments (as defined in § 570.200(c)) 

levied against residential properties 

owned and occupied by persons of lowand moderate-income. 

(v) For purposes of determining 

qualification under this criterion, 

activities of the same type that serve 

different areas will be considered 

separately on the basis of their 

individual service area. 

(vi) In determining whether there is a 

sufficiently large percentage of low- and 

moderate-income persons residing in 

the area served by an activity to qualify 

under paragraph (a)(1)(i), (ii), or (vii) of 

this section, the most recently available 

Census Bureau data provided by HUD 

must be used to the fullest extent 

feasible, together with the section 8 

income limits that would have applied 

at the time the income information was 

collected by the Census Bureau. 

Recipients that believe that the census 

data does not reflect current relative 

income levels in an area, or where 

census boundaries do not coincide 

sufficiently well with the service area of 

an activity, may conduct (or have 

conducted) a current survey of the 

residents of the area to determine the 

percent of such persons that are lowand moderate-income. HUD will accept 

information obtained through such 

surveys, to be used in lieu of the census 

data, where it determines that the 

survey was conducted in such a manner 

that the results meet standards of 

statistical reliability that are comparable 

to that of census data for areas of similar 

size. Where there is substantial evidence 

that provides a clear basis to believe that 

the use of the census data would 

substantially overstate the proportion of 

persons residing there that are low and 

moderate income, HUD may require that 

the recipient rebut such evidence in 

order to demonstrate compliance with 

section 105(c)(2) of the Act. 

(vii) Activities meeting the 

requirements of paragraph (d)(5)(i) of 

this section may be considered to 

qualify under this paragraph, provided 

that the area covered by the strategy is 

either a Federally-designated 

Empowerment Zone or Enterprise 

Community or primarily residential and 

contains a percentage of low- and 

moderate-income residents that is no 

less than the percentage computed by 

HUD pursuant to paragraph (a)(1)(ii) of 

this section or 70 percent, whichever is 

less, but in no event less than 51 

percent. Activities meeting the 

requirements of paragraph (d)(6)(i) of 

this section may also be considered to 

qualify under this paragraph (a)(1). 

(2) Limited clientele activities. (i) An 

activity which benefits a limited 

clientele, at least 51 percent of whom 

are low- or moderate-income persons. 

The activity must meet one of the 

following tests: 

(A) Benefit at least one of the 

following clientele, which are presumed 

to be low- and moderate-income 

persons: abused children; survivors of 

domestic violence; elderly persons (see 

570.3 for definition of elderly); adults 

meeting the Bureau of the Census’ 

Current Population Reports definition of 

‘‘severely disabled;’’ homeless persons; 

illiterate adults (adults unable to read 

and write in English and in their first 

language, if their first language is not 

English); persons living with AIDS; 

migrant farm workers; persons who 

meet the Federal poverty guidelines; 

persons insured by Medicaid; or 

(B) Require information on family size 

and income that demonstrates that at 

least 51 percent of the clientele are 

persons whose family income does not 

exceed the low- and moderate-income 

limit; or 

(C) Have income eligibility 

requirements which limit the activity 

exclusively to low- and moderateincome persons; or 

(D) Be of such nature and be in such 

location that it may be concluded that 

the activity’s clientele will primarily be 

low- and moderate-income persons. 

(ii) An activity that serves to remove 

material or architectural barriers to the 

mobility or accessibility of elderly 

persons or of adults meeting the Bureau 

of the Census’ Current Population 

Reports definition of ‘‘severely 

disabled’’ will be presumed to qualify 

under this criterion if it is restricted, to 

the extent practicable, to the removal of 

such barriers by assisting: 

(A) The reconstruction of a public 

facility or improvement, or portion 

thereof, that does not qualify under 

paragraph (a)(1) of this section; 

(B) The rehabilitation of a privately 

owned nonresidential building or 

improvement that does not qualify 

under paragraph (a)(1) or (4) of this 

section; or 

(C) The rehabilitation of the common 

areas of a residential structure that 

contains more than one dwelling unit 

and that does not qualify under 

paragraph (a)(3) of this section. 

(iii) A microenterprise assistance 

activity carried out in accordance with 

the provisions of § 570.201(o) with 

respect to those owners of 

microenterprises and persons 

developing microenterprises assisted 

under the activity during each program 

year who are low- and moderate-income 

persons. For purposes of this paragraph, 

persons determined to be low and 

moderate income may be presumed to 

continue to qualify as such for up to a 

three-year period. 

(iv) An activity designed to provide 

job training and placement and/or other 

employment support services, 

including, but not limited to, peer 

support programs, counseling, child 

care, transportation, and other similar 

services, in which the percentage of 

low- and moderate-income persons 

assisted is less than 51 percent may 

qualify under this paragraph in the 

following limited circumstance: 

(A) In such cases where such training 

or provision of supportive services 

assists business(es), the only use of 

CDBG assistance for the project is to 


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provide the job training and/or 

supportive services; and 

(B) The proportion of the total cost of 

the project borne by CDBG funds is no 

greater than the proportion of the total 

number of persons assisted who are low 

or moderate income. 

(v) The following kinds of activities 

may not qualify under this paragraph 

(a)(2): activities that provide benefits to 

all the residents of an area; activities 

involving the acquisition, construction 

or rehabilitation of property for housing; 

or activities where the benefit to lowand moderate-income persons to be 

considered is the creation or retention of 

jobs, except as provided in paragraph 

(a)(2)(iv) of this section. 

(3) Housing activities. An eligible 

activity carried out for the purpose of 

providing or improving permanent 

residential structures which will be 

occupied by low- and moderate-income 

households. This would include, but 

not necessarily be limited to, the 

acquisition or rehabilitation of property 

by the recipient, a subrecipient, a 

developer, an individual homebuyer, or 

an individual homeowner; conversion 

of nonresidential structures; and new 

housing construction. If the structure 

contains two dwelling units, at least one 

must be so occupied, and if the 

structure contains more than two 

dwelling units, at least 51 percent of the 

units must be so occupied. Where two 

or more rental buildings being assisted 

are or will be located on the same or 

contiguous properties, and the buildings 

will be under common ownership and 

management, the grouped buildings 

may be considered for this purpose as 

a single structure. Where housing 

activities being assisted meet the 

requirements of paragraph (d)(5)(ii) or 

(d)(6)(ii) of this section, all such housing 

may also be considered for this purpose 

as a single structure. For rental housing, 

occupancy by low- and moderateincome households must be at 

affordable rents to qualify under this 

criterion. The recipient shall adopt and 

make public its standards for 

determining ‘‘affordable rents’’ for this 

purpose. The following shall also 

qualify under this criterion: 

(i) When less than 51 percent of the 

units in a structure will be occupied by 

low- and moderate- income households: 

(A) The assistance is for an eligible 

activity to reduce the development cost 

of the substantial rehabilitation or 

conversion of a nonresidential structure 

to a multifamily, non-elderly rental 

housing project, or the new construction 

of a multifamily, non-elderly rental 

housing project; 

(B) At least 20 percent of the units 

will be occupied by low- and moderateincome households at affordable rents; 

and 

(C) The proportion of the total cost of 

developing the project to be borne by 

CDBG funds is no greater than the 

proportion of units in the project that 

will be occupied by low and moderate 

income households. 

(ii) When CDBG funds are used to 

assist rehabilitation eligible under 

§ 570.202(b)(9) or (10) in direct support 

of the recipient’s Rental Rehabilitation 

program authorized under 24 CFR part 

511, such funds shall be considered to 

benefit low and moderate income 

persons where not less than 51 percent 

of the units assisted, or to be assisted, 

by the recipient’s Rental Rehabilitation 

program overall are for low and 

moderate income persons. 

(iii) When CDBG funds are used for 

housing services eligible under 

§ 570.201(k), such funds shall be 

considered to benefit low- and 

moderate-income persons if the housing 

units for which the services are 

provided are HOME-assisted and the 

requirements at 24 CFR 92.252 or 92.254 

are met. 

(4) Job creation or retention activities. 

An activity designed to create or retain 

permanent jobs where at least 51 

percent of the full-time equivalent jobs 

involve the employment of low- and 

moderate-income persons. Poverty rates 

used in this paragraph shall be 

determined by Census Bureau data 

provided by HUD. To qualify under this 

paragraph, the activity must meet the 

following criteria: 

(i) For an activity that creates jobs, the 

recipient must document that at least 51 

percent of the jobs will be held by, or 

will be available to, low- and moderateincome persons. 

(ii) For an activity that retains jobs, 

the recipient must document that the 

jobs would actually be lost without the 

CDBG assistance and that either or both 

of the following conditions apply with 

respect to at least 51 percent of the jobs 

at the time the CDBG assistance is 

provided: 

(A) The job is known to be held by a 

low- or moderate-income person; or 

(B) The job can reasonably be 

expected to turn over within the 

following two years and that steps will 

be taken to ensure that it will be filled 

by, or made available to, a low- or 

moderate-income person upon turnover. 

(iii) Jobs that are not held or filled by 

a low- or moderate-income person may 

be considered to be available to lowand moderate-income persons if: 

(A) The assisted business does not 

require as a prerequisite special skill 

that can only be acquired with 

substantial training or work experience 

or education beyond high school, or the 

business agrees to hire unqualified 

persons and provide training; and 

(B) The recipient and the assisted 

business take actions to ensure that lowand moderate-income persons receive 

first consideration for filling such jobs. 

(iv) For purposes of determining 

whether a job is held by or made 

available to a low- or moderate-income 

person, the person may be presumed to 

be a low- or moderate-income person if: 

(A) The person resides, or the assisted 

business through which the person is 

employed is located, within a census 

tract that meets the requirements of 

paragraph (a)(4)(v) of this section; or 

(B) The person resides within a 

census tract that has at least 70 percent 

of its population who are low- and 

moderate-income persons. 

(v) A census tract qualifies for the 

presumptions permitted under 

paragraph (a)(4)(iv)(A) of this section if 

it has a poverty rate of at least 20 

percent and meets at least one of the 

following standards: 

(A) The specific activity being 

undertaken is located in a block group 

that has a poverty rate of at least 20 

percent; or 

(B) Upon the written request by the 

recipient, HUD determines that the 

census tract exhibits other objectively 

determinable signs of general distress 

such as high incidence of crime, 

narcotics use, homelessness, abandoned 

housing, deteriorated infrastructure, or 

substantial population decline. 

(vi) Each assisted business shall be 

considered to be a separate activity for 

purposes of determining whether the 

activity qualifies under this paragraph, 

except: 

(A) In certain cases such as where 

CDBG funds are used to acquire, 

develop or improve a real property (e.g., 

a business incubator or an industrial 

park) the requirement may be met by 

measuring jobs in the aggregate for all 

the businesses which locate on the 

property, provided such businesses are 

not otherwise assisted by CDBG funds. 

(B) Where CDBG funds are used to 

pay for the staff and overhead costs of 

an entity making loans to businesses 

exclusively from non-CDBG funds, this 

requirement may be met by aggregating 

the jobs created by all of the businesses 

receiving loans during each program 

year. 

(C) Where CDBG funds are used by a 

recipient or subrecipient to provide 

technical assistance to businesses, this 

requirement may be met by aggregating 

the jobs created or retained by all of the 

businesses receiving technical 

assistance during each program year. 


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(D) Where CDBG funds are used for 

activities meeting the criteria listed at 

§ 570.209(b)(2)(v), this requirement may 

be met by aggregating the jobs created or 

retained by all businesses for which 

CDBG assistance is obligated for such 

activities during the program year, 

except as provided at paragraph (d)(7) of 

this section. 

(E) Where CDBG funds are used by a 

Community Development Financial 

Institution to carry out activities for the 

purpose of creating or retaining jobs, 

this requirement may be met by 

aggregating the jobs created or retained 

by all businesses for which CDBG 

assistance is obligated for such activities 

during the program year, except as 

provided at paragraph (d)(7) of this 

section. 

(F) Where CDBG funds are used for 

public facilities or improvements which 

will result in the creation or retention of 

jobs by more than one business, this 

requirement may be met by aggregating 

the jobs created or retained by all such 

businesses as a result of the public 

facility or improvement. 

(1) Where the public facility or 

improvement is undertaken principally 

for the benefit of one or more particular 

businesses, but where other businesses 

might also benefit from the assisted 

activity, the requirement may be met by 

aggregating only the jobs created or 

retained by those businesses for which 

the facility/improvement is principally 

undertaken, provided that the cost (in 

CDBG funds) for the facility/ 

improvement is less than $10,000 per 

permanent full-time equivalent job to be 

created or retained by those businesses. 

(2) In any case where the cost per job 

to be created or retained (as determined 

under paragraph (a)(4)(vi)(F)(1) of this 

section) is $10,000 or more, the 

requirement must be met by aggregating 

the jobs created or retained as a result 

of the public facility or improvement by 

all businesses in the service area of the 

facility/improvement. This aggregation 

must include businesses which, as a 

result of the public facility/ 

improvement, locate or expand in the 

service area of the facility/improvement 

between the date the recipient identifies 

the activity in its action plan under part 

91 of this title and the date one year 

after the physical completion of the 

facility/improvement. In addition, the 

assisted activity must comply with the 

public benefit standards at § 570.209(b). 

(b) Activities which aid in the 

prevention or elimination of slums or 

blight. Activities meeting one or more of 

the following criteria, in the absence of 

substantial evidence to the contrary, 

will be considered to aid in the 

prevention or elimination of slums or 

blight: 

(1) Activities to address slums or 

blight on an area basis. An activity will 

be considered to address prevention or 

elimination of slums or blight in an area 

if: 

(i) The area, delineated by the 

recipient, meets a definition of a slum, 

blighted, deteriorated or deteriorating 

area under State or local law; 

(ii) The recipient demonstrates, 

supported by quantifiable data, that at 

least 25 percent of properties 

throughout the area experience a 

condition relating to physical or 

economic distress, such as abandoned 

or vacant properties, and/or known or 

suspected environmental 

contamination. 

(iii) The assisted activity addresses 

one or more of the conditions which 

contributed to the deterioration of the 

area. Rehabilitation of residential 

buildings carried out in an area meeting 

the above requirements will be 

considered to address the area’s 

deterioration only where each such 

building rehabilitated is considered 

substandard under local definition 

before rehabilitation, and all 

deficiencies making a building 

substandard have been eliminated if less 

critical work on the building is 

undertaken. At a minimum, the local 

definition for this purpose must be such 

that buildings that it would render 

substandard would also fail to meet the 

Housing Quality Standards (24 CFR 

982.401). 

(2) Activities to address slums or 

blight on a spot basis. The following 

activities may be undertaken on a spot 

basis to eliminate specific conditions of 

blight, physical decay, or environmental 

contamination that are not located in a 

slum or blighted area: acquisition; 

clearance; relocation; historic 

preservation; remediation of 

environmentally contaminated 

properties; or rehabilitation of buildings 

or improvements. If acquisition or 

relocation is undertaken, it must be a 

precursor to another eligible activity 

(funded with CDBG or other resources) 

that directly eliminates the specific 

conditions of blight or physical decay, 

or environmental contamination. 

Note 1 to paragraph (b). Activities which 

aid in the prevention or elimination of slums 

or blight: Despite the restrictions in 

paragraphs (b)(1) and (2) of this section, any 

rehabilitation activity which benefits lowand moderate-income persons pursuant to 

paragraph (a)(3) of this section can be 

undertaken without regard to the area in 

which it is located or the extent or nature of 

rehabilitation assisted. 

(c) Activities designed to meet 

community development needs having a 

particular urgency. In the absence of 

substantial evidence to the contrary, an 

activity will be considered to address 

this objective if the recipient certifies 

that the activity is designed to alleviate 

existing conditions which pose a serious 

and immediate threat to the health or 

welfare of the community which are of 

recent origin or which recently became 

urgent, that the recipient is unable to 

finance the activity on its own, and that 

other sources of funding are not 

available. A condition will generally be 

considered to be of recent origin if it 

developed or became critical within 18 

months preceding the certification by 

the recipient. 

(d) Additional criteria. (1) Where the 

assisted activity is acquisition of real 

property, a preliminary determination of 

whether the activity addresses a 

national objective may be based on the 

planned use of the property after 

acquisition. A final determination shall 

be based on the actual use of the 

property, excluding any short-term, 

temporary use. Where the acquisition is 

for the purpose of clearance which will 

eliminate specific conditions of blight or 

physical decay, the clearance activity 

shall be considered the actual use of the 

property. However, any subsequent use 

or disposition of the cleared property 

shall be treated as a ‘‘change of use’’ 

under § 570.505. 

(2) Where the assisted activity is 

relocation assistance that the recipient 

is required to provide, such relocation 

assistance shall be considered to 

address the same national objective as is 

addressed by the displacing activity. 

Where the relocation assistance is 

voluntary on the part of the grantee the 

recipient may qualify the assistance 

either on the basis of the national 

objective addressed by the displacing 

activity or on the basis that the 

recipients of the relocation assistance 

are low and moderate income persons. 

(3) In any case where the activity 

undertaken for the purpose of creating 

or retaining jobs is a public 

improvement and the area served is 

primarily residential, the activity must 

meet the requirements of paragraph 

(a)(1) of this section as well as those of 

paragraph (a)(4) of this section in order 

to qualify as benefiting low and 

moderate income persons. 

(4) CDBG funds expended for 

planning and administrative costs under 

§ 570.205 and § 570.206 will be 

considered to address the national 

objectives. 

(5) Where the grantee has elected to 

prepare an area revitalization strategy 

pursuant to the authority of 24 CFR 


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91.215(g) and HUD has approved the 

strategy, the grantee may also elect the 

following options: 

(i) Activities undertaken pursuant to 

the strategy for the purpose of creating 

or retaining jobs may, at the option of 

the grantee, be considered to meet the 

requirements of this paragraph under 

the criteria at paragraph (a)(1)(vii) of 

this section in lieu of the criteria at 

paragraph (a)(4) of this section; and 

(ii) All housing activities in the area 

for which, pursuant to the strategy, 

CDBG assistance is obligated during the 

program year may be considered to be 

a single structure for purposes of 

applying the criteria at paragraph (a)(3) 

of this section. 

(6) Where CDBG-assisted activities are 

carried out by a Community 

Development Financial Institution 

whose charter limits its investment area 

to a primarily residential area consisting 

of at least 51 percent low- and 

moderate-income persons, the grantee 

may also elect the following options: 

(i) Activities carried out by the 

Community Development Financial 

Institution for the purpose of creating or 

retaining jobs may, at the option of the 

grantee, be considered to meet the 

requirements of this paragraph under 

the criteria at paragraph (a)(1)(vii) of 

this section in lieu of the criteria at 

paragraph (a)(4) of this section; and 

(ii) All housing activities for which 

the Community Development Financial 

Institution obligates CDBG assistance 

during the program year may be 

considered to be a single structure for 

purposes of applying the criteria at 

paragraph (a)(3) of this section. 

(7) Where an activity meeting the 

criteria at § 570.209(b)(2)(v) may also 

meet the requirements of either 

paragraph (d)(5)(i) or (d)(6)(i) of this 

section, the grantee may elect to qualify 

the activity under either the area benefit 

criteria at paragraph (a)(1)(vii) of this 

section or the job aggregation criteria at 

paragraph (a)(4)(vi)(D) of this section, 

but not both. Where an activity may 

meet the job aggregation criteria at both 

paragraphs (a)(4)(vi)(D) and (E) of this 

section, the grantee may elect to qualify 

the activity under either criterion, but 

not both. 

(e) Timeframe to meet a national 

objective. Recipients are required to 

demonstrate that activities carried out 

under this subpart meet a national 

objective within six years of the date of 

the initial drawdown of CDBG funds for 

that activity or the length of the period 

of performance and any extension 

permitted under § 570.509, whichever is 

shorter. 

■ 19. Amend §570.209 as follows: 

■ a. Remove and reserve paragraphs 

(b)(1) and (2); 

■ b. Revise paragraph (b)(3); 

■ c. Remove in paragraph (b)(4) 

wherever it appears the reference 

‘‘(b)(3)(i)’’ and add in its place ‘‘(b)(3)(i) 

or (ii)’’; and 

■ d. Add paragraphs (b)(4)(iv) and 

(b)(5); 

The revision and additions read as 

follows: 

§ 570.209 Guidelines for evaluating and 

selecting economic development projects. 

* * * * * 

(b) * * * 

(3) Standards for individual activities. 

(i) Any activity subject to these 

guidelines which falls into one or more 

of the following categories may be 

assisted with CDBG funds if the amount 

of CDBG assistance is equal to or less 

than either of the following: 

(A) $100,000 per full-time equivalent, 

permanent job created or retained; or 

(B) $2,000 per low- and moderateincome person to which goods or 

services are provided by the activity. 

(ii) Any activity subject to these 

guidelines carried out pursuant to 

subpart M may be assisted with CDBG 

funds if HUD, through written approval, 

calculates that the cost of the activity on 

a net present value basis does not 

exceed the following amount of CDBG 

assistance: 

(A) $50,000 per full-time equivalent, 

permanent job created or retained; or 

(B) $1,000 per low- and moderateincome person to which goods or 

services are provided by the activity. 

(iii) An activity subject to these 

guidelines may be assisted with CDBG 

funds, if HUD determines in writing, 

based upon the written request of the 

recipient, that the recipient has 

demonstrated that the activity would 

result in a significant contribution to the 

goals and purposes of the CDBG 

program and the activity: 

(A) Would not result in a violation of 

a statutory provision or any other 

regulatory provision; and 

(B) Would not result in undue 

hardship to the recipient or 

beneficiaries of the activity. 

(iv) Any activity which consists of or 

includes any of the following will be 

considered by HUD to provide 

insufficient public benefit and may not 

be assisted with CDBG funds: 

(A) General promotion of the 

community as a whole (as opposed to 

the promotion of specific areas and 

programs); 

(B) Assistance to professional sports 

teams; 

(C) Assistance to privately-owned 

recreational facilities that serve a 

predominantly higher-income clientele, 

where the recreational benefit to users 

or members clearly outweighs 

employment or other benefits to lowand moderate-income persons; 

(D) Acquisition of land for which the 

specific proposed use has not yet been 

identified; and 

(E) Assistance to a for-profit business 

while that business or any other 

business owned by the same person(s) 

or entity(ies) is the subject of unresolved 

findings of noncompliance relating to 

previous CDBG assistance provided by 

the recipient. 

* * * * * 

(4) * * * 

(iv) The cost of an activity pursuant 

to (b)(3)(ii) of this section shall be 

determined by applying the procedures 

described in a notice issued by HUD. 

(5) Updating the individual activity 

standards. The standards in paragraphs 

(b)(3)(i) and (ii) of this section may be 

updated by issuance of a document in 

the Federal Register specifying the 

revised standards. 

* * * * * 

■ 20. Amend § 570.210 by revising 

paragraph (b)(2) to read as follows: 

§ 570.210 Prohibition on use of assistance 

for employment relocation activities. 

* * * * * 

(b) * * * 

(2) Labor market area (LMA). For 

metropolitan areas, an LMA is an area 

defined as such by the BLS. An LMA is 

an economically integrated geographic 

area within which individuals can live 

and find employment within a 

reasonable distance or can readily 

change employment without changing 

their place of residence. In addition, 

LMAs are nonoverlapping and 

geographically exhaustive. For 

metropolitan areas, grantees must use 

employment data, as defined by the 

BLS, for the LMA in which the affected 

business is currently located and from 

which current jobs may be lost. For nonmetropolitan areas, an LMA is either an 

area defined by the BLS as an LMA, or 

a State may choose to combine nonmetropolitan LMAs. States are required 

to define or reaffirm prior definitions of 

their LMAs on an annual basis and 

retain records to substantiate such areas 

prior to any business relocation that 

would be impacted by this rule. 

Metropolitan LMAs cannot be 

combined. However, a non-metropolitan 

LMA can be combined with a 

metropolitan LMA if it is for business 

reasons such as code enforcement 

compliance, necessary for expansion, 

necessary for transportation or supply 

chain access. Grantees must document 

the business reason for the combination 


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of a non-metropolitan LMA with a 

metropolitan LMA. For the HUDadministered Small Cities Program, each 

of the three participating counties in 

Hawaii will be considered to be its own 

LMA. Recipients of Fiscal Year 1999 

Small Cities Program funding in New 

York will follow the requirements for 

State CDBG recipients. 

* * * * * 

■ 21. Amend § 570.307 as follows: 

■ a. Remove in paragraphs (b)(1) and 

(d)(1) ‘‘§ 570.3(3)’’ and add in its place 

‘‘§ 570.3’’; and 

■ b. Add paragraph (h); 

The addition reads as follows: 

§ 570.307 Urban counties. 

* * * * * 

(h) Timeline. Urban counties are 

required to complete the qualification or 

requalification process to qualify as an 

urban county no later than September 

30 of the year of qualification or 

requalification. 

Subpart E [Removed and Reserved] 

■ 22. Remove and reserve subpart E, 

consisting of §§ 570.400 through 

570.416. 

Subpart G [Removed and Reserved] 

■ 23. Remove and reserve subpart G, 

consisting of §§ 570.450 through 

570.466. 

■ 24. Amend § 570.481 by adding 

paragraph (a)(4) to read as follows: 

§ 570.481 Definitions. 

(a) * * * 

(4) Period of performance means the 

time period beginning on HUD’s 

approval of a grant agreement for a 

given grant and ending six years from 

that date. For loan guarantees issued 

pursuant to subpart M of this part, the 

period of performance means the time 

period beginning on the date of HUD’s 

guarantee of a promissory note or other 

obligation and ending six years from 

that date. 

* * * * * 

■ 25. Amend § 570.482 as follows: 

■ a. Remove in paragraphs (c)(1) and 

(c)(2)(i) the text ‘‘section 105(a)(23)’’ and 

add in their places ‘‘section 105(a)(22)’’; 

■ b. Remove and reserve paragraphs 

(f)(2) and (3); 

■ c. Revise paragraph (f)(4); 

■ d. Remove in paragraph (f)(5)(i) the 

reference ‘‘(f)(4)(i)’’ and add in its place 

‘‘(f)(4)(i) or (ii)’’; 

■ e. Remove in paragraphs (f)(5)(ii) and 

(iii) the reference ‘‘(f)(4)(i)’’ and adding 

in their places ‘‘(f)(4)(i) and (ii)’’; 

■ f. Add paragraph (f)(5)(iv); 

■ g. Redesignate paragraph (f)(6) as 

paragraph (f)(7); 

■ h. Add new paragraph (f)(6); and 

■ i. Revise paragraph (h)(2)(ii); 

The revisions and additions read as 

follows: 

§ 570.482 Eligible activities. 

* * * * * 

(f) * * * 

(4) Standards for individual activities. 

(i) Any activity subject to these 

standards which falls into one or more 

of the following categories may be 

assisted with CDBG funds if the amount 

of CDBG assistance is equal to or less 

than either of the following: 

(A) $100,000 per full-time equivalent, 

permanent job created or retained; or 

(B) $2,000 per low- and moderateincome person to which goods or 

services are provided by the activity. 

(ii) Any activity subject to these 

standards carried out pursuant to 

subpart M may be assisted with CDBG 

funds if HUD, through written approval, 

calculates that the cost of the activity on 

a net present value basis does not 

exceed the following amount of CDBG 

assistance: 

(A) $50,000 per full-time equivalent, 

permanent job created or retained; or 

(B) $1,000 per low- and moderateincome person to which goods or 

services are provided by the activity. 

(iii) An activity subject to these 

standards may be assisted with CDBG 

funds, if HUD determines in writing, 

based upon the written request of the 

recipient, that the recipient has 

demonstrated that the activity would 

result in a significant contribution to the 

goals and purposes of the CDBG 

program and the activity: 

(A) Would not result in a violation of 

a statutory provision or any other 

regulatory provision; and 

(B) Would not result in undue 

hardship to the recipient or 

beneficiaries of the activity. 

(iv) Any activity which consists of or 

includes any of the following will be 

considered by HUD to provide 

insufficient public benefit and may not 

be assisted with CDBG funds: 

(A) General promotion of the 

community as a whole (as opposed to 

the promotion of specific areas and 

programs); 

(B) Assistance to professional sports 

teams; 

(C) Assistance to privately-owned 

recreational facilities that serve a 

predominantly higher-income clientele, 

where the recreational benefit to users 

or members clearly outweighs 

employment or other benefits to lowand moderate-income persons; 

(D) Acquisition of land for which the 

specific proposed use has not yet been 

identified; and 

(E) Assistance to a for-profit business 

while that business or any other 

business owned by the same person(s) 

or entity(ies) is the subject of unresolved 

findings of noncompliance relating to 

previous CDBG assistance provided by 

the recipient. 

* * * * * 

(5) * * * 

(iv) The cost of an activity pursuant 

to paragraph (b)(3)(ii) of this section 

shall be determined by applying the 

procedures described in a notice issued 

by HUD. 

(6) Updating the individual activity 

standards. The standards in paragraphs 

(b)(3)(i) and (ii) of this subsection may 

be updated by issuance of a document 

in the Federal Register specifying the 

revised standards. 

* * * * * 

(h) * * * 

(2) * * * 

(ii) Labor market area (LMA). For 

metropolitan areas, an LMA is an area 

defined as such by the U.S. Bureau of 

Labor Statistics (BLS). An LMA is an 

economically integrated geographic area 

within which individuals can live and 

find employment within a reasonable 

distance or can readily change 

employment without changing their 

place of residence. In addition, LMAs 

are nonoverlapping and geographically 

exhaustive. For metropolitan areas, 

grantees must use employment data, as 

defined by the BLS, for the LMA in 

which the affected business is currently 

located and from which current jobs 

may be lost. For non-metropolitan areas, 

grantees must use employment data, as 

defined by the BLS, for the LMA in 

which the assisted business is currently 

located and from which current jobs 

may be lost. For non-metropolitan areas, 

a LMA is either an area defined by the 

BLS as an LMA, or a State may choose 

to combine non-metropolitan LMAs. 

States are required to define or reaffirm 

prior definitions of their LMAs on an 

annual basis and retain records to 

substantiate such areas prior to any 

business relocation that would be 

impacted by this rule. Metropolitan 

LMAs cannot be combined. However, a 

non-metropolitan LMA can be 

combined with a metropolitan LMA if it 

is for business reasons such as code 

enforcement compliance, necessary for 

expansion, necessary for transportation 

or supply chain access. Grantees must 

document the business reason for the 

combination of a non-metropolitan LMA 

with a metropolitan LMA. For the 

Insular Areas, each jurisdiction will be 

considered to be an LMA. For the HUDadministered Small Cities Program, each 

of the three participating counties in 


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Hawaii will be considered to be its own 

LMA. Recipients of Fiscal Year 1999 

Small Cities Program funding in New 

York will follow the requirements for 

State CDBG recipients. 

* * * * * 

■ 26. Revise and republish § 570.483 to 

read as follows: 

§ 570.483 Criteria for national objectives. 

(a) General. The following criteria 

shall be used to determine whether a 

CDBG assisted activity complies with 

one or more of the national objectives as 

required to section 104(b)(3) of the Act. 

(HUD is willing to consider a waiver of 

these requirements in accordance with 

§ 570.480(b)). 

(b) Activities benefiting low- and 

moderate-income persons. Activities 

meeting the criteria in this paragraph (b) 

will be considered to benefit low- and 

moderate-income persons unless there 

is substantial evidence to the contrary. 

In assessing any such evidence, the full 

range of direct effects of the assisted 

activity will be considered. (The 

recipient shall appropriately ensure that 

activities that meet these criteria do not 

benefit moderate-income persons to the 

exclusion of low-income persons.) 

(1) Area benefit activities. (i) An 

activity, the benefits of which are 

available to all the residents in a 

primarily residential area, where at least 

51 percent of the residents are low- and 

moderate-income persons. The activity 

must serve the entire area, but the area 

served need not be coterminous with 

census tracts or other officially 

recognized boundaries. 

(ii) An activity, where the assistance 

is to a public improvement that 

provides benefits to all the residents of 

an area, that is limited to paying special 

assessments levied against residential 

properties owned and occupied by 

persons of low and moderate income. 

(iii)(A) An activity to develop, 

establish and operate (not to exceed two 

years after establishment), a uniform 

emergency telephone number system 

serving an area having less than 51 

percent of low and moderate income 

residents, when the system has not been 

made operational before the receipt of 

CDBG funds, provided a prior written 

determination is obtained from HUD. 

HUD’s determination will be based 

upon certifications by the State that: 

(1) The system will contribute 

significantly to the safety of the 

residents of the area. The unit of general 

local government must provide the State 

a list of jurisdictions and 

unincorporated areas to be served by the 

system and a list of the emergency 

services that will participate in the 

emergency telephone number system; 

(2) At least 51 percent of the use of 

the system will be by low- and 

moderate-income persons. The State’s 

certification may be based upon 

information which identifies the total 

number of calls actually received over 

the preceding twelve-month period for 

each of the emergency services to be 

covered by the emergency telephone 

number system and relates those calls to 

the geographic segment (expressed as 

nearly as possible in terms of census 

tracts, enumeration districts, block 

groups, or combinations thereof that are 

contained within the segment) of the 

service area from which the calls were 

generated. In analyzing this data to meet 

the requirements of this section, the 

State will assume that the distribution 

of income among callers generally 

reflects the income characteristics of the 

general population residing in the same 

geographic area where the callers reside. 

Alternatively, the State’s certification 

may be based upon other data, agreed to 

by HUD and the State, which shows that 

over the preceding twelve-month period 

the users of all the services to be 

included in the emergency telephone 

number system consisted of at least 51 

percent low- and moderate-income 

persons. 

(3) Other Federal funds received by 

the unit of general local government are 

insufficient or unavailable for a uniform 

emergency telephone number system. 

The unit of general local government 

must submit a statement explaining 

whether the problem is caused by the 

insufficiency of the amount of such 

funds, the restrictions on the use of such 

funds, or the prior commitment of such 

funds for other purposes by the unit of 

general local government. 

(4) Demonstrate that the percentage of 

the total costs of the system paid for by 

CDBG funds does not exceed the 

percentage of low- and moderateincome persons residing in the service 

area of the system. For this purpose, the 

recipient must include a description of 

the boundaries of the service area of the 

emergency telephone number system, 

the census divisions that fall within the 

boundaries of the service area (census 

tracts or block groups), the total number 

of persons and the total number of lowand moderate-income persons residing 

within each census division, the 

percentage of low- and moderateincome persons residing within the 

service area, and the total cost of the 

system. 

(B) The certifications of the State must 

be submitted along with a brief 

statement describing the factual basis 

upon which the certifications were 

made. 

(iv) Activities meeting the 

requirements of paragraph (e)(4)(i) of 

this section may be considered to 

qualify under this paragraph (b)(1). 

(v) HUD will consider activities 

meeting the requirements of paragraph 

(e)(5)(i) of this section to qualify under 

paragraph (b)(1) of this section, 

provided that the area covered by the 

strategy meets one of the following 

criteria: 

(A) The area is in a federally 

designated Empowerment Zone or 

Enterprise Community; 

(B) The area is primarily residential 

and contains a percentage of low and 

moderate income residents that is no 

less than 70 percent; 

(C) All of the census tracts (or block 

numbering areas) in the area have 

poverty rates of at least 20 percent, at 

least 90 percent of the census tracts (or 

block numbering areas) in the area have 

poverty rates of at least 25 percent, and 

the area is primarily residential. (If only 

part of a census tract or block 

numbering area is included in a strategy 

area, the poverty rate shall be computed 

for those block groups (or any part 

thereof) which are included in the 

strategy area.) 

(D) Upon request by the State, HUD 

may grant exceptions to the 70 percent 

low and moderate income or 25 percent 

poverty minimum thresholds on a caseby-case basis. In no case, however, may 

a strategy area have both a percentage of 

low and moderate income residents less 

than 51 percent and a poverty rate less 

than 20 percent. 

(2) Limited clientele activities. (i) An 

activity which benefits a limited 

clientele, at least 51 percent of whom 

are low- or moderate-income persons. 

(ii) To qualify under this paragraph 

(b)(2), the activity must meet one or the 

following tests: 

(A) Benefit at least one of the 

following clientele, which are presumed 

to be low- and moderate-income 

persons: abused children; survivors of 

domestic violence; elderly persons (see 

570.3 for definition of elderly); adults 

meeting the Bureau of the Census’ 

Current Population Reports definition of 

‘‘severely disabled;’’ homeless persons; 

illiterate adults (adults unable to read 

and write in English and in their first 

languages if their first language is not 

English); persons living with AIDS; 

migrant farm workers; persons who 

meet the Federal poverty guidelines; 

persons insured by Medicaid; or 

(B) Require information on family size 

and income that demonstrates that at 

least 51 percent of the clientele are 

persons whose family income does not 

exceed the low- and moderate-income 

limit; or 


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(C) It must have income eligibility 

requirements which limit the activity 

exclusively to low and moderate income 

persons; or 

(D) It must be of such a nature, and 

be in such a location, that it may be 

concluded that the activity’s clientele 

will primarily be low and moderate 

income persons. 

(iii) An activity that serves to remove 

material or architectural barriers to the 

mobility or accessibility of elderly 

persons or of adults meeting the Bureau 

of the Census’ Current Population 

Reports definition of ‘‘severely 

disabled’’ will be presumed to qualify 

under this criterion if it is restricted, to 

the extent practicable, to the removal of 

such barriers by assisting: 

(A) The reconstruction of a public 

facility or improvement, or portion 

thereof, that does not qualify under 

paragraph (b)(1) of this section; 

(B) The rehabilitation of a privately 

owned nonresidential building or 

improvement that does not qualify 

under paragraph (b)(1) or (4) of this 

section; or 

(C) The rehabilitation of the common 

areas of a residential structure that 

contains more than one dwelling unit 

and that does not qualify under 

paragraph (b)(3) of this section. 

(iv) A microenterprise assistance 

activity (carried out in accordance with 

the provisions of section 105(a)(23) of 

the Act or § 570.482(c) and limited to 

microenterprises) with respect to those 

owners of microenterprises and persons 

developing microenterprises assisted 

under the activity who are low- and 

moderate-income persons. For purposes 

of this paragraph, persons determined to 

be low and moderate income may be 

presumed to continue to qualify as such 

for up to a three-year period. 

(v) An activity designed to provide job 

training and placement and/or other 

employment support services, 

including, but not limited to, peer 

support programs, counseling, child 

care, transportation, and other similar 

services, in which the percentage of 

low- and moderate-income persons 

assisted is less than 51 percent may 

qualify under this paragraph in the 

following limited circumstances: 

(A) In such cases where such training 

or provision of supportive services is an 

integrally-related component of a larger 

project, the only use of CDBG assistance 

for the project is to provide the job 

training and/or supportive services; and 

(B) The proportion of the total cost of 

the project borne by CDBG funds is no 

greater than the proportion of the total 

number of persons assisted who are low 

or moderate income. 

(vi) The following kinds of activities 

may not qualify under paragraph this 

(b)(2): activities that provide benefits to 

all the residents of an area; activities 

involving the acquisition, construction 

or rehabilitation of property for housing; 

or activities where the benefit to lowand moderate-income persons to be 

considered is the creation or retention of 

jobs, except as provided in paragraph 

(b)(2)(iv) of this section. 

(3) Housing activities. An eligible 

activity carried out for the purpose of 

providing or improving permanent 

residential structures that, upon 

completion, will be occupied by low 

and moderate income households. This 

would include, but not necessarily be 

limited to, the acquisition or 

rehabilitation of property by the unit of 

general local government, a 

subrecipient, an entity eligible to 

receive assistance under section 

105(a)(15) of the Act, a developer, an 

individual homebuyer, or an individual 

homeowner; conversion of 

nonresidential structures; and new 

housing construction. If the structure 

contains two dwelling units, at least one 

must be so occupied, and if the 

structure contains more than two 

dwelling units, at least 51 percent of the 

units must be so occupied. If two or 

more rental buildings being assisted are 

or will be located on the same or 

contiguous properties, and the buildings 

will be under common ownership and 

management, the grouped buildings 

may be considered for this purpose as 

a single structure. If housing activities 

being assisted meet the requirements of 

paragraph (e)(4)(ii) or (e)(5)(ii) of this 

section, all such housing may also be 

considered for this purpose as a single 

structure. For rental housing, occupancy 

by low and moderate income 

households must be at affordable rents 

to qualify under this criterion. The unit 

of general local government shall adopt 

and make public its standards for 

determining ‘‘affordable rents’’ for this 

purpose. The following shall also 

qualify under this criterion: 

(i) When less than 51 percent of the 

units in a structure will be occupied by 

low- and moderate-income households, 

CDBG assistance may be provided in the 

following limited circumstances: 

(A) The assistance is for an eligible 

activity to reduce the development cost 

of the substantial rehabilitation or 

conversion of a nonresidential structure 

to a multifamily, non-elderly rental 

housing project, or the new construction 

of a multifamily, non-elderly rental 

housing project; 

(B) At least 20 percent of the units 

will be occupied by low- and moderateincome households at affordable rents; 

and 

(C) The proportion of the total cost of 

developing the project to be borne by 

CDBG funds is no greater than the 

proportion of units in the project that 

will be occupied by low and moderate 

income households. 

(ii) Where CDBG funds are used to 

assist rehabilitation delivery services or 

in direct support of the unit of general 

local government’s Rental Rehabilitation 

Program authorized under 24 CFR part 

511, the funds shall be considered to 

benefit low and moderate income 

persons where not less than 51 percent 

of the units assisted, or to be assisted, 

by the Rental Rehabilitation Program 

overall are for low and moderate income 

persons. 

(iii) When CDBG funds are used for 

housing services eligible under section 

105(a)(21) of the Act, if the housing 

units for which the services are 

provided are HOME-assisted and the 

requirements at 24 CFR 92.252 or 92.254 

are met. 

(4) Job creation or retention activities. 

(i) An activity designed to create or 

retain permanent jobs where at least 51 

percent of the full-time equivalent jobs 

involve the employment of low- and 

moderate-income persons. Poverty rates 

used in this paragraph shall be 

determined by Census Bureau data 

provided by HUD. 

(ii) For an activity that retains jobs, 

the unit of general local government 

must document that the jobs would 

actually be lost without the CDBG 

assistance and that either or both of the 

following conditions apply with respect 

to at least 51 percent of the jobs at the 

time the CDBG assistance is provided: 

The job is known to be held by a low 

or moderate income person; or the job 

can reasonably be expected to turn over 

within the following two years and that 

it will be filled by, or that steps will be 

taken to ensure that it is made available 

to, a low or moderate income person 

upon turnover. 

(iii) Jobs that are not held or filled by 

a low- or moderate-income persons may 

be considered to be available to lowand moderate-income persons if: 

(A) The assisted business does not 

require as a prerequisite special skills 

that can only be acquired with 

substantial training or work experience 

or education beyond high school, or the 

business agrees to hire unqualified 

persons and provide training; and 

(B) The unit of general local 

government and the assisted business 

take actions to ensure that low and 

moderate income persons receive first 

consideration for filling such jobs. 


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(iv) For purposes of determining 

whether a job is held by or made 

available to a low- or moderate-income 

person, the person may be presumed to 

be a low- or moderate-income person if: 

(A) The person resides, or the assisted 

business through which the person is 

employed is located, within a census 

tract that meets the requirements of 

paragraph (b)(4)(v) of this section; or 

(B) The person resides within a 

census tract that has a population of 

low- and moderate-income persons of at 

least 70 percent of the block group. 

(v) A census tract qualifies for the 

presumptions permitted under 

paragraph (b)(4)(iv)(A) of this section if 

it has a poverty rate of at least 20 

percent and meets at least one of the 

following standards: 

(A) The specific activity being 

undertaken is located in a block group 

that has a poverty rate of at least 20 

percent; or 

(B) Upon the written request by the 

recipient, HUD determines that the 

census tract exhibits other objectively 

determinable signs of general distress 

such as high incidence of crime, 

narcotics use, homelessness, abandoned 

housing, deteriorated infrastructure, or 

substantial population decline. 

(vi) Each assisted business shall be 

considered to be a separate activity for 

purposes of determining whether the 

activity qualifies under this paragraph, 

except: 

(A) In certain cases such as where 

CDBG funds are used to acquire, 

develop or improve a real property (e.g., 

a business incubator or an industrial 

park) the requirement may be met by 

measuring jobs in the aggregate for all 

the businesses that locate on the 

property, provided the businesses are 

not otherwise assisted by CDBG funds. 

(B) Where CDBG funds are used to 

pay for the staff and overhead costs of 

an entity specified in section 105(a)(15) 

of the Act making loans to businesses 

exclusively from non-CDBG funds, this 

requirement may be met by aggregating 

the jobs created by all of the businesses 

receiving loans during any one-year 

period. 

(C) Where CDBG funds are used by a 

recipient or subrecipient to provide 

technical assistance to businesses, this 

requirement may be met by aggregating 

the jobs created or retained by all of the 

businesses receiving technical 

assistance during any one-year period. 

(D) Where CDBG funds are used for 

activities meeting the criteria listed at 

§ 570.482(f)(3)(v), this requirement may 

be met by aggregating the jobs created or 

retained by all businesses for which 

CDBG assistance is obligated for such 

activities during any one-year period, 

except as provided at paragraph (e)(6) of 

this section. 

(E) Where CDBG funds are used by a 

Community Development Financial 

Institution to carry out activities for the 

purpose of creating or retaining jobs, 

this requirement may be met by 

aggregating the jobs created or retained 

by all businesses for which CDBG 

assistance is obligated for such activities 

during any one-year period, except as 

provided at paragraph (e)(6) of this 

section. 

(F) Where CDBG funds are used for 

public facilities or improvements which 

will result in the creation or retention of 

jobs by more than one business, this 

requirement may be met by aggregating 

the jobs created or retained by all such 

businesses as a result of the public 

facility or improvement. 

(1) Where the public facility or 

improvement is undertaken principally 

for the benefit of one or more particular 

businesses, but where other businesses 

might also benefit from the assisted 

activity, the requirement may be met by 

aggregating only the jobs created or 

retained by those businesses for which 

the facility/improvement is principally 

undertaken, provided that the cost (in 

CDBG funds) for the facility/ 

improvement is less than $10,000 per 

permanent full-time equivalent job to be 

created or retained by those businesses. 

(2) In any case where the cost per job 

to be created or retained (as determined 

under paragraph (b)(4)(vi)(F)(1) of this 

section) is $10,000 or more, the 

requirement must be met by aggregating 

the jobs created or retained as a result 

of the public facility or improvement by 

all businesses in the service area of the 

facility/improvement. This aggregation 

must include businesses which, as a 

result of the public facility/ 

improvement, locate or expand in the 

service area of the public facility/ 

improvement between the date the State 

awards the CDBG funds to the recipient 

and the date one year after the physical 

completion of the public facility/ 

improvement. In addition, the assisted 

activity must comply with the public 

benefit standards at § 570.482(f). 

(5) Planning-only activities. An 

activity involving planning (when such 

activity is the only activity for which 

the grant to the unit of general local 

government is given, or if the planning 

activity is unrelated to any other activity 

assisted by the grant) if it can be 

documented that at least 51 percent of 

the persons who would benefit from 

implementation of the plan are low and 

moderate income persons. Any such 

planning activity for an area or a 

community composed of persons of 

whom at least 51 percent are low and 

moderate income shall be considered to 

meet this national objective. 

(c) Activities which aid in the 

prevention or elimination of slums or 

blight. Activities meeting one or more of 

the following criteria, in the absence of 

substantial evidence to the contrary, 

will be considered to aid in the 

prevention or elimination of slums or 

blight: 

(1) Activities to address slums or 

blight on an area basis. An activity will 

be considered to address prevention or 

elimination of slums or blight in an area 

if the State can determine that: 

(i) The area, delineated by the unit of 

general local government, meets a 

definition of a slum, blighted, 

deteriorated or deteriorating area under 

State or local law; 

(ii) The unit of general local 

government demonstrates, supported by 

quantifiable data, that at least 25 percent 

of properties throughout the area 

experience a condition relating to 

physical or economic distress, such as 

abandoned or vacant properties, and/or 

known or suspected environmental 

contamination. 

(iii) The assisted activity addresses 

one or more of the conditions which 

contributed to the deterioration of the 

area. Rehabilitation of residential 

buildings carried out in an area meeting 

the above requirements will be 

considered to address the area’s 

deterioration only where each such 

building rehabilitated is considered 

substandard under local definition 

before rehabilitation, and all 

deficiencies making a building 

substandard have been eliminated if less 

critical work on the building is 

undertaken. At a minimum, the local 

definition for this purpose must be such 

that buildings that it would render 

substandard would also fail to meet the 

Housing Quality Standards (24 CFR 

982.401). 

Note 1 to paragraph (c)(1). Documentation 

is to be maintained by the unit of general 

local government on the boundaries of the 

area and the conditions and standards used 

that qualified the area at the time of its 

designation. The unit of general local 

government shall maintain records to 

substantiate how the area met the slums or 

blighted criteria. The designation of an area 

as slum or blighted under this section is 

required to have been determined within the 

last 10 years. Documentation must be 

retained pursuant to the recordkeeping 

requirements contained at § 570.506(b)(8)(ii). 

(2) Activities to address slums or 

blight on a spot basis. The following 

activities may be undertaken on a spot 

basis to eliminate specific conditions of 

blight, physical decay, or environmental 

contamination that are not located in a 


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slum or blighted area: acquisition; 

clearance; relocation; historic 

preservation; remediation of 

environmentally contaminated 

properties; or rehabilitation of buildings 

or improvements. If acquisition or 

relocation is undertaken, it must be a 

precursor to another eligible activity 

(funded with CDBG or other resources) 

that directly eliminates the specific 

conditions of blight or physical decay, 

or environmental contamination. 

Note 2 to paragraph (c): Activities which 

aid in the prevention or elimination of slums 

or blight: Despite the restrictions in 

paragraphs (c)(1) and (2) of this section, any 

rehabilitation activity which benefits low and 

moderate income persons pursuant to 

paragraph (a)(3) of this section can be 

undertaken without regard to the area in 

which it is located or the extent or nature of 

rehabilitation assisted. 

(d) Activities designed to meet 

community development needs having a 

particular urgency. In the absence of 

substantial evidence to the contrary, an 

activity will be considered to address 

this objective if the unit of general local 

government certifies, and the State 

determines, that the activity is designed 

to alleviate existing conditions which 

pose a serious and immediate threat to 

the health or welfare of the community 

which are of recent origin or which 

recently became urgent, that the unit of 

general local government is unable to 

finance the activity on its own, and that 

other sources of funding are not 

available. A condition will generally be 

considered to be of recent origin if it 

developed or became urgent within 18 

months preceding the certification by 

the unit of general local government. 

(e) Additional criteria. (1) In any case 

where the activity undertaken is a 

public improvement and the activity is 

clearly designed to serve a primarily 

residential area, the activity must meet 

the requirements of paragraph (b)(1) of 

this section whether or not the 

requirements of paragraph (b)(4) of this 

section are met in order to qualify as 

benefiting low- and moderate-income 

persons. 

(2) Where the assisted activity is 

acquisition of real property, a 

preliminary determination of whether 

the activity addresses a national 

objective may be based on the planned 

use of the property after acquisition. A 

final determination shall be based on 

the actual use of the property, excluding 

any short-term, temporary use. Where 

the acquisition is for the purpose of 

clearance which will eliminate specific 

conditions of blight or physical decay, 

the clearance activity shall be 

considered the actual use of the 

property. However, any subsequent use 

or disposition of the cleared property 

shall be treated as a ‘‘change of use’’ 

under § 570.489(j). 

(3) Where the assisted activity is 

relocation assistance that the unit of 

general local government is required to 

provide, the relocation assistance shall 

be considered to address the same 

national objective as is addressed by the 

displacing activity. Where the relocation 

assistance is voluntary, the unit of 

general local government may qualify 

the assistance either on the basis of the 

national objective addressed by the 

displacing activity or, if the relocation 

assistance is to low and moderate 

income persons, on the basis of the 

national objective of benefiting low and 

moderate income persons. 

(4) Where CDBG-assisted activities are 

carried out by a Community 

Development Financial Institution 

whose charter limits its investment area 

to a primarily residential area consisting 

of at least 51 percent low- and 

moderate-income persons, the unit of 

general local government may also elect 

the following options: 

(i) Activities carried out by the 

Community Development Financial 

Institution for the purpose of creating or 

retaining jobs may, at the option of the 

unit of general local government, be 

considered to meet the requirements of 

this paragraph under the criteria at 

paragraph (b)(1)(iv) of this section in 

lieu of the criteria at paragraph (b)(4) of 

this section; and 

(ii) All housing activities for which 

the Community Development Financial 

Institution obligates CDBG assistance 

during any one-year period may be 

considered to be a single structure for 

purposes of applying the criteria at 

paragraph (b)(3) of this section. 

(5) If the unit of general local 

government has elected to prepare a 

community revitalization strategy 

pursuant to the authority of 24 CFR 

91.315(e)(2), and the State has approved 

the strategy, the unit of general local 

government may also elect the following 

options: 

(i) Activities undertaken pursuant to 

the strategy for the purpose of creating 

or retaining jobs may, at the option of 

the grantee, be considered to meet the 

requirements of paragraph (b) of this 

section under the criteria at paragraph 

(b)(1)(v) of this section instead of the 

criteria at paragraph (b)(4) of this 

section; and 

(ii) All housing activities in the area 

undertaken pursuant to the strategy may 

be considered to be a single structure for 

purposes of applying the criteria at 

paragraph (b)(3) of this section. 

(6) If an activity meeting the criteria 

in § 570.482(f)(3)(v) also meets the 

requirements of either paragraph 

(e)(4)(i) or (e)(5)(i) of this section, the 

unit of general local government may 

elect to qualify the activity either under 

the area benefit criteria at paragraph 

(b)(1)(iv) or (v) of this section or under 

the job aggregation criteria at paragraph 

(b)(4)(vi)(D) of this section, but not 

under both. Where an activity may meet 

the job aggregation criteria at both 

paragraphs (b)(4)(vi)(D) and (E) of this 

section, the unit of general local 

government may elect to qualify the 

activity under either criterion, but not 

both. 

(f) Planning and administrative costs. 

CDBG funds expended for eligible 

planning and administrative costs by 

units of general local government in 

conjunction with other CDBG assisted 

activities will be considered to address 

the national objectives. 

(g) Timeline to meet a national 

objective. Recipients are required to 

demonstrate that activities carried out 

under section 105(a) of the Act meet a 

national objective within six years of the 

date of the initial drawdown of CDBG 

funds for that activity or the length of 

the period of performance and any 

extension permitted, whichever is 

shorter. 

■ 27. Amend § 570.489 as follows: 

■ a. Revise paragraph (e)(2)(iv)(C); 

■ b. Add paragraphs (e)(3)(ii)(C) and 

(f)(4); and 

■ c. Revise paragraph (h)(4)(i); 

The revisions and additions read as 

follows: 

§ 570.489 Program administrative 

requirements. 

* * * * * 

(e) * * * 

(2) * * * 

(iv) * * * 

(C) Interest income received by units 

of general local government on deposits 

of grant funds before disbursement of 

the funds for activities, except that the 

unit of general local government may 

keep interest payments in an amount 

not to exceed the amount provided by 

2 CFR 200.305(b)(9) per year for 

administrative expenses otherwise 

permitted to be paid with CDBG funds. 

* * * * * 

(3) * * * 

(ii) * * * 

(C) The State must require units of 

general local government, to the 

maximum extent feasible, to disburse 

program income that is subject to the 

requirements of this subpart before 

requesting additional funds from the 

State for activities, except as provided 

in paragraph (f) of this section. 

* * * * * 

(f) * * * 


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(4) A State is responsible for ensuring 

that funds in a revolving loan fund are 

being used to continue the activity 

which generated the program income. 

* * * * * 

(h) * * * 

(4) * * * 

(i) A disclosure of the nature of the 

conflict, accompanied by an assurance 

that there has been public disclosure of 

the conflict (public disclosure is 

considered a combination of any of the 

following: publication on the recipient’s 

website, including social media; 

electronic mailings; media 

advertisements; public service 

announcements; and display in public 

areas such as libraries, grocery store 

bulletin boards, and neighborhood 

centers), evidence of the public 

disclosure, and a description of how the 

public disclosure was made; 

* * * * * 

§ 570.490 [Amended] 

■ 28. Amend § 570.490 in paragraph 

(a)(2) by removing ‘‘24 CFR 91.320(j)(1)’’ 

and adding in its place ‘‘24 CFR 

91.320(k)(1)’’. 

■ 29. Amend § 570.495 by revising 

paragraph (a)(4) to read as follows: 

§ 570.495 Reviews and audits response. 

(a) * * * 

(4) Advise the State to reimburse its 

grant in any amounts improperly 

expended, using non-Federal funds. In 

lieu of reimbursing its grant, the State 

may elect to request a voluntary grant 

reduction from a current or future year’s 

allocation of funds. A request for a 

voluntary grant reduction must be 

signed by the State’s chief elected 

official. In its request, the State must 

waive its right to a hearing pursuant to 

§ 570.496; 

* * * * * 

§ 570.500 [Amended] 

■ 30. Amend § 570.500 by removing and 

reserving paragraph (a)(4)(ii). 

■ 31. Amend § 570.503 by revising 

paragraph (b)(7)(i) to read as follows: 

§ 570.503 Agreements with subrecipients. 

* * * * * 

(b) * * * 

(7) * * * 

(i) Used to meet one of the national 

objectives in § 570.208 until six years 

after expiration of the agreement, or for 

such longer period of time as 

determined to be appropriate by the 

recipient; or 

* * * * * 

■ 32. Amend § 570.504 as follows: 

■ a. Revise paragraph (b)(2)(iii); 

■ b. Remove in paragraph (c) 

‘‘§ 570.503(b)(8)’’ and add in its place 

‘‘§ 570.503(b)(7)’’; and 

■ c. Add paragraph (f). 

The revision and addition read as 

follows: 

§ 570.504 Program income. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) At the end of each program year, 

the aggregate amount of program income 

cash balances and any investment 

thereof (except those needed for 

immediate cash needs, cash balances of 

a revolving loan fund, cash balances 

from a lump-sum drawdown, or cash or 

investments held for section 108 loan 

guarantee security needs) that, as of the 

last day of the program year, exceeds 

one-twelfth of the most recent grant 

made pursuant to § 570.304 shall be 

remitted to HUD as soon as practicable 

thereafter and sent to the United States 

Treasury FRB New York, New York, NY, 

U.S. Department of Housing and Urban 

Development, ABA Routing Number 

021030004, Account Number 86010300. 

The memorandum section should read: 

Recipient Name (e.g., city of Apple), 

Attention: HUD CPD/CDBG, Account 

Code 86X6760, $(dollar amount), 

‘‘Returning Excess Program Income.’’ 

This provision applies to program 

income cash balances and investments 

thereof held by the grantee and its 

subrecipients. (This provision shall be 

applied for the first time at the end of 

the program year for which Federal 

Fiscal Year 1996 funds are provided.) 

* * * * * 

(f) Transfer of revolving loan funds. A 

grantee may elect to terminate or to 

reduce the balance of an existing 

revolving loan fund and reprogram 

some or all of the remaining funds to 

other activities. The process of 

reprogramming funds out of a revolving 

loan fund shall be governed by 24 CFR 

91.505; once transferred out of the 

revolving loan fund, the program 

income is subject to the requirements of 

paragraphs (a) through (d) of this 

section. If HUD determines that a 

revolving loan fund no longer meets the 

definition of a revolving loan fund 

under § 570.500(b) because of a lack of 

loan activity or because loan fund 

balances significantly exceed the 

amount necessary to support loan 

activity, HUD may take corrective 

actions. 

■ 33. Amend § 570.506 by adding a 

sentence to the end of paragraph 

(b)(5)(ii)(C) and revising paragraphs 

(b)(7) and (8), (c)(1), (d), and (e) to read 

as follows: 

§ 570.506 Records to be maintained. 

* * * * * 

(b) * * * 

(5) * * * 

(ii) * * * 

(C) * * * For each such low- and 

moderate-income person hired, the size 

and annual income of the person’s 

family prior to the person being hired 

for the job. In lieu of businesses 

obtaining information regarding the size 

and annual income of the person’s 

family, the recipient may obtain and 

maintain such information. 

* * * * * 

(7) For purposes of documenting, 

pursuant to paragraph (b)(5)(i)(B), 

(b)(5)(ii)(C), or (b)(6)(iii) or (v) of this 

section that the person for whom a job 

was either filled by or made available to 

a low- or moderate-income person: 

(i) In lieu of maintaining records 

showing the person’s family size and 

income, the recipient may substitute 

records showing for each person 

employed, the name of the business, 

type of job, and the annual wages or 

salary of the job. HUD will consider the 

person income-qualified if the annual 

wages or salary of the job is at or under 

the HUD-established income limit for a 

one-person family. 

(ii) Based upon the census tract where 

the person resides or in which the 

business is located, the recipient, in lieu 

of maintaining records showing the 

person’s family size and income, may 

substitute records showing either the 

person’s address at the time the 

determination of income status was 

made or the address of the business 

providing the job, as applicable, the 

census tract in which that address was 

located, the percent of persons residing 

in that tract who either are in poverty 

or who are low- and moderate-income, 

as applicable, the data source used for 

determining the percentage, and a 

description of the pervasive poverty and 

general distress in the census tract in 

sufficient detail to demonstrate how the 

census tract met the criteria in 

§ 570.208(a)(4)(v), as applicable. 

(8) For each activity determined to aid 

in the prevention or elimination of 

slums or blight based on addressing one 

or more of the conditions which 

qualified an area as a slum or blighted 

area: 

(i) The boundaries of the area; 

(ii) A designation, within the last 10 

years, of the area as slum or blighted; 

and 

(iii) Quantifiable data substantiating 

the conditions and standards that 

qualified the area at the time of its 

designation. 

* * * * * 


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(c) * * * 

(1) Records that demonstrate that the 

recipient has made the determinations 

required as a condition of eligibility of 

certain activities, as prescribed in 

§§ 570.201(e)(1), (f), (i)(2), (p), and (q), 

570.202(b)(3), 570.206(f), 570.209, 

570.210, and 570.309. 

* * * * * 

(d) Records which demonstrate 

compliance with § 570.503(b)(7) and (8) 

or § 570.505 regarding maintenance of 

property condition and change of use of 

real property acquired or improved with 

CDBG assistance. 

(e) Records that demonstrate 

compliance with the citizen 

participation requirements prescribed in 

24 CFR part 91, subpart B, for 

entitlement recipients, or in 24 CFR part 

91, subpart C, for HUD-administered 

small cities recipients, and subpart F for 

all recipients. 

* * * * * 

■ 34. Amend § 570.507 by revising 

paragraph (d) to read as follows: 

§ 570.507 Reports. 

* * * * * 

(d) Reports—(1) Reporting of CDBG 

funds. Recipients must collect and 

report data on their use of CDBG funds 

in the Integrated Disbursement and 

Information System (IDIS), or any 

successor reporting system, as specified 

by HUD. 

(2) Other reports. Recipients may be 

required to submit such other reports 

and information as HUD determines are 

necessary to carry out its 

responsibilities under the Act or other 

applicable laws. 

■ 35. Revise § 570.509 to read as 

follows: 

§ 570.509 Grant closeout procedures. 

This section implements 2 CFR 

200.344 as applicable in the context of 

the CDBG program. This section 

specifies the actions a grantee and HUD 

must take to complete the closeout 

process. 

(a) Final financial, performance and 

other reports. In general, no later than 

90 days after the end of the period of 

performance or no later than 90 days 

after the end of the program year in 

which the grantee expends all funds 

from the origin year grant (whichever 

comes first), the grantee must submit all 

financial, performance, and other 

reports as required by 24 CFR 91.520. 

(b) Liquidation of obligations. In 

general, a grantee must liquidate all 

obligations incurred under the origin 

year grant not later than 90 calendar 

days after the end date of the period of 

performance as specified in § 570.3. 

(c) Closeout phases. Closeout of an 

origin year grant may occur in two 

phases if the Grant funds were 

expended to assist an activity(ies) that is 

incomplete at the time the final report 

is due to HUD. The two phases are: 

(1) Account closeout, in which HUD 

removes the recipient’s access to grant 

funds and removes the grant from the 

grantee’s line of credit. 

(2) Programmatic closeout, which 

marks completion of all programmatic 

requirements associated with a grant. 

Programmatic requirements include but 

are not limited to: physical completion 

of all activities for which funds were 

expended from the original year grant; 

all activities have met a national 

objective under § 570.208; and the 

grantee has reported on all 

accomplishments resulting from the 

activities. 

(d) Extensions. (1) Extension to allow 

for programmatic closeout for activities 

for which funds have been disbursed 

but which have not been completed: 

(i) If the grantee has expended all 

grant funds at the time the final reports 

are due to HUD, but has not yet 

completed one or more activities to 

meet programmatic requirements, as 

defined in paragraph (c)(2) of this 

section, HUD may authorize an 

extension of the end date of the period 

of performance by up to two years for 

completion of an activity(ies) and up to 

the time period allowed at § 570.208 to 

meet a national objective. 

(ii) However, this extension does not 

apply to the availability of any funds 

remaining in a grant’s line of credit and 

HUD will initiate account closeout. 

(iii) The recipient must submit an 

interim version of the final reports in 

accordance with and as required in 

paragraph (a) of this section, specifically 

noting any incomplete assisted activity. 

At the end of the extension period, or 

when the activity(ies) is completed, 

whichever is earlier, the grantee must 

submit the final reports including any 

required information regarding that 

activity(ies). 

(2) Specific extensions for good cause. 

A grantee may request, and HUD may 

provide, an extension of the period of 

performance, deadlines for reporting, or 

deadline for obligation liquidation for a 

grant provided good cause is 

demonstrated. 

(e) Refund of unobligated balances. At 

account closeout, the grantee must 

promptly refund any balances of 

unobligated cash paid in advance or 

paid and that is not authorized to be 

retained by the grantee. All such 

refunds must be completed prior to 

submission of the reports required in 

paragraph (a) of this section. 

(f) Accounting for real property. In the 

reports required under paragraph (a) of 

this section, the grantee must account 

for any real property acquired with 

grant funds. 

(g) Closeout actions. In general, HUD 

will complete all closeout actions for a 

grant no later than one year after receipt 

and acceptance of all required final 

reports. In completing closeout actions, 

HUD will review the responsibilities 

and performance of the recipient under 

the grant agreement, applicable laws 

and regulations. HUD may delay 

programmatic closeout if it finds a 

further Federal interest in keeping the 

grant agreement open for the purpose of 

securing performance. 

(1) HUD will cancel any unused 

portion of the awarded grant, as shown 

in the executed grant closeout 

agreement. Any unused grant funds 

disbursed from the U.S. Treasury which 

are in the possession of the recipient 

shall be refunded to HUD. Any funds 

which have exceeded the statutory time 

limit on the use of funds will be 

recaptured by the U.S. Treasury 

pursuant to 24 CFR 570.200(k). 

(2) Any costs paid with CDBG funds 

which were not audited previously shall 

be subject to coverage in the recipient’s 

next single audit performed in 

accordance with HUD regulations 

implementing the Single Audit Act 

requirements at 2 CFR part 200. The 

recipient may be required to repay HUD 

any disallowed costs based on the 

results of the audit, or on additional 

HUD reviews provided for in the 

closeout agreement. 

(3) Prior to completing account 

closeout, HUD will identify for the grant 

recipient any unused grant funds to be 

canceled by HUD and provide the grant 

recipient an opportunity to respond. 

(h) After closeout. (1) HUD may 

monitor the recipient’s compliance and 

performance after the closeout of the 

award with respect to the following 

actions, and HUD may take findings of 

noncompliance into account, as 

unsatisfactory performance of the 

recipient, in the consideration of any 

future grant award under this part: 

(i) Closeout costs (e.g., audit costs) 

and costs resulting from contingent 

liabilities described in the closeout 

agreement pursuant to paragraph (g)(1) 

of this section. Contingent liabilities 

include, but are not limited to, thirdparty claims against the recipient, as 

well as related administrative costs; 

(ii) Use of real property assisted with 

CDBG funds in accordance with the 

principles described in §§ 570.503(b)(7) 

and 570.505; 

(iii) Compliance with requirements 

governing future program income or 


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receivables generated from activities 

funded from the origin year grant, as 

described in § 570.504(b)(4) and (5); 

(iv) Ensuring that flood insurance 

coverage for affected property owners is 

maintained for the mandatory period; 

and 

(v) Other provisions appropriate to 

any special circumstances of the grant 

closeout, in modification of or in 

addition to the obligations of this 

section. 

(2) The recipient is responsible for: 

(i) Compliance with all program 

requirements, certifications, and 

assurances in using any remaining 

CDBG funds available for closeout costs 

and contingent liabilities; 

(ii) Use of real property assisted with 

CDBG funds in accordance with the 

principles described in §§ 570.503(b)(7) 

and 570.505; 

(iii) Compliance with requirements 

governing future program income or 

receivables generated from activities 

funded from the origin year grant, as 

described in § 570.504(b)(4) and (5); 

(iv) Ensuring that flood insurance 

coverage for affected property owners is 

maintained for the mandatory period; 

and 

(v) Other provisions appropriate to 

any special circumstances of the grant 

closeout, in modification of or in 

addition to the obligations of this 

section. 

(i) Status of consolidated plan after 

closeout. The Consolidated Plan will 

remain in effect after closeout until the 

expiration of the program year covered 

by the last approved consolidated plan 

pursuant to 24 CFR 91.520. 

(j) Termination of grant—(1) For 

convenience. Grant assistance provided 

under this part may be terminated for 

convenience in whole or in part before 

the completion of the assisted activities, 

in accordance with the provisions of 2 

CFR 200.340. The recipient shall not 

incur new obligations for the terminated 

portions after the effective date and 

shall cancel as many outstanding 

obligations as possible. HUD shall allow 

full credit to the recipient for those 

portions of obligations which could not 

be canceled and which had been 

properly incurred by the recipient in 

carrying out the activities before the 

termination. The closeout policies 

contained in this section shall apply in 

such cases, except where the approved 

grant is terminated in its entirety. 

Responsibility for the environmental 

review to be performed under 24 CFR 

part 50 or 24 CFR part 58, as applicable, 

shall be determined as part of the 

closeout process. 

(2) For cause. In cases in which the 

Secretary terminates the recipient’s 

grant under the authority of subpart O 

of this part, or under the terms of the 

grant agreement, the closeout policies 

contained in this section shall apply, 

except where the approved grant is 

cancelled in its entirety. The provisions 

in 2 CFR 200.343 on the effects of 

termination shall also apply. HUD shall 

determine whether an environmental 

review is required, and if so, HUD shall 

perform it in accordance with 24 CFR 

part 50. 

§ 570.600 [Amended] 

■ 36. Amend § 570.600 in paragraph (a) 

by removing ‘‘§ 570.405 and’’. 

§ 570.606 [Amended] 

■ 37. Amend § 570.606 in paragraph 

(b)(2)(ii)(C) by removing ‘‘49 CFR 

24.2(g)(2)’’ and adding in its place ‘‘49 

CFR 24.2(a)(9)(ii)’’. 

■ 38. Amend § 570.611 by revising 

paragraphs (a)(2) and (d)(1)(i) to read as 

follows: 

§ 570.611 Conflict of interest. 

(a) * * * 

(2) In all cases not governed by 2 CFR 

200.317 and 200.318, the provisions of 

this section shall apply. Such cases 

include the acquisition and disposition 

of real property and the provision of 

assistance by the recipient or by its 

subrecipients to individuals, businesses, 

and other private entities under eligible 

activities that authorize such assistance 

(e.g., rehabilitation, preservation, and 

other improvements of private 

properties or facilities pursuant to 

§ 570.202; or grants, loans, and other 

assistance to businesses, individuals, 

and other private entities pursuant to 

§ 570.203, § 570.204, or § 570.703(i)). 

* * * * * 

(d) * * * 

(1) * * * 

(i) A disclosure of the nature of the 

conflict, accompanied by an assurance 

that there has been public disclosure of 

the conflict (public disclosure is 

considered a combination of any of the 

following: publication on the recipient’s 

website, including social media; 

electronic mailings; media 

advertisements; public service 

announcements; and display in public 

areas such as libraries, grocery store 

bulletin boards, and neighborhood 

centers), evidence of the public 

disclosure, and a description of how the 

public disclosure was made; and 

* * * * * 

§ 570.613 [Removed and Reserved] 

■ 39. Remove and reserve § 570.613. 

■ 40. Amend § 570.703 by revising 

paragraph (f) and removing and 

reserving paragraph (j). 

The revision reads as follows: 

§ 570.703 Eligible activities. 

* * * * * 

(f) Site preparation either related to 

the redevelopment or use of the real 

property acquired or rehabilitated 

pursuant to paragraphs (a) and (b) of 

this section, or for an economic 

development purpose, including: 

(1) Construction, reconstruction, 

installation of public and other site 

improvements, utilities or facilities 

(other than buildings); or 

(2) Remediation of properties 

(remediation can include projectspecific environmental assessment costs 

not otherwise eligible under § 570.205) 

with known or suspected environmental 

contamination. 

* * * * * 

■ 41. Amend § 570.704 as follows: 

■ a. Revise paragraphs (a)(2)(i)(B), (b) 

introductory text, and (b)(1) and (2); 

■ b. Remove and reserve paragraphs 

(b)(3) and (4); 

■ c. Revise paragraphs (b)(8)(iii), (v), 

and (ix); 

■ d. Add paragraphs (b)(8)(xi) and (xii) 

and (c)(3)(vii); and 

■ e. Revise paragraph (c)(4). 

The revisions and additions read as 

follows: 

§ 570.704 Application requirements. 

(a) * * * 

(2) * * * 

(i) * * * 

(B) Activities that may be undertaken 

with guaranteed loan funds; 

* * * * * 

(b) Submission requirements. An 

application for loan guarantee assistance 

may be submitted at any time. The 

application (or plan submission 

described in paragraph (a)(1)(v) of this 

section) shall be submitted to the HUD 

headquarters office that administers 

loan guarantees under this subpart and 

shall include the following: 

(1) A description of how each of the 

activities to be carried out with the 

guaranteed loan funds meets the eligible 

activity criteria in § 570.703 and the 

national objectives criteria in § 570.208 

or § 570.483, as applicable. 

(2) A schedule for repayment of the 

loan which identifies the sources of 

repayment, together with a statement 

identifying the entity that will act as 

borrower and issue the debt obligations, 

and the source of the payment of fees 

required by § 570.712. 

* * * * * 

(8) * * * 

(iii) It has, prior to submission of its 

application to HUD: furnished citizens 

with information required by paragraph 


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(a)(2)(i) of this section; held at least one 

public hearing to obtain the views of 

citizens on community development 

needs; and prepared its application in 

accordance with paragraph (a)(1)(iv) or 

(v) of this section, as applicable, and 

made the application available to the 

public; 

* * * * * 

(v) It will affirmatively further fair 

housing, and the guaranteed loan funds 

will be administered in compliance 

with Title VI of the Civil Rights Act of 

1964 (42 U.S.C. 2000d et seq.) and the 

Fair Housing Act (42 U.S.C. 3601–3619), 

and implementing regulations; 

* * * * * 

(ix) (Where applicable, the public 

entity may also include the following 

additional certification.) It lacks 

sufficient resources from funds 

provided under this subpart or program 

income to allow it to comply with the 

provisions of § 570.200(c)(2), and it 

must therefore assess properties owned 

and occupied by moderate income 

persons, to recover the non-guaranteed 

loan funded portion of the capital cost 

without paying such assessments on 

their behalf from guaranteed loan funds; 

* * * * * 

(xi) It possesses the legal authority to 

make the pledge of grants required 

under § 570.705(b)(2). 

(xii) It has made efforts to obtain 

financing for activities described in the 

application without the use of the loan 

guarantee, the public entity will 

maintain documentation of such efforts 

for the term of the loan guarantee, and 

the public entity cannot complete such 

financing consistent with the timely 

execution of the program plans without 

such guarantee. 

* * * * * 

(c) * * * 

(3) * * * 

(vii) Activities to be undertaken with 

the guaranteed loan funds do not meet 

the public benefit standards under 

§ 570.209. 

(4) HUD will notify the public entity 

or State in writing that the loan 

guarantee request has either been 

approved (in the requested amount or a 

portion thereof) or disapproved. If the 

request is approved in an amount less 

than requested or disapproved, the 

public entity or State shall be informed 

of the specific reasons for disapproval or 

partial approval. If the request is 

approved, either in full or in part, HUD 

shall issue an offer of commitment to 

guarantee debt obligations of the 

borrower identified in the application 

subject to compliance with this part, 

including the requirements under 

§ 570.705(b), (d), (g) and (h) for securing 

and issuing debt obligations, the 

conditions for release of funds described 

in paragraph (d) of this section, and 

such other conditions as HUD may 

specify in the commitment documents 

in a particular case. 

* * * * * 

■ 42. Amend § 570.705 as follows: 

■ a. Revise paragraph (a)(1)(iii); 

■ b. Remove paragraphs (a)(2)(iii)(A) 

through (C); and 

■ c. Revise paragraph (b)(3). 

The revisions read as follows: 

§ 570.705 Loan requirements. 

(a) * * * 

(1) * * * 

(iii) The amount any one public entity 

may receive may be limited to such 

amount as is necessary to allow HUD to 

give priority to applications containing 

activities to be carried out in areas 

designated as economically distressed 

by the Federal Government or by any 

State. 

* * * * * 

(b) * * * 

(3) Furnish, at the discretion of HUD, 

such other security as may be deemed 

appropriate by HUD in making such 

guarantees. Such other security shall be 

specified in the contract entered into 

pursuant to paragraph (b)(1) of this 

section. 

* * * * * 

■ 43. Amend § 570.902 as follows: 

■ a. Revise the section heading, the 

introductory text, and paragraph (a); and 

■ b. Remove and reserve paragraph (b) 

and remove paragraph (c); 

The revisions read as follows: 

§ 570.902 Review for timely performance 

and continuing capacity for timely 

performance. 

HUD will review the rate of 

disbursement of each entitlement, HUDadministered small cities, nonentitlement counties in the State of 

Hawaii, and Insular Areas grant 

quarterly to determine whether each 

recipient is carrying out its CDBGassisted activities in a timely manner 

and whether it has the continuing 

capacity to do so. 

(a) Entitlement recipients, Insular 

Areas, and Non-entitlement CDBG 

grantees in Hawaii. (1) The period of 

performance is defined at § 570.3. 

(2) Based on the sum of draw 

vouchers both submitted and completed 

in the designated online system during 

the reporting quarter, HUD will identify 

each grant as: 

(i) Slow Spender. Slow Spender 

means the grantee is disbursing ten 

percent less than the monthly pace 

required to fully expend the grant 

during the period of performance. 

(ii) On Pace. On Pace means the 

grant’s disbursement rate exceeds Slow 

Spender and may be a sufficient rate to 

fully disburse the grant during the 

period of performance. 

(iii) Ready to Close. The grant has 

reached the end of the period of 

performance (phase 1). 

(iv) First Year. This is a new grant and 

HUD will not report performance 

publicly for the origin year of a grant. 

(3) If a grantee is not spending at a 

pace to disburse an entire grant during 

the period of performance (phase 1), 

HUD will evaluate the grantee’s capacity 

and will provide technical assistance to 

improve timely performance. 

(4) Absent contrary evidence 

satisfactory to HUD, HUD will consider 

an insular area, an entitlement recipient, 

or a non-entitlement CDBG grantee in 

Hawaii to be failing to carry out its 

CDBG activities in a timely manner and 

to lack continuing capacity to carry out 

activities in a timely manner if three or 

more of its grants are designated Slow 

Spender in each quarter during four 

consecutive calendar quarters. 

(5) In determining appropriate 

corrective actions or sanctions, HUD 

will consider: 

(i) A grantee’s demonstration, to 

HUD’s satisfaction, that the lack of 

timeliness or capacity has resulted from 

factors beyond the grantee’s reasonable 

control. 

(ii) The likelihood that the recipient 

will improve its disbursement rate for 

the majority of its non-First-Year open 

grants to On Pace within 120 days. For 

these purposes, HUD will take into 

account the extent to which funds on 

hand have been obligated by the 

recipient and its subrecipients for 

specific activities at the time the finding 

is made and other relevant information. 

* * * * * 

■ 44. Amend § 570.910 by revising 

paragraph (b)(5) and adding a paragraph 

(c) to read as follows: 

§ 570.910 Corrective and remedial actions. 

* * * * * 

(b) * * * 

(5) Advise the recipient to reimburse 

with non-Federal funds its program 

account or letter of credit in any 

amounts improperly expended and 

reprogram the use of the funds in 

accordance with applicable 

requirements; 

* * * * * 

(c) Voluntary grant reductions. A 

recipient may elect to request a 

voluntary grant reduction from a current 

or future year’s allocation of funds in 

lieu of reimbursing its grant under 

paragraph (b)(5) of this section. A 


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request for a voluntary grant reduction 

must be signed by the jurisdiction’s 

chief elected official. In its request, the 

recipient must waive its right to a 

hearing pursuant to § 570.913. 

PART 1003—COMMUNITY 

DEVELOPMENT BLOCK GRANTS FOR 

INDIAN TRIBES AND ALASKA NATIVE 

VILLAGES 

■ 45. The authority citation for part 

1003 continues to read as follows: 

Authority: 42 U.S.C. 3535(d) and 5301 et 

seq. 

■ 46. Amend § 1003.4 by adding in 

alphabetical order a definition for 

‘‘Activity delivery costs’’ to read as 

follows: 

§ 1003.4 Definitions. 

* * * * * 

Activity delivery costs means the 

allowable costs of work performed by a 

recipient or subrecipient in carrying out 

specific activities eligible under 

§§ 1003.201 through 1003.204. The cost 

principles at 2 CFR part 200, subpart E, 

must be used in determining the 

allowability of the costs. 

* * * * * 

■ 47. Amend § 1003.201 by revising the 

section heading and paragraphs (a), (c) 

introductory text, and (m) and adding 

paragraphs (p), (q), and (r) to read as 

follows: 

§ 1003.201 Eligible activities. 

* * * * * 

(a) Acquisition. Acquisition in whole 

or in part by the grantee, or other public 

or private nonprofit entity, by purchase, 

long-term lease (defined as 15 years or 

more), donation, or otherwise, of real 

property (including air rights, water 

rights, rights-of-way, easements, and 

other interests therein) for any public 

purpose, subject to the limitations of 

§ 1003.207. 

* * * * * 

(c) Public facilities and 

improvements. Acquisition, 

construction, reconstruction, 

rehabilitation or installation of public 

facilities and improvements, except as 

provided in § 1003.207(a), carried out by 

the grantee or other public or private 

nonprofit entities. In undertaking such 

activities, design features and 

improvements which promote energy 

efficiency may be included. [However, 

activities under this paragraph may be 

directed to the removal of material and 

architectural barriers that restrict the 

mobility and accessibility of elderly or 

disabled persons to publicly owned and 

privately owned buildings, facilities, 

and improvements including those 

provided for in § 1003.207(a)(1).] Such 

activities may also include the 

execution of architectural design 

features, and similar treatments 

intended to enhance the aesthetic 

quality of facilities and improvements 

receiving ICDBG assistance. Facilities 

designed for use in providing shelter for 

persons having special needs are 

considered public facilities and not 

subject to the prohibition of new 

housing construction described in 

§ 1003.207(b)(3). Such facilities include 

shelters for the homeless; convalescent 

homes; hospitals, nursing homes; 

domestic violence shelters; halfway 

houses for run-away children, drug 

offenders or parolees; group homes for 

individuals with intellectual disabilities 

and temporary housing for disaster 

survivors, including those impacted by 

climate-related events. In certain cases, 

nonprofit entities and subrecipients 

including those specified in § 1003.204 

may acquire title to public facilities. 

When such facilities are owned by 

nonprofit entities or subrecipients, they 

shall be operated so as to be open for 

use by the general public during all 

normal hours of operation. Public 

facilities and improvements eligible for 

assistance under this paragraph (c) are 

subject to the following policies in 

paragraphs (c)(1) through (3) of this 

section: 

* * * * * 

(m) Technical assistance. Provision of 

technical assistance to public or 

nonprofit entities to increase the 

capacity of such entities to carry out 

specific eligible neighborhood 

revitalization or economic development 

activities. General administrative and 

operating costs of a public or nonprofit 

entity are not eligible under this 

paragraph. Capacity building for private 

or public entities (including grantees) 

for other purposes may be eligible as a 

planning cost under § 1003.205. 

* * * * * 

(p) Tornado safe shelters. ICDBG 

funds may be used by the recipient or 

provided as loans or grants to non-profit 

and for-profit entities, including owners 

of manufactured housing communities, 

for the construction or improvement of 

tornado-safe shelters for manufactured 

housing residents in accordance with 

section 105(a) of the Act. Activities 

pursuant to this paragraph may be 

located only in a neighborhood 

(including a manufactured housing 

community) that- 

(1) Contains at least 20 manufactured 

housing units within such proximity to 

the shelter that the shelter is available 

to the resident in the event of a tornado, 

(2) Consists predominantly of persons 

of low and moderate income 

(3) Is located within a State in which 

a tornado has occurred during the fiscal 

year for which with amounts to be used 

were made available or the preceding 3 

fiscal years, as determined by the 

Secretary in consultation with the 

Administrator of the Federal Emergency 

Management Agency. 

(q) Essential repairs and operating 

expenses. ICDBG funds may be used for 

activities necessary to make essential 

repairs and pay operating expenses 

necessary to maintain the habitability of 

housing units (including abandoned or 

blighted properties) acquired through 

tax foreclosure proceedings (also known 

as In Rem) for up to five years to prevent 

abandonment or deterioration of 

housing units located in primarily lowand moderate-income neighborhoods. 

(r) Assistance to mixed-use property. 

ICDBG funds may be used to carry out 

eligible activities in mixed-use 

properties so long as the ICDBG 

recipient expends funds only on the 

eligible use in that property. For 

purposes of this section, the term 

‘‘Mixed-use property’’ means a property 

containing multiple uses, at least one of 

which must be eligible to be assisted 

with ICDBG funds. 

■ 48. Amend § 1003.202 by revising 

paragraph (a) introductory text to read 

as follows: 

§ 1003.202 Eligible rehabilitation and 

preservation activities. 

(a) Types of buildings and 

improvements eligible for rehabilitation 

or reconstruction assistance. ICDBG 

funds may be used to finance the 

rehabilitation and reconstruction of: 

* * * * * 

■ 49. Amend § 1003.203 by revising 

paragraph (b) to read as follows: 

§ 1003.203 Special economic development 

activities. 

* * * * * 

(b) The provision of assistance to a 

private for-profit business, including, 

but not limited to, grants, loans, loan 

guarantees, interest supplements, loan 

participations, technical assistance, and 

other forms of support (including use of 

pass-through financing structures), for 

any activity where the assistance is 

necessary or appropriate to carry out an 

economic development project, 

excluding those described as ineligible 

in § 1003.207(a). In order to ensure that 

any such assistance does not unduly 

enrich the for-profit business, the 

grantee shall conduct an analysis to 

determine that the amount of any 

financial assistance to be provided is 

not excessive, considering the actual 

needs of the business in making the 

project financially feasible and the 


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extent of public benefit expected to be 

derived from the economic development 

project. The grantee shall document the 

analysis as well as any factors it 

considered in making its determination 

that the assistance is necessary or 

appropriate to carry out the project. The 

requirement for making such a 

determination applies whether the 

business is to receive assistance from 

the grantee or through a subrecipient. 

* * * * * 

■ 50. Amend § 1003.206 by revising the 

section heading and the introductory 

text to read as follows: 

§ 1003.206 Program administrative costs. 

ICDBG funds may be used for the 

payment of reasonable administrative 

costs and carrying charges related to the 

planning and execution of community 

development activities assisted in whole 

or in part with funds provided under 

this part. No more than 20 percent of the 

sum of any grant plus program income 

received shall be expended for activities 

described in this section and in 

§ 1003.205. This does not include staff 

and overhead costs directly related to 

carrying out activities eligible under 

§§ 1003.201 through 1003.204, since 

those costs are eligible as part of such 

activities. These costs are activity 

delivery costs as defined in § 1003.4. In 

addition, technical assistance costs 

associated with developing the capacity 

to undertake a specific funded activity 

are also not considered program 

administration costs. These costs must 

not, however, exceed 10 percent of the 

total grant award. 

* * * * * 

■ 51. Amend § 1003.208 as follows: 

■ a. Revise paragraphs (b)(1) 

introductory text and (b)(1)(i) and (ii); 

■ b. Remove the text ‘‘Bureau of the 

Census’’ and add in its place ‘‘Census 

Bureau’s’’ in paragraph (b)(2) 

introductory text; 

■ c. Add paragraph (b)(5); 

■ d. Remove ‘‘, upon completion,’’ from 

the first sentence of paragraph (c) 

introductory text; and 

■ e. Revise paragraphs (c)(1)(i) and (ii), 

(c)(2), and (d). 

The revisions and addition read as 

follows: 

§ 1003.208 Criteria for compliance with the 

primary objective. 

* * * * * 

(b) * * * 

(1) An activity which benefits a 

limited clientele, at least 51 percent of 

whom are low or moderate income 

persons. The activity must meet one of 

the following tests: 

(i) Benefit at least one of the following 

clientele who are generally presumed to 

be principally low and moderate income 

persons: abused children, survivors of 

domestic violence, elderly persons, 

adults meeting the Census Bureau’s 

Current Population Reports definition of 

‘‘severely disabled,’’ homeless persons, 

illiterate adults (adults unable to read 

and write in English and in their first 

language, if their first language is not 

English), persons living with AIDS, 

migrant farm workers, persons who 

meet the Federal poverty guidelines, 

persons insured by Medicaid; or 

(ii) Require information on family size 

and income that demonstrates that at 

least 51 percent of the clientele are 

persons whose family income does not 

exceed the low- and moderate-income 

limit; or 

* * * * * 

(5) The following kinds of activities 

may not qualify under this paragraph 

(b): activities that provide benefits to all 

the residents of an area; activities 

involving the acquisition, construction 

or rehabilitation of property for housing; 

or activities where the benefit to lowand moderate-income persons to be 

considered is the creation or retention of 

jobs, except as provided in paragraph 

(b)(4) of this section. 

(c) * * * 

(1) * * * 

(i) The assistance is for an eligible 

activity to reduce the development cost 

of the substantial rehabilitation of (as 

defined at 24 CFR 5.100), conversion of 

a nonresidential structure to, or new 

construction of, a multifamily, nonelderly rental housing project; 

(ii) At least 20 percent of the units 

will be occupied by low- and moderateincome households at affordable rents; 

and 

* * * * * 

(2) When ICDBG funds are used for 

housing services eligible under 

§ 1003.201(j), if the housing for which 

the services are provided is to be 

occupied by low-and moderate-income 

households. 

(d) Job creation or retention activities. 

An activity designed to create or retain 

permanent jobs where at least 51 

percent of the full-time equivalent jobs 

will be held by, or made available to, 

low- and moderate-income persons. For 

purposes of determining whether a job 

is held by or made available to a low or 

moderate income person, the person 

may be presumed to be a low or 

moderate income person if: he/she 

resides within a census tract where not 

less than 70 percent of the residents 

have incomes at or below 80 percent of 

the area median; or, if he/she resides in 

a census tract designated as 

economically distressed by the Federal 

Government; or, if the assisted business 

is located in and the job under 

consideration is to be located in such a 

tract or area. As a general rule, each 

assisted business shall be considered to 

be a separate activity for purposes of 

determining whether the activity 

qualifies under this paragraph. 

However, in certain cases such as where 

ICDBG funds are used to acquire, 

develop or improve a real property (e.g., 

a business incubator or an industrial 

park) the requirement may be met by 

measuring jobs in the aggregate for all 

the businesses which locate on the 

property, provided such businesses are 

not otherwise assisted by ICDBG funds. 

Where ICDBG funds are used to pay for 

the staff and overhead costs of a CBDO 

under the provisions of § 1003.204 

making loans to businesses from nonICDBG funds, this requirement may be 

met by aggregating the jobs created by 

all of the businesses receiving loans 

during any one-year period. 

(1) For an activity that creates jobs, 

the grantee must document that at least 

51 percent of the jobs will be held by, 

or made available to, low- and 

moderate-income persons. 

(2) For an activity that retains jobs, 

the grantee must document that the jobs 

would be lost without the ICDBG 

assistance and that at least one of the 

following conditions applies with 

respect to at least 51 percent of the jobs 

at the time the ICDBG assistance is 

provided: 

(i) The job is known to be held by a 

low- or moderate-income person; or 

(ii) The job can reasonably be 

expected to turn over within the 

following two years and that steps will 

be taken to ensure that it will be filled 

by, or made available to, a low- or 

moderate-income person upon turnover. 

(3) Jobs will be considered to be 

available to low- and moderate-income 

persons only if: 

(i) The assisted business does not 

require as a prerequisite special skills 

that can only be acquired with 

substantial training or work experience 

or education beyond high school or the 

business agrees to hire unqualified 

persons and provide training; and 

(ii) The grantee and the assisted 

business take actions to ensure that lowand moderate-income persons receive 

first consideration for filling such jobs. 

* * * * * 

■ 52. Amend § 1003.506 by revising 

paragraph (a) introductory text to read 

as follows: 

§ 1003.506 Reports. 

(a) Status and evaluation report. 

Grantees shall submit a status and 

evaluation report on previously funded 


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open grants 90 days after the end of the 

grantee’s Tribal program year, or 90 

days after the end of the Federal fiscal 

year if a grantee’s Tribal program year 

is the same as the Federal fiscal year, 

and at the time of grant close-out. The 

report shall address the following areas: 

* * * * * 

§ 1003.602 [Amended] 

■ 53. Amend § 1003.602 in paragraph 

(h)(2)(ii) by removing ‘‘49 CFR 

24.2(g)(2)’’ and adding in its place ‘‘49 

CFR 24.2(a)(9)(ii)’’. 

■ 54. Amend § 1003.606 by revising 

paragraph (d)(1)(i) to read as follows: 

§ 1003.606 Conflict of interest. 

* * * * * 

(d) * * * 

(1) * * * 

(i) A disclosure of the nature of the 

possible conflict, accompanied by an 

assurance that there has been public 

disclosure of the conflict (public 

disclosure is considered a combination 

of any of the following: publication on 

the grantee’s website, including social 

media; electronic mailings; media 

advertisements; public service 

announcements; and display in public 

areas such as libraries, grocery store 

bulletin boards, and neighborhood 

centers), evidence of the public 

disclosure, and a description of how the 

public disclosure was made; and 

* * * * * 

Marion M. McFadden, 

Principal Deputy Assistant Secretary for 

Community Planning and Development. 

Dominique Blom, 

General Deputy Assistant Secretary for Public 

and Indian Housing. 

[FR Doc. 2024–00039 Filed 1–9–24; 8:45 am] 

BILLING CODE 4210–67–P 


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