Community Development Block Grant Funds in Disaster Relief and Recovery
Released: 2012-11-01T00:00:00

Background

The CDBG program, administered by the Department of Housing and Urban Development (HUD), is the federal government's largest and most widely available source of financial assistance to support state and local government-directed neighborhood revitalization, housing rehabilitation, and economic development activities. These formula-based grants are allocated to more than 1,100 entitlement communities (metropolitan cities with populations of 50,000 or more, and urban counties), the 50 states, Puerto Rico, and the insular areas of American Samoa, Guam, the Virgin Islands, and the Northern Mariana Islands. Grants are used to implement plans intended to address local housing, neighborhood revitalization, public services, and infrastructure needs, as determined by local officials with citizen input.

Due to the block grant nature of the program, local and state officials exercise a great deal of discretion in determining which combination of eligible activities (in 25 categories) to undertake when developing their community development plans. Eligible CDBG activities include historic preservation; real property acquisition, demolition, site preparation and disposition; economic development and job creation, including assistance to for-profit entities and establishment of revolving loan funds; housing assistance, including rehabilitation loans and grants; public service activities, including job counseling and employment training; and assistance to not-for-profit entities, including community development corporations and faith-based institutions.

Any of the eligible activities undertaken by a community must address at least one of the program's following three national objectives:

principally benefit low and moderate income persons; aid in eliminating or preventing slums or blight; or meet particularly urgent community development needs because existing conditions pose a serious and immediate threat to the public.

It is this third program objective—meeting an urgent threat—that allows CDBG funds to be used to assist in disaster response activities.

The program's authorizing statute requires each state and entitlement community to allocate 70% of its CDBG funds to activities that primarily benefit low- and moderate-income persons. In response to previous disasters, HUD has waived this provision in order to allow a community to address an urgent threat to the safety of residents.

CDBG Disaster Assistance

The CDBG program has been used frequently by the federal government to respond to natural and manmade catastrophes (for a list of CDBG disaster recovery appropriations see the Appendix ). In general, Congress has provided increased flexibility and allocated additional CDBG funds to affected communities and states to help them respond to and recover from presidentially declared disasters. This includes allowing communities to reprogram CDBG funds to meet disaster-related needs, including short-term disaster relief, mitigation activities, and long-term recovery activities. In assisting communities and states in responding to disasters, HUD may expedite grant awards for affected communities in presidentially declared disaster areas, including allowing affected grantees to move up their CDBG program start dates.

Short-Term Disaster Relief

Past disaster relief legislation has allowed CDBG funds to fill gaps in Federal Emergency Management Agency (FEMA) and Small Business Administration (SBA) emergency relief activities. In general, such legislation prohibited CDBG funds from substituting for FEMA or SBA funding but allowed CDBG funds to be used for activities that are not reimbursable by FEMA or SBA. Typically, CDBG has been used to finance the removal of debris, the provision of extra security patrols, and the emergency restoration of essential services, such as water, sewer, electrical, and telecommunications. For instance, approximately $250 million in CDBG funds were used to finance the emergency temporary restoration of utilities in the affected areas of Lower Manhattan following the destruction of the World Trade Center, and an additional $500 million was made available for permanent utility restoration and infrastructure improvements.

Mitigation Activities

Mitigation activities are intended to lessen the impact of a disaster, and can range from such physical measures as the construction of levees to protect against flooding to buildings designed to withstand earthquakes. Mitigation activities may also involve training exercises and public awareness programs. Less typical is the use of CDBG to compensate businesses and workers for lost wages or revenues. Mitigation can take place at any time—before a disaster occurs, during an emergency, or after a disaster, during recovery or reconstruction.

Mitigation activities have involved the use of CDBGs to fund buyouts of real property in areas prone to a recurrence of the event. For instance, following the Midwest floods of 1993, CDBG and Hazard Mitigation Grants from FEMA were used to acquire privately held real property within flood plain areas in the nine affected states and convert the land to public uses, such as recreation, or allow it to return to its natural state. CDBG funds were also used to construct and repair levees in an effort to reduce the area's vulnerability to future flood losses. Following the Midwest floods of 1997, Congress again appropriated CDBG funds to cover buyouts of privately-held land in flood prone areas in the affected states.

Following the terrorist attacks of September 11, 2001, Congress appropriated $2 billion under P.L. 107-117 for disaster relief and recovery assistance to New York. The act earmarked at least $500 million for economic losses to individuals, businesses, and nonprofit organizations in an effort to mitigate the attack's economic impact. That provision required HUD to implement the program within 45 days after passage of the act. It limited economic loss grants to small businesses located within a designated area to no more than $500,000. In addition, the act earmarked at least $10 million for the tourism and travel industry.

Long-Term Recovery Activities

The third set of activities eligible for CDBG assistance is associated with long-term recovery and reconstruction efforts. This would include assistance to businesses and residents affected by a presidentially declared disaster, as well as grants intended to attract new businesses to the area. The forms of assistance may range from business loans to infrastructure improvements.

For instance, to assist in the redevelopment of the Lower Manhattan area of New York following the terrorist attacks of September 11, 2001, Congress appropriated $3.5 billion in CDBG funds. Of the $3.5 billion in CDBG funds made available, $1.49 billion has been allocated to recovery assistance including $350 million in business recovery grants (to compensate businesses for lost revenue) and small firm attraction and retention grants (awarding incentives to businesses agreeing to stay in Lower Manhattan). The $1.49 billion also included $280.5 million in residential grant assistance to encourage renters and owners to stay in the area. In exchange for a two-year commitment to stay in the area, renters and owners in designated Lower Manhattan neighborhoods received residential grants that covered up to 30% of their housing costs. In addition, $330 million in CDBG funds were made available to cover some portion of costs incurred by Con Edison and Verizon in restoring utility and telecommunication services to the Lower Manhattan area.

Other Actions by HUD in Support of Disaster Recovery

In addition to providing CDBG funding assistance, Congress has included a number of other provisions in past disaster relief appropriations to facilitate relief and recovery efforts and to ensure accountability. These have included the use of waivers, funding transfers, matching funds, and reporting requirements.

Authority to Waive Program Requirements

Previous disaster relief appropriations have granted the Secretary of Housing and Urban Development significant authority to waive program requirements but have generally prohibited waivers in four areas: nondiscrimination, environmental review, labor standards, and fair housing. This is consistent with the program's authorizing legislation, which states:

For funds designated under this title by a recipient to address the damage in an area for which the President has declared a disaster under title IV of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, the Secretary may suspend all requirements for purposes of assistance under section 106 for that area, except for those related to public notice of funding availability, nondiscrimination, fair housing, labor standards, environmental standards, and requirements that activities benefit persons of low- and moderate-income.

Congress, on a few occasions, has waived or modified the CDBG program's income targeting provisions, which require grantees to allocate at least 70% of their funds to activities that benefit low- and moderate-income persons. For instance, in response to the Midwest floods of 1998 and the Florida hurricanes of 2004, Gulf Coast hurricanes of 2005, and natural disasters of 2008, the income targeting requirement was lowered to 50%. In response to the 1992 Los Angeles riots, Congress increased the ceiling on the use of the CDBG funds for public service activities in Los Angeles from 15% to 25%.

In addition to waivers, affected grantees in presidentially declared disaster areas may request the suspension of certain statutory or regulatory provisions. This may include extension of the deadline for submitting annual performance reports, and changes in the time frame for measuring whether the community met the CDBG program's income-targeting requirement (that 70% of CDBG expenditures benefitted low- and moderate-income persons). Grantees may also seek a suspension or removal of statutory provisions prohibiting the use of CDBG funds for new housing construction or for repair or reconstruction of buildings used for the general conduct of local government. Several past disaster relief acts included language requiring HUD to publish in the Federal Register , five days in advance of the effective date, any waivers or suspensions of any statute or regulation governing the use of CDBG funds for disaster relief.

Funding Transfers

Congress has included language in previous disaster relief appropriations allowing communities to transfer CDBG funds to other programs. For instance, disaster relief assistance legislation in response to the Northridge, California, earthquake of 1994 included a provision allowing HUD to transfer $75 million in CDBG assistance to the HOME Investment Partnership program (a housing block grant administered by HUD). In addition, Congress included language in appropriations dealing with the 1998 Midwest floods that transferred administrative authority over CDBG funds for land buyouts from HUD to FEMA as a part of a disaster mitigation strategy.

State Matching Funds

Congress has also included language in disaster relief appropriations requiring communities to meet a financial match requirement as a condition for receipt of CDBG-funded disaster relief assistance. For instance, disaster relief assistance in response to the Florida hurricanes of 2004 required each state to "provide not less than 10 percent in non-Federal public matching funds or its equivalent value (other than administrative costs) for any funds allocated to the state under this heading." CDBGs awarded to states following the 1998 Midwest floods were conditioned on each state providing 25% in non-federal public matching funds.

Matching Other Federal Funds

Statutory provisions governing the regular CDBG program allow states and local governments to use their annual (non-disaster related) CDBG allocations to meet the matching fund requirements of other federal programs (42 U.S.C. 5305[a][9]). However, recently Congress included language in appropriations dealing with Gulf Coast hurricanes of 2005 and natural disasters in 2008 that prohibited states and local governments from using CDBG disaster-relief funds to meet the matching fund requirements of other federal programs.

Reporting Requirements

Several past appropriations acts have included provisions requiring quarterly reports on the expenditure of funds in order to provide oversight and ensure accountability in the allocation of disaster relief funds. Legislation providing CDBG disaster relief assistance to communities affected by the 1997 and 1998 Midwest floods included provisions that required HUD and FEMA to jointly submit quarterly reports to the House and Senate Appropriations Committees on the use of CDBG funds for land acquisition and buyouts. Legislation providing CDBG assistance to New York following the September 11, 2001, terrorist attacks, the Gulf Coast hurricanes of 2005, and natural disasters of 2008 also included quarterly reporting provisions.

Recent Legislation

On July 29, 2010, President Obama signed into law the Supplemental Appropriations Act for FY2010, P.L. 111-212 . The legislation appropriates supplemental CDBG funds for disaster recovery activities. Specifically, provisions included during Senate consideration and passage of H.R. 4899 , the Supplemental Appropriations Act of 2010, recommended appropriating $100 million in CDBG supplemental funds for presidentially declared disaster areas affected by severe storms and flooding during the period from March 2010 to May 2010. P.L. 111-212 limits the $100 million in CDBG disaster assistance to states where

the entire state has been declared a presidential disaster area; or at least 20 counties in the state have been declared presidential disaster areas.

Given these parameters, the act is intended to allocate CDBG disaster recovery funds only to the states of Rhode Island, Kentucky, Nebraska, and Tennessee. In addition, P.L. 111-212 allows

each grantee to use up to 5% of its CDBG disaster recovery funds for administrative costs; HUD to award CDBG disaster recovery grants to both states and local governments; CDBG disaster recovery funds to be used to meet the matching fund requirements of other federal programs; and HUD, at the request of a grantee, to waive any statutes or regulations governing the CDBG program except for provisions related to environmental review, fair labor standards, civil rights, and nondiscrimination.

The latter provision gives grantees greater flexibility in developing and implementing CDBG disaster recovery plans.

Disaster Relief 112th Congress: P.L. 112-55

On September 15, 2011, the Senate passed, by unanimous consent, its version of H.J.Res. 66 , which would have appropriated $100 million in supplemental CDBG disaster assistance. The bill included many of the standard provisions included in previous CDBG disaster appropriations. It would have:

directed HUD to allocate funds to both states and local governments; allowed CDBG disaster funds to be used to meet the matching fund requirements of other federal programs; allowed states and localities to use up to 5% of their CDBG disaster allocation to cover administrative costs; and allowed HUD to grant waivers or specify alternative program requirements (except those related to fair housing, nondiscrimination, labor standards, and environmental review) as long as such waivers or alternative requirements are not inconsistent with purpose and rules governing the CDBG program.

The House-passed version of H.J.Res. 66 did not include provisions appropriating supplemental CDBG disaster funds.

During consideration of the Consolidated and Further Continuing Appropriations Act of 2012, H.R. 2112 , which was signed into law as P.L. 112-55 by the President on November 18, 2011, Congress included $400 million in supplemental CDBG assistance in response to multiple disasters that occurred during 2011. On April 16, 2012, HUD announced the allocation of these funds to 17 grantees, including nine local governments, in the eight states of Alabama, Missouri, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Vermont. The act:

allows funds to be used to support housing, infrastructure, and economic recovery efforts; caps the percentage of funds that may be used for administrative expenses at 5% of the amount allocated; requires all grantees to submit to HUD detailed disaster recovery plans prior to obligating CDBG disaster recovery funds;. prohibits funds from being used to for activities reimbursable by, or made available, by the Federal Emergency Management Administration or the Army Corps of Engineers; and allows HUD to waive statutory or regulatory provisions governing the use of CDBG funds, except those related to fair housing, nondiscrimination, labor standards, and environmental review.

When seeking a waiver of CDBG program requirements, grantees are required to explain why such a waiver is necessary to the grantee's recovery efforts.

Policy Considerations

The CDBG program's broad list of eligible activities and its flexibility has allowed communities and states affected by disasters to undertake short-term disaster relief efforts, implement mitigation strategies, and finance long-term recovery activities. These funds have been used to support disaster recovery efforts spanning multiple states, as well as to respond to disaster recovery efforts in highly urbanized areas.

As Congress examines legislative proposals intended to finance long-term disaster recovery efforts, it may move to consider a number of CDBG-related policy questions:

Is the CDBG program an appropriate and effective means of providing federal support for long-term disaster recovery efforts? If it is, what should be the level of CDBG assistance awarded to affected areas? Should CDBG assistance be controlled by the individual communities, by the states, or by a multi-state regional entity or entities? Should Congress require states to meet a matching fund requirement as a condition for receiving disaster recovery-related CDBG funds? If so, what level of matching funds would be appropriate? Would it be fixed, or adjustable to account for such factors as level of damage, state fiscal capacity, income levels, and other factors? What additional compliance and accountability measures or actions, if any, should Congress require of CDBG recipients as a condition of receiving CDBG funds?

Appendix. Funding History of CDBG Supplemental Appropriations for Disaster Relief