70214 Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR–4559–F–01]

RIN 2506–AC06

CDBG Program Regulations on PreAward Costs and New Housing

Construction

AGENCY: Office of the Assistant

Secretary for Community Planning and

Development, HUD.

ACTION: Final rule.

SUMMARY: This rule changes the

Community Development Block Grant

(CDBG) program to permit a new CDBG

grantee without a consolidated plan to

be reimbursed for costs for activities

related to the development and

preparation of its first consolidated

plan, and to permit homeownership

activities, to the extent authorized by

statute, to be funded in connection with

new construction.

EFFECTIVE DATE: December 21, 2000.

FOR FURTHER INFORMATION CONTACT: Sue

Miller, Entitlement Communities

Division, Department of Housing and

Urban Development, 451 Seventh Street,

SW, Washington, DC 20410. Telephone:

(202) 708–1577. (This is not a toll-free

number). Hearing-impaired or speechimpaired individuals may access the

voice telephone number listed above by

calling the Federal information relay

service during working hours at 1–800–

877–8339.

SUPPLEMENTARY INFORMATION: This rule

makes three changes to the regulations

for the Community Development Block

Grant (CDBG) program. It permits a new

CDBG grantee without a consolidated

plan to incur costs for activities related

to the development and preparation of

its first consolidated plan, and to be

reimbursed from CDBG funds for those

costs. The rule allows homeownership

activities, to the extent authorized by

statute, to be funded in connection with

new construction. Finally, the rule

makes a related technical correction by

removing the specific statutory

reference for homeownership activities.

Costs for First Consolidated Plan

A CDBG grantee is allowed

reimbursement from grant funds for

costs incurred prior to the effective date

of the grant agreement when certain

requirements stated in the regulations

are met. One of those requirements is

that the activity must be included in a

consolidated plan action plan, or an

amended consolidated plan action plan,

prior to the costs being incurred. As a

result, a new CDBG grantee that does

not yet have a consolidated plan cannot

obtain reimbursement for costs related

to the development and preparation of

its first consolidated plan without

obtaining a regulatory waiver. This

outcome is an unintended consequence

of a previous rule regarding CDBG preaward costs (60 FR 56892, November 9,

1995). Grantees ordinarily are able to

fund their development and preparation

costs for a future year’s consolidated

plan by including that activity in the

current year’s consolidated plan, but the

1995 change did not take into account

the special needs of new grantees.

Failure to permit a new grantee to fund

these costs from CDBG funds could

negatively impact the implementation of

its CDBG program and its ability to

effectively carry out activities that will

benefit low- and moderate-income

residents. Although HUD could

continue to address this problem

through waivers, that is an inefficient

approach and one that leaves a new

grantee uncertain of funding until a

waiver is granted. HUD and new

grantees will benefit from a regulations

change to permit routine reimbursement

for a new grantee for its pre-award costs

for development and preparation of its

first consolidated plan, and there will be

no adverse effect from this change.

Homeownership Activities for New

Construction

In general, CDBG assistance is not

available for new construction activities.

However, a statutory provision

(discussed below) does allow certain

forms of direct homeownership

assistance to low- and moderate-income

households. To date, HUD has applied

a conservative interpretation to this

statutory provision that did not permit

the use of CDBG funds for

homeownership assistance that directly

assisted the construction of new

housing. We have reconsidered this

interpretation, in part because

homeownership assistance (originally

approved as an eligible activity only for

certain years) is now permanently

authorized, and because of the

important role that CDBG assistance can

play in the development of new

affordable housing with increased

opportunities for homeownership for

low- and moderate-income persons.

HUD has concluded that neither the

statutory text nor the legislative history

behind the provisions for CDBG

homeownership assistance require that

the availability of homeownership

assistance be affected by whether or not

the home was previously constructed.

Therefore, the regulations will now

reflect this revised interpretation.

Revision to Statutory Reference

In connection with the change

discussed above, we are revising the

current statutory reference for

homeownership assistance that appears

in § 570.201(n). It cites ‘‘section

105(a)(25)’’ of the Housing and

Community Development Act of 1974.

However, due to intervening statutory

changes, a different provision regarding

lead-based paint hazard evaluation and

reduction is now designated as section

105(a)(25) and the correct citation for

the homeownership assistance

provision is not completely certain. For

example, the United States Code

Annotated designates the provision as

42 U.S.C. 5305(a)(24) [corresponding to

a section 105(a)(24) of the 1974 Act], but

the current ‘‘Basic Laws on Housing and

Community Development’’ printed as

Committee Print 106–1 for use of the

House of Representatives’ Committee on

Banking and Financial Services

expressly states that there is no section

105(a)(24). Despite the uncertainty

regarding correct citation, there is no

dispute over the fact that the

homeownership assistance provision is

now permanently authorized as eligible

activity for the CDBG program. This rule

thus revises the citation in § 570.201(n)

from the current specific reference to

section 105(a)(25) to a more general

reference to section 105(a).

Other Matters

Justification for Final Rulemaking

It is the general practice of the

Department to provide a 60-day public

comment period on all rules in

accordance with 24 CFR part 10.

However, a public comment procedure

may be omitted under § 10.1 if the

Department determines that is

impracticable, unnecessary, or contrary

to the public interest. It may also be

omitted for interpretive rules. The

Department has decided that public

comment is both unnecessary and

contrary to the public interest regarding

both the change on pre-award costs for

consolidated plan preparation and

development by first-time grantees, and

eligibility for homeownership assistance

in connection with new construction.

Delay is issuance of a final rule could

adversely affect first-time grantees and

interfere with the achievement of the

purposes of the program, with no

corresponding public benefit because

the changes are simple ones without a

substantive adverse effect on anyone. In

addition, the change regarding

homeownership assistance qualifies as

an interpretive rule reflecting a revision

in our interpretation of statutory limits.

Public comment regarding the third

Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Rules and Regulations 70215

change (deletion of an incorrect

statutory reference) is clearly not

needed due to complete lack of

substantive effect.

Environmental Impact

A Finding of No Significant Impact

with respect to the environment for this

rule 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. The Finding of No Significant

Impact is available for public inspection

between 7:30 a.m. and 5:30 p.m.

weekdays in the Office of the Rules

Docket Clerk, Office of the General

Counsel, Department of Housing and

Urban Development, Room 10276, 451

Seventh Street, SW., Washington, DC

20410–0500.

Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act

of 1995 (2 U.S.C. 1532) establishes

requirements for Federal agencies to

assess the effects of their regulatory

actions on State, local, and tribal

governments and the private sector.

This rule does not impose a Federal

mandate that will result in the

expenditure by State, local, or tribal

governments, in the aggregate, or by the

private sector, or $100 million or more

in any one year.

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that this rule would not have a

significant economic impact on a

substantial number of small entities.

There are no anti-competitive

discriminatory aspects of the rule with

regard to small entities, and there are

not any unusual procedures that would

need to be complied with by small

entities.

Executive Order 13132, Federalism

This rule does not have Federalism

implications and does not impose

substantial direct compliance costs on

State and local governments or preempt

State law within the meaning of the

Executive Order.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic

Assistance program number is 14.218.

List of Subjects in 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, Lead

poisoning, Loan programs—housing and

community development, Low and

moderate income housing, New

communities, Northern Mariana Islands,

Pacific Islands Trust Territory, Pockets

of poverty, Puerto Rico, Reporting and

recordkeeping requirements, Small

cities, Student aid, Virgin Islands.

Accordingly, the Department hereby

amends 24 CFR part 570 as follows:

PART 570—COMMUNITY

DEVELOPMENT BLOCK GRANTS

1. The authority citation for part 570

continues to read as follows:

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

5320.

2. Section 570.200 is amended by

revising paragraph (h)(1)(i) to read as

follows:

§ 570.200 General policies.

* * * * *

(h) * * *

(1) * * *

(i) The activity for which the costs are

being incurred is included, prior to the

costs being incurred, in a consolidated

plan action plan, an amended

consolidated plan action plan, or an

application under subpart M of this

part, except that a new entitlement

grantee preparing to receive its first

allocation of CDBG funds may incur

costs necessary to develop its

consolidated plan and undertake other

administrative actions necessary to

receive its first grant, prior to the costs

being included in its consolidated plan;

* * * * *

2. Section 570.201 is amended by

revising paragraph (n) to read as

follows:

§ 570.201 Basic eligible activities.

* * * * *

(n) Homeownership assistance. CDBG

funds may be used to provide direct

homeownership assistance to low- or

moderate-income households in

accordance with section 105(a) of the

Act.

* * * * *

3. Section 570.207 is amended by

revising paragraph (b)(3)(ii) to read as

follows:

§ 570.207 Ineligible activities.

* * * * *

(b) * * *

(3) * * *

(ii) As authorized under § 570.201(m)

or (n);

* * * * *

Dated: August 24, 2000.

Cardell Cooper,

Assistant Secretary for Community Planning

and Development.

[FR Doc. 00–29675 Filed 11–20–00; 8:45 am]

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