[Title 24 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2017 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          


          Title 24

Housing and Urban Development


________________________

Parts 500 to 699

                         Revised as of April 1, 2017

          Containing a codification of documents of general 
          applicability and future effect

          As of April 1, 2017
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 24:
    SUBTITLE B--Regulations Relating to Housing and Urban 
      Development (Continued)
          Chapter V--Office of Assistant Secretary for 
          Community Planning and Development, Department of 
          Housing and Urban Development                              5
          Chapter VI--Office of Assistant Secretary for 
          Community Planning and Development, Department of 
          Housing and Urban Development [Reserved]
  Finding Aids:
      Table of CFR Titles and Chapters........................     339
      Alphabetical List of Agencies Appearing in the CFR......     359
      List of CFR Sections Affected...........................     369

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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 24 CFR 500.1 refers 
                       to title 24, part 500, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
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    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
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LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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[[Page vii]]

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    Director,
    Office of the Federal Register.
    April 1, 2017.

                                
                                      
                            

  

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                               THIS TITLE

    Title 24--Housing and Urban Development is composed of five volumes. 
The first four volumes containing parts 0-199, parts 200-499, parts 500-
699, parts 700-1699, represent the regulations of the Department of 
Housing and Urban Development. The fifth volume, containing part 1700 to 
end, continues with regulations of the Department of Housing and Urban 
Development and also includes regulations of the Board of Directors of 
the Hope for Homeowners Program, and the Neighborhood Reinvestment 
Corporation. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of April 1, 2017.

    For this volume, Michele Bugenhagen was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of John 
Hyrum Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                 TITLE 24--HOUSING AND URBAN DEVELOPMENT




                  (This book contains parts 500 to 699)

  --------------------------------------------------------------------

   SUBTITLE B--Regulations Relating to Housing and Urban Development 
                                (Continued)

                                                                    Part

chapter v--Office of Assistant Secretary for Community 
  Planning and Development, Department of Housing and Urban 
  Development...............................................         510
chapter vi--Office of Assistant Secretary for Community Planning and 
  Development, Department of Housing and Urban Development [Reserved]

[[Page 3]]

   Subtitle B--Regulations Relating to Housing and Urban Development 
                               (Continued)

[[Page 5]]



  CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND 
        DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT




  --------------------------------------------------------------------

                          SUBCHAPTER A--GENERAL
Part                                                                Page
500             Expiring programs--savings clause...........           7
             SUBCHAPTER B--SLUM CLEARANCE AND URBAN RENEWAL
510             Section 312 Rehabilitation Loan Program.....           8
                   SUBCHAPTER C--COMMUNITY FACILITIES
570             Community development block grants..........           9
573             Loan guarantee recovery fund................         159
574             Housing opportunities for persons with AIDS.         164
576             Emergency Solutions Grants Program..........         181
578             Continuum of Care Program...................         219
581             Use of Federal real property to assist the 
                    homeless................................         267
582             Shelter Plus Care...........................         276
583             Supportive Housing Program..................         293
586             Revitalizing base closure communities and 
                    community assistance--community 
                    redevelopment and homeless assistance...         312
594             John Heinz Neighborhood Development Program.         321
599             Renewal communities.........................         324

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                          SUBCHAPTER A_GENERAL





PART 500_EXPIRING PROGRAMS_SAVINGS CLAUSE--Table of Contents



    Authority: 42 U.S.C. 3535(d).

    Source: 79 FR 58195, Sept. 2, 2014, unless otherwise noted.



Sec. 500.1  Expiring programs--Savings clause.

    No new grants or grant agreements are being made under the programs 
listed in this section. Existing grants or grant agreements making 
designation under these programs continue to be governed by the 
regulations in effect as they existed immediately before October 2, 2014 
(see 24 CFR parts 500 to 699, revised as of April 1, 2014):

24 CFR Part 511  Rental Rehabilitation Grant Program (42 U.S.C. 1437o)
24 CFR Part 572  HOPE for Homeownership of Single Family Homes (HOPE 3) 
(42 U.S.C. 12891)
24 CFR Part 585  Youthbuild (42 U.S.C. 8011)
24 CFR Part 590  Urban homesteading (12 U.S.C. 1706e)
24 CFR Part 597  Urban empowerment zones and enterprise communities 
(Round one designations) (26 U.S.C. 1391)
24 CFR Part 598  Urban empowerment zones; Round two and three 
designations (26 U.S.C. 1391)

[[Page 8]]



              SUBCHAPTER B_SLUM CLEARANCE AND URBAN RENEWAL





PART 510_SECTION 312 REHABILITATION LOAN PROGRAM--Table of Contents



    Authority: 42 U.S.C. 1452b and 3535(d).

    Source: 79 FR 51895, Sept. 2, 2014, unless otherwise noted. 
Redesignated at 79 FR 51895, Sept. 2, 2014.



Sec. 510.1  Multi-family property loans.

    (a) In cases in which a corporation is a borrower on a section 312 
loan, the Assistant Secretary for CPD or his designee may require an 
officer of the corporation or a principal stockholder to personally 
guarantee the section 312 loan or to cosign the loan note as a borrower, 
where necessary to make the finding of acceptable risk required for 
assumption of the loan.
    (b) All partners of any partnership which is a borrower on a section 
312 loan shall be personally liable for repayment of the section 312 
loan. Limited partners shall assume personal liability by co-signing the 
loan note as a borrower or by personally guaranteeing the loan.
    (c) Any personal guarantee or endorsement shall not relieve the 
partnership or corporate borrower from securing the section 312 loan by 
a mortgage or deed of trust on the property to be rehabilitated.

[44 FR 21751, Apr. 11, 1979, as amended at 44 FR 47513, Aug. 13, 1979; 
44 FR 55562, Sept. 27, 1979. Redesignated and amended at 61 FR 7061, 
Feb. 23, 1996]

[[Page 9]]



                    SUBCHAPTER C_COMMUNITY FACILITIES





PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS--Table of Contents



                      Subpart A_General Provisions

Sec.
570.1  Purpose and primary objective.
570.3  Definitions.
570.4  Allocation of funds.
570.5  Waivers.

Subpart B [Reserved]

                      Subpart C_Eligible Activities

570.200  General policies.
570.201  Basic eligible activities.
570.202  Eligible rehabilitation and preservation activities.
570.203  Special economic development activities.
570.204  Special activities by Community-Based Development Organizations 
          (CBDOs).
570.205  Eligible planning, urban environmental design and policy-
          planning-management-capacity building activities.
570.206  Program administrative costs.
570.207  Ineligible activities.
570.208  Criteria for national objectives.
570.209  Guidelines for evaluating and selecting economic development 
          projects.
570.210  Prohibition on use of assistance for employment relocation 
          activities.

                      Subpart D_Entitlement Grants

570.300  General.
570.301  Activity locations and float-funding.
570.302  Submission requirements.
570.303  Certifications.
570.304  Making of grants.
570.307  Urban counties.
570.308  Joint requests.
570.309  Restriction on location of activities.

                    Subpart E_Special Purpose Grants

570.400  General.
570.401  Community adjustment and economic diversification planning 
          assistance.
570.402  Technical assistance awards.
570.403  New Communities.
570.404  Historically Black colleges and universities program.
570.405  The insular areas.
570.406  Formula miscalculation grants.
570.410  Special Projects Program.
570.411  Joint Community Development Program.
570.415  Community Development Work Study Program.
570.416  Hispanic-serving institutions work study program.

   Subpart F_Small Cities, Non-Entitlement CDBG Grants in Hawaii and 
                         Insular Areas Programs

570.420  General.
570.421  New York Small Cities Program design.
570.422-4.25  [Reserved]
570.426  Program income.
570.427  Program amendments.
570.428  [Reserved]
570.429  Hawaii general and grant requirements.
570.431  Citizen participation.
570.440  Application requirements for insular area grants funded under 
          section 106.
570.441  Citizen participation--insular areas.
570.442  Reallocations-Insular Areas.

                Subpart G_Urban Development Action Grants

570.450  Purpose.
570.456  Ineligible activities and limitations on eligible activities.
570.457  Displacement, relocation, acquisition, and replacement of 
          housing.
570.461  Post-preliminary approval requirements; lead-based paint.
570.463  Project amendments and revisions.
570.464  Project closeout.
570.465  Applicability of rules and regulations.
570.466  Additional application submission requirements for Pockets of 
          Poverty--employment opportunities.

Subpart H [Reserved]

        Subpart I_State Community Development Block Grant Program

570.480  General.
570.481  Definitions.
570.482  Eligible activities.
570.483  Criteria for national objectives.
570.484  Overall benefit to low and moderate income persons.
570.485  Making of grants.
570.486  Local government requirements.
570.487  Other applicable laws and related program requirements.
570.488  Displacement, relocation, acquisition, and replacement of 
          housing.
570.489  Program administrative requirements.
570.490  Recordkeeping requirements.
570.491  Performance and evaluation report.
570.492  State's reviews and audits.
570.493  HUD's reviews and audits.

[[Page 10]]

570.494  Timely distribution of funds by states.
570.495  Reviews and audits response.
570.496  Remedies for noncompliance; opportunity for hearing.
570.497  Condition of State election to administer State CDBG Program.

                     Subpart J_Grant Administration

570.500  Definitions.
570.501  Responsibility for grant administration.
570.502  Applicability of uniform administrative requirements.
570.503  Agreements with subrecipients.
570.504  Program income.
570.505  Use of real property.
570.506  Records to be maintained.
570.507  Reports.
570.508  Public access to program records.
570.509  Grant closeout procedures.
570.510  Transferring projects from urban counties to metropolitan 
          cities.
570.511  Use of escrow accounts for rehabilitation of privately owned 
          residential property.
570.512  [Reserved]
570.513  Lump sum drawdown for financing of property rehabilitation 
          activities.

                  Subpart K_Other Program Requirements

570.600  General.
570.601  Public Law 88-352 and Public Law 90-284; affirmatively 
          furthering fair housing; Executive Order 11063.
570.602  Section 109 of the Act.
570.603  Labor standards.
570.604  Environmental standards.
570.605  National Flood Insurance Program.
570.606  Displacement, relocation, acquisition, and replacement of 
          housing.
570.607  Employment and contracting opportunities.
570.608  Lead-based paint.
570.609  Use of debarred, suspended or ineligible contractors or 
          subrecipients.
570.610  Uniform administrative requirements, cost principles, and audit 
          requirements (or Federal awards).
570.611  Conflict of interest.
570.612  Executive Order 12372.
570.613  Eligibility restrictions for certain resident aliens.
570.614  Architectural Barriers Act and the Americans with Disabilities 
          Act.
570.615  Housing counseling.

Subpart L [Reserved]

                        Subpart M_Loan Guarantees

570.700  Purpose.
570.701  Definitions.
570.702  Eligible applicants.
570.703  Eligible activities.
570.704  Application requirements.
570.705  Loan requirements.
570.706  Federal guarantee; subrogation.
570.707  Applicability of rules and regulations.
570.708  Sanctions.
570.709  Allocation of loan guarantee assistance.
570.710  State responsibilities.
570.711  State borrowers; additional requirements and application 
          procedures.
570.712  Collection of fees; procedure to determine amount of the fee.

                   Subpart N_Urban Renewal Provisions

570.800  Urban renewal regulations.

                      Subpart O_Performance Reviews

570.900  General.
570.901  Review for compliance with the primary and national objectives 
          and other program requirements.
570.902  Review to determine if CDBG funded activities are being carried 
          out in a timely manner.
570.903  Review to determine if the recipient is meeting its 
          consolidated plan responsibilities.
570.904  Equal opportunity and fair housing review criteria.
570.905  Review of continuing capacity to carry out CDBG funded 
          activities in a timely manner.
570.906  Review of urban counties.
570.907-570.909  [Reserved]
570.910  Corrective and remedial actions.
570.911  Reduction, withdrawal, or adjustment of a grant or other 
          appropriate action.
570.912  Nondiscrimination compliance.
570.913  Other remedies for noncompliance.

Appendix A to Part 570--Guidelines and Objectives for Evaluating Project 
          Costs and Financial Requirements

    Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and 5301-
5320.

    Source: 40 FR 24693, June 9, 1975, unless otherwise noted.



                      Subpart A_General Provisions

    Source: 53 FR 34437, Sept. 6, 1988, unless otherwise noted.



Sec. 570.1  Purpose and primary objective.

    (a) This part describes policies and procedures applicable to the 
following programs authorized under title I of the Housing and Community 
Development Act of 1974, as amended:
    (1) Entitlement grants program (subpart D);

[[Page 11]]

    (2) Nonentitlement Funds: HUD-administered Small Cities and Insular 
Area programs (subpart F);
    (3) State program: State-administered CDBG nonentitlement funds 
(subpart I);
    (4) Special Purpose Grants (subpart E);
    (5) Urban Development Action Grant program (subpart G); and
    (6) Loan Guarantees (subpart M).
    (b) Subparts A, C, J, K, and O apply to all programs in paragraph 
(a) except as modified or limited under the provisions of these subparts 
or the applicable program regulations. In the application of the 
subparts to Special Purpose Grants or the Urban Development Action Grant 
program, the reference to funds in the form of grants in the term ``CDBG 
funds'', as defined in Sec. 570.3, shall mean the grant funds under 
those programs. The subparts do not apply to the State program (subpart 
I) except to the extent expressly referred to.
    (c) The primary objective of the programs authorized under title I 
of the Housing and Community Development Act of 1974, as amended, is 
described in section 101(c) of the Act (42 U.S.C. 5301(c)).

[53 FR 34437, Sept. 6, 1988, as amended at 56 FR 56126, Oct. 31, 1991; 
61 FR 11475, Mar. 20, 1996; 69 FR 32778, June 10, 2004]



Sec. 570.3  Definitions.

    The terms Affirmatively Furthering Fair Housing, Assessment of Fair 
Housing or AFH, HUD, and Secretary are defined in 24 CFR part 5. All of 
the following definitions in this section that rely on data from the 
United States Bureau of the Census shall rely upon the data available 
from the latest decennial census or the American Community Survey.
    Act means title I of the Housing and Community Development Act of 
1974 as amended (42 U.S.C. 5301 et seq.).
    Age of housing means the number of year-round housing units, as 
further defined in section 102(a)(11) of the Act.
    Applicant means a State or unit of general local government that 
makes application pursuant to the provisions of subpart E, F, G or M.
    Buildings for the general conduct of government shall have the 
meaning provided in section 102(a)(21) of the Act.
    CDBG funds means Community Development Block Grant funds, including 
funds received in the form of grants under subpart D, F, or Sec. 570.405 
of this part, funds awarded under section 108(q) of the Housing and 
Community Development Act of 1974, loans guaranteed under subpart M of 
this part, urban renewal surplus grant funds, and program income as 
defined in Sec. 570.500(a).
    Chief executive officer of a State or unit of general local 
government means the elected official or the legally designated 
official, who has the primary responsibility for the conduct of that 
entity's governmental affairs. Examples of the ``chief executive 
officer'' of a unit of general local government are: the elected mayor 
of a municipality; the elected county executive of a county; the 
chairperson of a county commission or board in a county that has no 
elected county executive; and the official designated pursuant to law by 
the governing body of a unit of general local government.
    City means the following:
    (1) For purposes of Entitlement Community Development Block Grant 
and Urban Development Action Grant eligibility:
    (i) Any unit of general local government that is classified as a 
municipality by the United States Bureau of the Census, or
    (ii) Any other unit of general local government that is a town or 
township and that, in the determination of the Secretary:
    (A) Possesses powers and performs functions comparable to those 
associated with municipalities;
    (B) Is closely settled (except that the Secretary may reduce or 
waive this requirement on a case by case basis for the purposes of the 
Action Grant program); and
    (C) Contains within its boundaries no incorporated places as defined 
by the United States Bureau of the Census that have not entered into 
cooperation agreements with the town or township for a period covering 
at least 3 years to undertake or assist in the undertaking of essential 
community development and housing assistance activities. The 
determination of eligibility of a town or township to qualify as a city 
will be

[[Page 12]]

based on information available from the United States Bureau of the 
Census and information provided by the town or township and its included 
units of general local government.
    (2) For purposes of Urban Development Action Grant eligibility only, 
Guam, the Virgin Islands, American Samoa, the Commonwealth of the 
Northern Mariana Islands, the counties of Kauai, Maui, and Hawaii in the 
State of Hawaii, and Indian tribes that are eligible recipients under 
the State and Local Government Fiscal Assistance Act of 1972 and located 
on reservations in Oklahoma as determined by the Secretary of the 
Interior or in Alaskan Native Villages.
    Community Development Financial Institution has the same meaning as 
used in the Community Development Banking and Financial Institutions Act 
of 1994 (12 U.S.C. 4701 note).
    Consolidated plan. The plan prepared in accordance with 24 CFR part 
91, which describes needs, resources, priorities and proposed activities 
to be undertaken with respect to HUD programs, including the CDBG 
program. An approved consolidated plan means a consolidated plan that 
has been approved by HUD in accordance with 24 CFR part 91.
    Discretionary grant means a grant made from the various Special 
Purpose Grants in accordance with subpart E of this part.
    Entitlement amount means the amount of funds which a metropolitan 
city or urban county is entitled to receive under the Entitlement grant 
program, as determined by formula set forth in section 106 of the Act
    Extent of growth lag shall have the meaning provided in section 
102(a)(12) of the Act.
    Extent of housing overcrowding shall have the meaning provided in 
section 102(a)(10) of the Act.
    Extent of poverty means the number of persons whose incomes are 
below the poverty level based on data compiled and published by the 
United States Bureau of the Census available from the latest census 
referable to the same point or period in time and the latest reports 
from the Office of Management and Budget. For purposes of this part, the 
Secretary has determined that it is neither feasible nor appropriate to 
make adjustments at this time in the computations of ``extent of 
poverty'' for regional or area variations in income and cost of living.
    Family refers to the definition of ``family'' in 24 CFR 5.403.
    Household means all persons occupying a housing unit. The occupants 
may be a family, as defined in 24 CFR 5.403; two or more families living 
together; or any other group of related or unrelated persons who share 
living arrangements, regardless of actual or perceived, sexual 
orientation, gender identity, or marital status.
    Income. For the purpose of determining whether a family or household 
is low- and moderate-income under subpart C of this part, grantees may 
select any of the three definitions listed below for each activity, 
except that integrally related activities of the same type and 
qualifying under the same paragraph of Sec. 570.208(a) shall use the 
same definition of income. The option to choose a definition does not 
apply to activities that qualify under Sec. 570.208(a)(1) (Area benefit 
activities), except when the recipient carries out a survey under 
Sec. 570.208(a)(1)(vi). Activities qualifying under Sec. 570.208(a)(1) 
generally must use the area income data supplied to recipients by HUD. 
The three definitions are as follows:
    (1)(i) ``Annual income'' as defined under the Section 8 Housing 
Assistance Payments program at 24 CFR 813.106 (except that if the CDBG 
assistance being provided is homeowner rehabilitation under 
Sec. 570.202, the value of the homeowner's primary residence may be 
excluded from any calculation of Net Family Assets); or
    (ii) Annual income as reported under the Census long-form for the 
most recent available decennial Census. This definition includes:
    (A) Wages, salaries, tips, commissions, etc.;
    (B) Self-employment income from own nonfarm business, including 
proprietorships and partnerships;
    (C) Farm self-employment income;
    (D) Interest, dividends, net rental income, or income from estates 
or trusts;
    (E) Social Security or railroad retirement;

[[Page 13]]

    (F) Supplemental Security Income, Aid to Families with Dependent 
Children, or other public assistance or public welfare programs;
    (G) Retirement, survivor, or disability pensions; and
    (H) Any other sources of income received regularly, including 
Veterans' (VA) payments, unemployment compensation, and alimony; or
    (iii) Adjusted gross income as defined for purposes of reporting 
under Internal Revenue Service (IRS) Form 1040 for individual Federal 
annual income tax purposes.
    (2) Estimate the annual income of a family or household by 
projecting the prevailing rate of income of each person at the time 
assistance is provided for the individual, family, or household (as 
applicable). Estimated annual income shall include income from all 
family or household members, as applicable. Income or asset enhancement 
derived from the CDBG-assisted activity shall not be considered in 
calculating estimated annual income.
    Insular area shall have the meaning provided in section 102(a)(24) 
of the Act.
    Low- and moderate-income household means a household having an 
income equal to or less than the Section 8 low-income limit established 
by HUD.
    Low- and moderate-income person means a member of a family having an 
income equal to or less than the Section 8 low-income limit established 
by HUD. Unrelated individuals will be considered as one-person families 
for this purpose.
    Low-income household means a household having an income equal to or 
less than the Section 8 very low-income limit established by HUD.
    Low-income person means a member of a family that has an income 
equal to or less than the Section 8 very low-income limit established by 
HUD. Unrelated individuals shall be considered as one-person families 
for this purpose.
    Metropolitan area shall have the meaning provided in section 
102(a)(3) of the Act.
    Metropolitan city shall have the meaning provided in section 
102(a)(4) of the Act except that the term ``central city'' is replaced 
by ``principal city.''
    Microenterprise shall have the meaning provided in section 
102(a)(22) of the Act.
    Moderate-income household means a household having an income equal 
to or less than the Section 8 low-income limit and greater than the 
Section 8 very low-income limit, established by HUD.
    Moderate-income person means a member of a family that has an income 
equal to or less than the Section 8 low-income limit and greater than 
the Section 8 very low-income limit, established by HUD. Unrelated 
individuals shall be considered as one-person families for this purpose.
    Nonentitlement amount means the amount of funds which is allocated 
for use in a State's nonentitlement areas as determined by formula set 
forth in section 106 of the Act.
    Nonentitlement area shall have the meaning provided in section 
102(a)(7) of the Act.
    Origin year means the specific Federal fiscal year during which the 
annual grant funds were appropriated.
    Population means the total resident population based on data 
compiled and published by the United States Bureau of the Census 
available from the latest census or which has been upgraded by the 
Bureau to reflect the changes resulting from the Boundary and Annexation 
Survey, new incorporations and consolidations of governments pursuant to 
Sec. 570.4, and which reflects, where applicable, changes resulting from 
the Bureau's latest population determination through its estimating 
technique using natural changes (birth and death) and net migration, and 
is referable to the same point or period in time.
    Small business means a business that meets the criteria set forth in 
section 3(a) of the Small Business Act (15 U.S.C. 631, 636, 637).
    State shall have the meaning provided in section 102(a)(2) of the 
Act.
    Unit of general local government shall have the meaning provided in 
section 102(a)(1) of the Act.
    Urban county shall have the meaning provided in section 102(a)(6) of 
the Act. For the purposes of this definition, HUD will determine whether 
the county's combined population contains the

[[Page 14]]

required percentage of low- and moderate-income persons by identifying 
the number of persons that resided in applicable areas and units of 
general local government based on data from the most recent decennial 
census, and using income limits that would have applied for the year in 
which that census was taken.
    Urban Development Action Grant (UDAG) means a grant made by the 
Secretary pursuant to section 119 of the Act and subpart G of this part.

[53 FR 34437, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
56 FR 56126, Oct. 31, 1991; 60 FR 1915, 1943, Jan. 5, 1995; 60 FR 56909, 
Nov. 9, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 11475, Mar. 20, 1996; 61 
FR 18674, Apr. 29, 1996; 68 FR 69582, Dec. 12, 2003; 69 FR 32778, June 
10, 2004; 77 FR 5675, Feb. 3, 2012; 80 FR 42366, July 16, 2015; 80 FR 
69870, Nov. 12, 2015]



Sec. 570.4  Allocation of funds.

    (a) The determination of eligibility of units of general local 
government to receive entitlement grants, the entitlement amounts, the 
allocation of appropriated funds to States for use in nonentitlement 
areas, the reallocation of funds, the allocation of appropriated funds 
to insular areas, and the allocation of appropriated funds for 
discretionary grants under the Secretary's Fund shall be governed by the 
policies and procedures described in sections 106 and 107 of the Act, as 
appropriate.
    (b) The definitions in Sec. 570.3 shall govern in applying the 
policies and procedures described in sections 106 and 107 of the Act.
    (c) In determining eligibility for entitlement and in allocating 
funds under section 106 of the Act for any federal fiscal year, HUD will 
recognize corporate status and geographical boundaries and the status of 
metropolitan areas and principal cities effective as of July 1 preceding 
such federal fiscal year, subject to the following limitations:
    (1) With respect to corporate status as certified by the applicable 
State and available for processing by the Census Bureau as of such date;
    (2) With respect to boundary changes or annexations, as are used by 
the Census Bureau in preparing population estimates for all general 
purpose governmental units and are available for processing by the 
Census Bureau as of such date, except that any such boundary changes or 
annexations which result in the population of a unit of general local 
government reaching or exceeding 50,000 shall be recognized for this 
purpose whether or not such changes are used by the Census Bureau in 
preparing such population estimates; and
    (3) With respect to the status of Metropolitan Statistical Areas and 
principal cities, as officially designated by the Office of Management 
and Budget as of such date.
    (d) In determining whether a county qualifies as an urban county, 
and in computing entitlement amounts for urban counties, the demographic 
values of population, poverty, housing overcrowding, and age of housing 
of any Indian tribes located within the county shall be excluded. In 
allocating amounts to States for use in nonentitlement areas, the 
demographic values of population, poverty, housing overcrowding and age 
of housing of all Indian tribes located in all nonentitled areas shall 
be excluded. It is recognized that all such data on Indian tribes are 
not generally available from the United States Bureau of the Census and 
that missing portions of data will have to be estimated. In 
accomplishing any such estimates the Secretary may use such other 
related information available from reputable sources as may seem 
appropriate, regardless of the data's point or period of time and shall 
use the best judgement possible in adjusting such data to reflect the 
same point or period of time as the overall data from which the Indian 
tribes are being deducted, so that such deduction shall not create an 
imbalance with those overall data.
    (e) Amounts remaining after closeout of a grant which are required 
to be returned to HUD under the provisions of Sec. 570.509, Grant 
closeout procedures, shall be considered as funds available for 
reallocation unless the appropriation under which the funds were 
provided to the Department has lapsed.

[53 FR 34437, Sept. 6, 1988, as amended at 68 FR 69582, Dec. 12, 2003; 
69 FR 32778, June 10, 2004]

[[Page 15]]



Sec. 570.5  Waivers.

    HUD's authority for the waiver of regulations and for the suspension 
of requirements to address damage in a Presidentially declared disaster 
area is described in 24 CFR part 5 and in section 122 of the Act, 
respectively.

[61 FR 11476, Mar. 20, 1996]

Subpart B [Reserved]



                      Subpart C_Eligible Activities

    Source: 53 FR 34439, Sept. 6, 1988, unless otherwise noted.



Sec. 570.200  General policies.

    (a) Determination of eligibility. An activity may be assisted in 
whole or in part with CDBG funds only if all of the following 
requirements are met:
    (1) Compliance with section 105 of the Act. Each activity must meet 
the eligibility requirements of section 105 of the Act as further 
defined in this subpart.
    (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 low- and 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 as 
contained in its certification. Criteria for determining whether an 
activity addresses one or more of these objectives are found in 
Sec. 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 of CDBG fund expenditures shall be for activities meeting the 
criteria under Sec. 570.208(a) or under Sec. 570.208(d)(5) or (6) for 
benefiting low- and moderate-income persons. For grants under section 
107 of the Act, insular area recipients must meet this requirement for 
each separate grant. See Sec. 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 HUD-administered Small Cities 
program in New York are at Sec. 570.420(d)(2). In determining the 
percentage of funds expended for such activities:
    (i) Cost of administration and planning eligible under Sec. 570.205 
and Sec. 570.206 will be assumed to benefit low and moderate income 
persons in the same proportion as the remainder of the CDBG funds and, 
accordingly shall be excluded from the calculation;
    (ii) Funds deducted by HUD for repayment of urban renewal temporary 
loans pursuant to Sec. 570.802(b) shall be excluded;
    (iii) Funds expended for the repayment of loans guaranteed under the 
provisions of subpart M of this part (including repayment of the portion 
of a loan used to pay any issuance, servicing, underwriting, or other 
costs as may be incurred under Sec. 570.705(g)) shall also be excluded;
    (iv) Funds expended for the acquisition, new construction or 
rehabilitation of property for housing that qualifies under 
Sec. 570.208(a)(3) shall be counted for this purpose but shall be 
limited to an amount determined by multiplying the total cost (including 
CDBG and non-CDBG costs) of the acquisition, construction or 
rehabilitation by the percent of units in such housing to

[[Page 16]]

be occupied by low and moderate income persons.
    (v) Funds expended for any other activities qualifying under 
Sec. 570.208(a) shall be counted for this purpose in their entirety.
    (4) Compliance with environmental review procedures. The 
environmental review procedures set forth at 24 CFR part 58 must be 
completed for each activity (or project as defined in 24 CFR part 58), 
as applicable.
    (5) Cost principles. Costs incurred, whether charged on a direct or 
an indirect basis, must be in conformance with 2 CFR part 200, subpart 
E. All items of cost listed in 2 CFR part 200, subpart E, that require 
prior Federal agency approval are allowable without prior approval of 
HUD to the extent they comply with the general policies and principles 
stated in 2 CFR part 200, subpart E and are otherwise eligible under 
this subpart C, except for the following:
    (i) Depreciation methods for fixed assets shall not be changed 
without the approval of the Federal cognizant agency.
    (ii) Fines penalties, damages, and other settlements are unallowable 
costs to the CDBG program.
    (iii) Costs of housing (e.g., depreciation, maintenance, utilities, 
furnishings, rent), housing allowances and personal living expenses 
(goods or services for personal use) regardless of whether reported as 
taxable income to the employees (2 CFR 200.445);
    (iv) Organization costs (2 CFR 200.455); and
    (v) Pre-award costs are limited to those authorized under paragraph 
(h) of this section.
    (b) Special policies governing facilities. The following special 
policies apply to:
    (1) Facilities containing both eligible and ineligible uses. A 
public facility otherwise eligible for assistance under the CDBG program 
may be provided with CDBG funds even if it is part of a multiple use 
building containing ineligible uses, if:
    (i) The facility which is otherwise eligible and proposed for 
assistance will occupy a designated and discrete area within the larger 
facility; and
    (ii) The recipient can determine the costs attributable to the 
facility proposed for assistance as separate and distinct from the 
overall costs of the multiple-use building and/or facility.

Allowable costs are limited to those attributable to the eligible 
portion of the building or facility.
    (2) Fees for use of facilities. Reasonable fees may be charged for 
the use of the facilities assisted with CDBG funds, but charges such as 
excessive membership fees, which will have the effect of precluding low 
and moderate income persons from using the facilities, are not 
permitted.
    (c) Special assessments under the CDBG program. The following 
policies relate to special assessments under the CDBG program:
    (1) Definition of special assessment. The term ``special 
assessment'' means the recovery of the capital costs of a public 
improvement, such as streets, water or sewer lines, curbs, and gutters, 
through a fee or charge levied or filed as a lien against a parcel of 
real estate as a direct result of benefit derived from the installation 
of a public improvement, or a one-time charge made as a condition of 
access to a public improvement. This term does not relate to taxes, or 
the establishment of the value of real estate for the purpose of levying 
real estate, property, or ad valorem taxes, and does not include 
periodic charges based on the use of a public improvement, such as water 
or sewer user charges, even if such charges include the recovery of all 
or some portion of the capital costs of the public improvement.
    (2) Special assessments to recover capital costs. Where CDBG funds 
are used to pay all or part of the cost of a public improvement, special 
assessments may be imposed as follows:
    (i) Special assessments to recover the CDBG funds may be made only 
against properties owned and occupied by persons not of low and moderate 
income. Such assessments constitute program income.
    (ii) Special assessments to recover the non-CDBG portion may be made 
provided that CDBG funds are used to pay the special assessment in 
behalf of all properties owned and occupied by low and moderate income 
persons; except that CDBG funds need not be used

[[Page 17]]

to pay the special assessments in behalf of properties owned and 
occupied by moderate income persons if the grant recipient certifies 
that it does not have sufficient CDBG funds to pay the assessments in 
behalf of all of the low and moderate income owner-occupant persons. 
Funds collected through such special assessments are not program income.
    (3) Public improvements not initially assisted with CDBG funds. The 
payment of special assessments with CDBG funds constitutes CDBG 
assistance to the public improvement. Therefore, CDBG funds may be used 
to pay special assessments provided:
    (i) The installation of the public improvements was carried out in 
compliance with requirements applicable to activities assisted under 
this part including environmental, citizen participation and Davis-Bacon 
requirements;
    (ii) The installation of the public improvement meets a criterion 
for national objectives in Sec. 570.208(a)(1), (b), or (c); and
    (iii) The requirements of Sec. 570.200(c)(2)(ii) are met.
    (d) Consultant activities. Consulting services are eligible for 
assistance under this part for professional assistance in program 
planning, development of community development objectives, and other 
general professional guidance relating to program execution. The use of 
consultants is governed by the following:
    (1) Employer-employee type of relationship. No person providing 
consultant services in an employer-employee type of relationship shall 
receive more than a reasonable rate of compensation for personal 
services paid with CDBG funds. In no event, however, shall such 
compensation exceed the equivalent of the daily rate paid for Level IV 
of the Executive Schedule. Such services shall be evidenced by written 
agreements between the parties which detail the responsibilities, 
standards, and compensation.
    (2) Independent contractor relationship. Consultant services 
provided under an independent contractor relationship are governed by 
the procurement requirements in 2 CFR part 200, subpart D, and are not 
subject to the compensation limitation of Level IV of the Executive 
Schedule.
    (e) Recipient determinations required as a condition of eligibility. 
In several instances under this subpart, the eligibility of an activity 
depends on a special local determination. Recipients shall maintain 
documentation of all such determinations. A written determination is 
required for any activity carried out under the authority of 
Secs. 570.201(f), 570.201(i)(2), 570.201(p), 570.201(q), 570.202(b)(3), 
570.206(f), 570.209, 570.210, and 570.309.
    (f) Means of carrying out eligible activities. (1) Activities 
eligible under this subpart, other than those authorized under 
Sec. 570.204(a), may be undertaken, subject to local law:
    (i) By the recipient through:
    (A) Its employees, or
    (B) Procurement contracts governed by the requirements of 2 CFR part 
200, subpart D; or
    (ii) Through loans or grants under agreements with subrecipients, as 
defined at Sec. 570.500(c); or
    (iii) By one or more public agencies, including existing local 
public agencies, that are designated by the chief executive officer of 
the recipient.
    (2) Activities made eligible under Sec. 570.204(a) may only be 
undertaken by entities specified in that section.
    (g) Limitation on planning and administrative costs--(1) Origin year 
grant expenditure test. For origin year 2015 grants and subsequent 
grants, no more than 20 percent of any origin year grant shall be 
expended for planning and program administrative costs, as defined in 
Secs. 570.205 and 570.206, respectively. Expenditures of program income 
for planning and program administrative costs are excluded from this 
calculation.
    (2) Program year obligation test. For all grants and recipients 
subject to subpart D, the amount of CDBG funds obligated during each 
program year for planning plus administrative costs, as defined in 
Secs. 570.205 and 570.206, respectively, shall be limited to an amount 
no greater than 20 percent of the sum of the grant made for that program 
year (if any) plus the program income received by the recipient and its 
subrecipients (if any) during that program year. For origin year 2015 
grants and

[[Page 18]]

subsequent grants, recipients must apply this test consistent with 
paragraph (g)(1) of this section.
    (3) Funds from a grant of any origin year may be used to pay 
planning and program administrative costs associated with any grant of 
any origin year.
    (h) Reimbursement for pre-award costs. The effective date of the 
grant agreement is the program year start date or the date that the 
consolidated plan is received by HUD, whichever is later. For a Section 
108 loan guarantee, the effective date of the grant agreement is the 
date of HUD execution of the grant agreement amendment for the 
particular loan guarantee commitment.
    (1) Prior to the effective date of the grant agreement, a recipient 
may incur costs or may authorize a subrecipient to incur costs, and then 
after the effective date of the grant agreement pay for those costs 
using its CDBG funds, provided that:
    (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;
    (ii) Citizens are advised of the extent to which these pre-award 
costs will affect future grants;
    (iii) The costs and activities funded are in compliance with the 
requirements of this part and with the Environmental Review Procedures 
stated in 24 CFR part 58;
    (iv) The activity for which payment is being made complies with the 
statutory and regulatory provisions in effect at the time the costs are 
paid for with CDBG funds;
    (v) CDBG payment will be made during a time no longer than the next 
two program years following the effective date of the grant agreement or 
amendment in which the activity is first included; and
    (vi) The total amount of pre-award costs to be paid during any 
program year pursuant to this provision is no more than the greater of 
25 percent of the amount of the grant made for that year or $300,000.
    (2) Upon the written request of the recipient, HUD may authorize 
payment of pre-award costs for activities that do not meet the criteria 
at paragraph (h)(1)(v) or (h)(1)(vi) of this section, if HUD determines, 
in writing, that there is good cause for granting an exception upon 
consideration of the following factors, as applicable:
    (i) Whether granting the authority would result in a significant 
contribution to the goals and purposes of the CDBG program;
    (ii) Whether failure to grant the authority would result in undue 
hardship to the recipient or beneficiaries of the activity;
    (iii) Whether granting the authority would not result in a violation 
of a statutory provision or any other regulatory provision;
    (iv) Whether circumstances are clearly beyond the recipient's 
control; or
    (v) Any other relevant considerations.
    (i) Urban Development Action Grant. Grant assistance may be provided 
with Urban Development Action Grant funds, subject to the provisions of 
subpart G, for:
    (1) Activities eligible for assistance under this subpart; and
    (2) Notwithstanding the provisions of Sec. 570.207, such other 
activities as the Secretary may determine to be consistent with the 
purposes of the Urban Development Action Grant program.
    (j) Equal participation of faith-based organizations. The HUD 
program requirements in Sec. 5.109 of this title apply to the CDBG 
program, including the requirements regarding disposition and change in 
use of real property by a faith-based organization.
    (k) Any unexpended CDBG origin year grant funds in the United States 
Treasury account on September 30 of the fifth Federal fiscal year after 
the end of the origin year grant's period of availability for obligation 
by HUD will

[[Page 19]]

be canceled. HUD may require an earlier expenditure and draw down 
deadline under a grant agreement.

[53 FR 34439, Sept. 6, 1988, as amended at 54 FR 47031, Nov. 8, 1989; 57 
FR 27119, June 17, 1992; 60 FR 1943, Jan. 5, 1995; 60 FR 17445, Apr. 6, 
1995; 60 FR 56910, Nov. 9, 1995; 61 FR 11476, Mar. 20, 1996; 61 FR 
18674, Apr. 29, 1996; 65 FR 70215, Nov. 21, 2000; 68 FR 56404, Sept. 30, 
2003; 69 FR 32778, June 10, 2004; 70 FR 76369, Dec. 23, 2005; 72 FR 
46370, Aug. 17, 2007; 80 FR 67633, Nov. 3, 2015; 80 FR 69870, Nov. 12, 
2015; 80 FR 75936, Dec. 7, 2015; 81 FR 19418, Apr. 4, 2016]



Sec. 570.201  Basic eligible activities.

    CDBG funds may be used for the following activities:
    (a) Acquisition. Acquisition in whole or in part by the recipient, 
or other public or private nonprofit entity, by purchase, long-term 
lease, 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 Sec. 570.207.
    (b) Disposition. Disposition, through sale, lease, donation, or 
otherwise, of any real property acquired with CDBG funds or its 
retention for public purposes, including reasonable costs of temporarily 
managing such property or property acquired under urban renewal, 
provided that the proceeds from any such disposition shall be program 
income subject to the requirements set forth in Sec. 570.504.
    (c) Public facilities and improvements. Acquisition, construction, 
reconstruction, rehabilitation or installation of public facilities and 
improvements, except as provided in Sec. 570.207(a), carried out by the 
recipient or other public or private nonprofit entities. (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 severely disabled persons to public 
facilities and improvements, including those provided for in 
Sec. 570.207(a)(1).) In undertaking such activities, design features and 
improvements which promote energy efficiency may be included. 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 CDBG assistance, such 
as decorative pavements, railings, sculptures, pools of water and 
fountains, and other works of art. 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 Sec. 570.207(b)(3). Such facilities include 
shelters for the homeless; convalescent homes; hospitals, nursing homes; 
battered spouse shelters; halfway houses for run-away children, drug 
offenders or parolees; group homes for mentally retarded persons and 
temporary housing for disaster victims. In certain cases, nonprofit 
entities and subrecipients including those specified in Sec. 570.204 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 are subject to the policies in Sec. 570.200(b).
    (d) Clearance and remediation activities. Clearance, demolition, and 
removal of buildings and improvements, including movement of structures 
to other sites and remediation of known or suspected environmental 
contamination. Demolition of HUD-assisted or HUD-owned housing units may 
be undertaken only with the prior approval of HUD. Remediation may 
include project-specific environmental assessment costs not otherwise 
eligible under Sec. 570.205.
    (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 
Sec. 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. To be eligible 
for CDBG assistance, a public service must be either a new service or a 
quantifiable increase in the level of an existing service above that 
which has been provided by or on

[[Page 20]]

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.) The amount of CDBG 
funds used for public services shall not exceed paragraphs (e) (1) or 
(2) of this section, as applicable:
    (1) The amount of CDBG funds used for public services shall not 
exceed 15 percent of each grant, except that for entitlement grants made 
under subpart D of this part, nonentitlement CDBG grants in Hawaii, and 
for recipients of insular area funds under section 106 of the Act, the 
amount shall not exceed 15 percent of the grant plus 15 percent of 
program income, as defined in Sec. 570.500(a). For entitlement grants 
under subpart D of this part, nonentitlement CDBG grants in Hawaii, and 
for recipients of insular area funds under section 106 of the Act, 
compliance is based on limiting the amount of CDBG funds obligated for 
public service activities in each program year to an amount no greater 
than 15 percent of the entitlement grant made for that program year plus 
15 percent of the program income received during the grantee's 
immediately preceding program year.
    (2) A recipient which obligated more CDBG funds for public services 
than 15 percent of its grant funded from origin year 1982 or 1983 
appropriations (excluding program income and any assistance received 
under Public Law 98-8), may obligate more CDBG funds than allowable 
under paragraph (e)(1) of this section, so long as the total amount 
obligated in any program year does not exceed:
    (i) For an entitlement grantee, 15% of the program income it 
received during the preceding program year; plus
    (ii) A portion of the grant received for the program year which is 
the highest of the following amounts:
    (A) The amount determined by applying the percentage of the grant it 
obligated for public services in the 1982 program year against the grant 
for its current program year;
    (B) The amount determined by applying the percentage of the grant it 
obligated for public services in the 1983 program year against the grant 
for its current program year;
    (C) The amount of funds it obligated for public services in the 1982 
program year; or,
    (D) The amount of funds it obligated for public services in the 1983 
program year.
    (f) Interim assistance. (1) The following activities may be 
undertaken on an interim basis in areas exhibiting objectively 
determinable signs of physical deterioration where the recipient has 
determined that immediate action is necessary to arrest the 
deterioration and that permanent improvements will be carried out as 
soon as practicable:
    (i) The repairing of streets, sidewalks, parks, playgrounds, 
publicly owned utilities, and public buildings; and
    (ii) The execution of special garbage, trash, and debris removal, 
including neighborhood cleanup campaigns, but not the regular curbside 
collection of garbage or trash in an area.
    (2) In order to alleviate emergency conditions threatening the 
public health and safety in areas where the chief executive officer of 
the recipient determines that such an emergency condition exists and 
requires immediate resolution, CDBG funds may be used for:
    (i) The activities specified in paragraph (f)(1) of this section, 
except for the repair of parks and playgrounds;
    (ii) The clearance of streets, including snow removal and similar 
activities, and
    (iii) The improvement of private properties.
    (3) All activities authorized under paragraph (f)(2) of this section 
are limited to the extent necessary to alleviate emergency conditions.
    (g) Payment of non-Federal share. Payment of the non-Federal share 
required in connection with a Federal grant-in-aid program undertaken as 
part of CDBG activities, provided, that such payment shall be limited to 
activities otherwise eligible and in compliance

[[Page 21]]

with applicable requirements under this subpart.
    (h) Urban renewal completion. Payment of the cost of completing an 
urban renewal project funded under title I of the Housing Act of 1949 as 
amended. Further information regarding the eligibility of such costs is 
set forth in Sec. 570.801.
    (i) Relocation. Relocation payments and other assistance for 
permanently and temporarily relocated individuals families, businesses, 
nonprofit organizations, and farm operations where the assistance is (1) 
required under the provisions of Sec. 570.606 (b) or (c); or (2) 
determined by the grantee to be appropriate under the provisions of 
Sec. 570.606(d).
    (j) Loss of rental income. Payments to housing owners for losses of 
rental income incurred in holding, for temporary periods, housing units 
to be used for the relocation of individuals and families displaced by 
program activities assisted under this part.
    (k) Housing services. Housing services, as provided in section 
105(a)(21) of the Act (42 U.S.C. 5305(a)(21)). If housing counseling, as 
defined in 24 CFR 5.100, is provided, it must be carried out in 
accordance with 24 CFR 5.111.
    (l) Privately owned utilities. CDBG funds may be used to acquire, 
construct, reconstruct, rehabilitate, or install the distribution lines 
and facilities of privately owned utilities, including the placing 
underground of new or existing distribution facilities and lines.
    (m) Construction of housing. CDBG funds may be used for the 
construction of housing assisted under section 17 of the United States 
Housing Act of 1937.
    (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.
    (o)(1) The provision of assistance either through the recipient 
directly or through public and private organizations, agencies, and 
other subrecipients (including nonprofit and for-profit subrecipients) 
to facilitate economic development by:
    (i) Providing credit, including, but not limited to, grants, loans, 
loan guarantees, and other forms of financial support, for the 
establishment, stabilization, and expansion of microenterprises;
    (ii) Providing technical assistance, advice, and business support 
services to owners of microenterprises and persons developing 
microenterprises; and
    (iii) Providing general support, including, but not limited to, peer 
support programs, counseling, child care, transportation, and other 
similar services, to owners of microenterprises and persons developing 
microenterprises.
    (2) Services provided this paragraph (o) shall not be subject to the 
restrictions on public services contained in paragraph (e) of this 
section.
    (3) For purposes of this paragraph (o), ``persons developing 
microenterprises'' means such persons who have expressed interest and 
who are, or after an initial screening process are expected to be, 
actively working toward developing businesses, each of which is expected 
to be a microenterprise at the time it is formed.
    (4) Assistance under this paragraph (o) may also include training, 
technical assistance, or other support services to increase the capacity 
of the recipient or subrecipient to carry out the activities under this 
paragraph (o).
    (p) Technical assistance. Provision of technical assistance to 
public or nonprofit entities to increase the capacity of such entities 
to carry out 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 once the entity has 
received the technical assistance and undertakes the activity.) Capacity 
building for private or public entities (including grantees) for other 
purposes may be eligible under Sec. 570.205.
    (q) Assistance to institutions of higher education. Provision of 
assistance by the recipient to institutions of higher education when the 
grantee determines

[[Page 22]]

that such an institution has demonstrated a capacity to carry out 
eligible activities under this subpart C.

[53 FR 34439, Sept. 6, 1988, as amended at 53 FR 31239, Aug. 17, 1988; 
55 FR 29308, July 18, 1990; 57 FR 27119, June 17, 1992; 60 FR 1943, Jan. 
5, 1995; 60 FR 56911, Nov. 9, 1995; 61 FR 18674, Apr. 29, 1996; 65 FR 
70215, Nov. 21, 2000; 67 FR 47213, July 17, 2002; 71 FR 30034, May 24, 
2006; 80 FR 69870, Nov. 12, 2015; 81 FR 90659, Dec. 14, 2016]



Sec. 570.202  Eligible rehabilitation and preservation activities.

    (a) Types of buildings and improvements eligible for rehabilitation 
assistance. CDBG funds may be used to finance the rehabilitation of:
    (1) Privately owned buildings and improvements for residential 
purposes; improvements to a single-family residential property which is 
also used as a place of business, which are required in order to operate 
the business, need not be considered to be rehabilitation of a 
commercial or industrial building, if the improvements also provide 
general benefit to the residential occupants of the building;
    (2) Low-income public housing and other publicly owned residential 
buildings and improvements;
    (3) Publicly or privately owned commercial or industrial buildings, 
except that the rehabilitation of such buildings owned by a private for-
profit business is limited to improvement to the exterior of the 
building, abatement of asbestos hazards, lead-based paint hazard 
evaluation and reduction, and the correction of code violations;
    (4) Nonprofit-owned nonresidential buildings and improvements not 
eligible under Sec. 570.201(c); and
    (5) Manufactured housing when such housing constitutes part of the 
community's permanent housing stock.
    (b) Types of assistance. CDBG funds may be used to finance the 
following types of rehabilitation activities, and related costs, either 
singly, or in combination, through the use of grants, loans, loan 
guarantees, interest supplements, or other means for buildings and 
improvements described in paragraph (a) of this section, except that 
rehabilitation of commercial or industrial buildings is limited as 
described in paragraph (a)(3) of this section.
    (1) Assistance to private individuals and entities, including profit 
making and nonprofit organizations, to acquire for the purpose of 
rehabilitation, and to rehabilitate properties, for use or resale for 
residential purposes;
    (2) Labor, materials, and other costs of rehabilitation of 
properties, including repair directed toward an accumulation of deferred 
maintenance, replacement of principal fixtures and components of 
existing structures, installation of security devices, including smoke 
detectors and dead bolt locks, and renovation through alterations, 
additions to, or enhancement of existing structures and improvements, 
abatement of asbestos hazards (and other contaminants) in buildings and 
improvements that may be undertaken singly, or in combination;
    (3) Loans for refinancing existing indebtedness secured by a 
property being rehabilitated with CDBG funds if such financing is 
determined by the recipient to be necessary or appropriate to achieve 
the locality's community development objectives;
    (4) Improvements to increase the efficient use of energy in 
structures through such means as installation of storm windows and 
doors, siding, wall and attic insulation, and conversion, modification, 
or replacement of heating and cooling equipment, including the use of 
solar energy equipment;
    (5) Improvements to increase the efficient use of water through such 
means as water savings faucets and shower heads and repair of water 
leaks;
    (6) Connection of residential structures to water distribution lines 
or local sewer collection lines;
    (7) For rehabilitation carried out with CDBG funds, costs of:
    (i) Initial homeowner warranty premiums;
    (ii) Hazard insurance premiums, except where assistance is provided 
in the form of a grant; and
    (iii) Flood insurance premiums for properties covered by the Flood 
Disaster Protection Act of 1973, pursuant to Sec. 570.605.
    (8) Costs of acquiring tools to be lent to owners, tenants, and 
others who will use such tools to carry out rehabilitation;

[[Page 23]]

    (9) Rehabilitation services, such as rehabilitation counseling, 
energy auditing, preparation of work specifications, loan processing, 
inspections, and other services related to assisting owners, tenants, 
contractors, and other entities, participating or seeking to participate 
in rehabilitation activities authorized under this section, under 
section 312 of the Housing Act of 1964, as amended, under section 810 of 
the Act, or under section 17 of the United States Housing Act of 1937;
    (10) Assistance for the rehabilitation of housing under section 17 
of the United States Housing Act of 1937; and
    (11) Improvements designed to remove material and architectural 
barriers that restrict the mobility and accessibility of elderly or 
severely disabled persons to buildings and improvements eligible for 
assistance under paragraph (a) of this section.
    (c) Code enforcement. Costs incurred for inspection for code 
violations and enforcement of codes (e.g., salaries and related expenses 
of code enforcement inspectors and legal proceedings, but not including 
the cost of correcting the violations) in deteriorating or deteriorated 
areas when such enforcement together with public or private 
improvements, rehabilitation, or services to be provided may be expected 
to arrest the decline of the area.
    (d) Historic preservation. CDBG funds may be used for the 
rehabilitation, preservation or restoration of historic properties, 
whether publicly or privately owned. Historic properties are those sites 
or structures that are either listed in or eligible to be listed in the 
National Register of Historic Places, listed in a State or local 
inventory of historic places, or designated as a State or local landmark 
or historic district by appropriate law or ordinance. Historic 
preservation, however, is not authorized for buildings for the general 
conduct of government.
    (e) Renovation of closed buildings. CDBG funds may be used to 
renovate closed buildings, such as closed school buildings, for use as 
an eligible public facility or to rehabilitate such buildings for 
housing.
    (f) Lead-based paint activities. Lead-based paint activities 
pursuant to Sec. 570.608.
    (g) Broadband infrastructure. Any substantial rehabilitation, as 
substantial rehabilitation is defined by 24 CFR 5.100, of a building 
with more than 4 rental units, for which CDBG funds are first obligated 
by the recipient on or after April 19, 2017, must include installation 
of broadband infrastructure, as this term is also defined in 24 CFR 
5.100, except where the recipient determines and, in accordance with 
Sec. 570.506, documents the determination that:
    (1) The location of the substantial rehabilitation makes 
installation of broadband infrastructure infeasible;
    (2) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (3) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
60 FR 1944, Jan. 5, 1995; 60 FR 56911, Nov. 9, 1995; 64 FR 50225, Sept. 
15, 1999; 71 FR 30035, May 24, 2006; 82 FR 92636, Dec. 20, 2016]



Sec. 570.203  Special economic development activities.

    A recipient may use CDBG funds for special economic development 
activities in addition to other activities authorized in this subpart 
that may be carried out as part of an economic development project. 
Guidelines for selecting activities to assist under this paragraph are 
provided at Sec. 570.209. The recipient must ensure that the appropriate 
level of public benefit will be derived pursuant to those guidelines 
before obligating funds under this authority. Special activities 
authorized under this section do not include assistance for the 
construction of new housing. Activities eligible under this section may 
include costs associated with project-specific assessment or remediation 
of known or suspected environmental contamination. Special economic 
development activities include:
    (a) The acquisition, construction, reconstruction, rehabilitation or 
installation of commercial or industrial buildings, structures, and 
other real property equipment and improvements,

[[Page 24]]

including railroad spurs or similar extensions. Such activities may be 
carried out by the recipient or public or private nonprofit 
subrecipients.
    (b) The provision of assistance to a private for-profit business, 
including, but not limited to, grants, loans, loan guarantees, interest 
supplements, technical assistance, and other forms of support, for any 
activity where the assistance is appropriate to carry out an economic 
development project, excluding those described as ineligible in 
Sec. 570.207(a). In selecting businesses to assist under this authority, 
the recipient shall minimize, to the extent practicable, displacement of 
existing 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; and the screening, referral, and placement of applicants for 
employment opportunities generated by CDBG-eligible economic development 
activities, including the costs of providing necessary training for 
persons filling those positions.

[53 FR 34439, Sept. 6, 1988, as amended at 60 FR 1944, Jan. 5, 1995; 71 
FR 30035, May 24, 2006]



Sec. 570.204  Special activities by Community-Based Development
Organizations (CBDOs).

    (a) Eligible activities. The recipient may provide CDBG funds as 
grants or loans to any CBDO qualified under this section to carry out a 
neighborhood revitalization, community economic development, or energy 
conservation project. The funded project activities may include those 
listed as eligible under this subpart, and, except as described in 
paragraph (b) of this section, activities not otherwise listed as 
eligible under this subpart. For purposes of qualifying as a project 
under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded 
activity or activities may be considered either alone or in concert with 
other project activities either being carried out or for which funding 
has been committed. For purposes of this section:
    (1) Neighborhood revitalization project includes activities of 
sufficient size and scope to have an impact on the decline of a 
geographic location within the jurisdiction of a unit of general local 
government (but not the entire jurisdiction) designated in comprehensive 
plans, ordinances, or other local documents as a neighborhood, village, 
or similar geographical designation; or the entire jurisdiction of a 
unit of general local government which is under 25,000 population;
    (2) Community economic development project includes activities that 
increase economic opportunity, principally for persons of low- and 
moderate-income, or that stimulate or retain businesses or permanent 
jobs, including projects that include one or more such activities that 
are clearly needed to address a lack of affordable housing accessible to 
existing or planned jobs and those activities specified at 24 CFR 
91.1(a)(1)(iii); activities under this paragraph may include costs 
associated with project-specific assessment or remediation of known or 
suspected environmental contamination;
    (3) Energy conservation project includes activities that address 
energy conservation, principally for the benefit of the residents of the 
recipient's jurisdiction; and
    (4) To carry out a project means that the CBDO undertakes the funded 
activities directly or through contract with an entity other than the 
grantee, or through the provision of financial assistance for activities 
in which it retains a direct and controlling involvement and 
responsibilities.
    (5) Any new construction or substantial rehabilitation, as 
substantial rehabilitation is defined by 24 CFR 5.100, of a building 
with more than 4 rental units, for which CDBG funds are first obligated 
by the recipient on or after April 19, 2017, must include installation 
of broadband infrastructure, as this term is also defined in 24 CFR 
5.100, except where the recipient determines and, in accordance with 
Sec. 570.506, documents the determination that:
    (i) The location of the new construction or substantial 
rehabilitation

[[Page 25]]

makes installation of broadband infrastructure infeasible;
    (ii) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (iii) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.
    (b) Ineligible activities. Notwithstanding that CBDOs may carry out 
activities that are not otherwise eligible under this subpart, this 
section does not authorize:
    (1) Carrying out an activity described as ineligible in 
Sec. 570.207(a);
    (2) Carrying out public services that do not meet the requirements 
of Sec. 570.201(e), except that:
    (i) Services carried out under this section that are specifically 
designed to increase economic opportunities through job training and 
placement and other employment support services, including, but not 
limited to, peer support programs, counseling, child care, 
transportation, and other similar services; and
    (ii) Services of any type carried out under this section pursuant to 
a strategy approved by HUD under the provisions of 24 CFR 91.215(e) 
shall not be subject to the limitations in Sec. 570.201(e)(1) or (2), as 
applicable;
    (3) Providing assistance to activities that would otherwise be 
eligible under Sec. 570.203 that do not meet the requirements of 
Sec. 570.209; or
    (4) Carrying out an activity that would otherwise be eligible under 
Sec. 570.205 or Sec. 570.206, but that would result in the recipient's 
exceeding the spending limitation in Sec. 570.200(g).
    (c) Eligible CBDOs. (1) A CBDO qualifying under this section is an 
organization which has the following characteristics:
    (i) Is an association or corporation organized under State or local 
law to engage in community development activities (which may include 
housing and economic development activities) primarily within an 
identified geographic area of operation within the jurisdiction of the 
recipient, or in the case of an urban county, the jurisdiction of the 
county; and
    (ii) Has as its primary purpose the improvement of the physical, 
economic or social environment of its geographic area of operation by 
addressing one or more critical problems of the area, with particular 
attention to the needs of persons of low and moderate income; and
    (iii) May be either non-profit or for-profit, provided any monetary 
profits to its shareholders or members must be only incidental to its 
operations; and
    (iv) Maintains at least 51 percent of its governing body's 
membership for low- and moderate-income residents of its geographic area 
of operation, owners or senior officers of private establishments and 
other institutions located in and serving its geographic area of 
operation, or representatives of low- and moderate-income neighborhood 
organizations located in its geographic area of operation; and
    (v) Is not an agency or instrumentality of the recipient and does 
not permit more than one-third of the membership of its governing body 
to be appointed by, or to consist of, elected or other public officials 
or employees or officials of an ineligible entity (even though such 
persons may be otherwise qualified under paragraph (c)(1)(iv) of this 
section); and
    (vi) Except as otherwise authorized in paragraph (c)(1)(v) of this 
section, requires the members of its governing body to be nominated and 
approved by the general membership of the organization, or by its 
permanent governing body; and
    (vii) Is not subject to requirements under which its assets revert 
to the recipient upon dissolution; and
    (viii) Is free to contract for goods and services from vendors of 
its own choosing.
    (2) A CBDO that does not meet the criteria in paragraph (c)(1) of 
this section may also qualify as an eligible entity under this section 
if it meets one of the following requirements:
    (i) Is an entity organized pursuant to section 301(d) of the Small 
Business Investment Act of 1958 (15 U.S.C. 681(d)), including those 
which are profit making; or
    (ii) Is an SBA approved Section 501 State Development Company or 
Section 502 Local Development Company,

[[Page 26]]

or an SBA Certified Section 503 Company under the Small Business 
Investment Act of 1958, as amended; or
    (iii) Is a Community Housing Development Organization (CHDO) under 
24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships 
program participating jurisdiction, with a geographic area of operation 
of no more than one neighborhood, and has received HOME funds under 24 
CFR 92.300 or is expected to receive HOME funds as described in and 
documented in accordance with 24 CFR 92.300(e).
    (3) A CBDO that does not qualify under paragraph (c)(1) or (2) of 
this section may also be determined to qualify as an eligible entity 
under this section if the recipient demonstrates to the satisfaction of 
HUD, through the provision of information regarding the organization's 
charter and by-laws, that the organization is sufficiently similar in 
purpose, function, and scope to those entities qualifying under 
paragraph (c)(1) or (2) of this section.

[60 FR 1944, Jan. 5, 1995, as amended at 71 FR 30035, May 24, 2006; 81 
FR 92636, Dec. 20, 2016]



Sec. 570.205  Eligible planning, urban environmental design and
policy-planning-management-capacity building activities.

    (a) Planning activities which consist of all costs of data 
gathering, studies, analysis, and preparation of plans and the 
identification of actions that will implement such plans, including, but 
not limited to:
    (1) Comprehensive plans;
    (2) Community development plans;
    (3) Functional plans, in areas such as:
    (i) Housing, including the development of a consolidated plan;
    (ii) Land use and urban environmental design;
    (iii) Economic development;
    (iv) Open space and recreation;
    (v) Energy use and conservation;
    (vi) Floodplain and wetlands management in accordance with the 
requirements of Executive Orders 11988 and 11990;
    (vii) Transportation;
    (viii) Utilities; and
    (ix) Historic preservation.
    (4) Other plans and studies such as:
    (i) Small area and neighborhood plans;
    (ii) Capital improvements programs;
    (iii) Individual project plans (but excluding engineering and design 
costs related to a specific activity which are eligible as part of the 
cost of such activity under Secs. 570.201-570.204);
    (iv) The reasonable costs of general environmental, urban 
environmental design and historic preservation studies; and general 
environmental assessment- and remediation-oriented planning related to 
properties with known or suspected environmental contamination. However, 
costs necessary to comply with 24 CFR part 58, including project 
specific environmental assessments and clearances for activities 
eligible for assistance under this part, are eligible as part of the 
cost of such activities under Secs. 570.201-570.204. Costs for such 
specific assessments and clearances may also be incurred under this 
paragraph but would then be considered planning costs for the purposes 
of Sec. 570.200(g);
    (v) Strategies and action programs to implement plans, including the 
development of codes, ordinances and regulations;
    (vi) Support of clearinghouse functions, such as those specified in 
Executive Order 12372; and
    (vii) Assessment of Fair Housing.
    (viii) Developing an inventory of properties with known or suspected 
environmental contamination.
    (5) [Reserved]
    (6) Policy--planning--management--capacity building activities which 
will enable the recipient to:
    (1) Determine its needs;
    (2) Set long-term goals and short-term objectives, including those 
related to urban environmental design;
    (3) Devise programs and activities to meet these goals and 
objectives;
    (4) Evaluate the progress of such programs and activities in 
accomplishing these goals and objectives; and
    (5) Carry out management, coordination and monitoring of activities 
necessary for effective planning implementation, but excluding the costs 
necessary to implement such plans.

[53 FR 34439, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991; 
60 FR 1915, Jan. 5, 1995; 71 FR 30035, May 24, 2006; 80 FR 42366, July 
16, 2015]

[[Page 27]]



Sec. 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 and, where applicable, housing activities (described in paragraph 
(g) of this section) covered in the recipient's housing assistance plan. 
This does not include staff and overhead costs directly related to 
carrying out activities eligible under Sec. 570.201 through 
Sec. 570.204, since those costs are eligible as part of such activities.
    (a) General management, oversight and coordination. Reasonable costs 
of overall program management, coordination, monitoring, and evaluation. 
Such costs include, but are not necessarily limited to, necessary 
expenditures for the following:
    (1) Salaries, wages, and related costs of the recipient's staff, the 
staff of local public agencies, or other staff engaged in program 
administration. In charging costs to this category the recipient may 
either include the entire salary, wages, and related costs allocable to 
the program of each person whose primary responsibilities with regard to 
the program involve program administration assignments, or the pro rata 
share of the salary, wages, and related costs of each person whose job 
includes any program administration assignments. The recipient may use 
only one of these methods during the program year. Program 
administration includes the following types of assignments:
    (i) Providing local officials and citizens with information about 
the program;
    (ii) Preparing program budgets and schedules, and amendments 
thereto;
    (iii) Developing systems for assuring compliance with program 
requirements;
    (iv) Developing interagency agreements and agreements with 
subrecipients and contractors to carry out program activities;
    (v) Monitoring program activities for progress and compliance with 
program requirements;
    (vi) Preparing reports and other documents related to the program 
for submission to HUD;
    (vii) Coordinating the resolution of audit and monitoring findings;
    (viii) Evaluating program results against stated objectives; and
    (ix) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraph (a)(1)(i) through (viii) of this section.
    (2) Travel costs incurred for official business in carrying out the 
program;
    (3) Administrative services performed under third party contracts or 
agreements, including such services as general legal services, 
accounting services, and audit services; and
    (4) Other costs for goods and services required for administration 
of the program, including such goods and services as rental or purchase 
of equipment, insurance, utilities, office supplies, and rental and 
maintenance (but not purchase) of office space.
    (b) Public information. The provisions of information and other 
resources to residents and citizen organizations participating in the 
planning, implementation, or assessment of activities being assisted 
with CDBG funds.
    (c) Fair housing activities. Provision of fair housing services 
designed to further the fair housing objectives of the Fair Housing Act 
(42 U.S.C. 3601-20) by making all persons, without regard to race, 
color, religion, sex, national origin, familial status or handicap, 
aware of the range of housing opportunities available to them; other 
fair housing enforcement, education, and outreach activities; and other 
activities designed to further the housing objective of avoiding undue 
concentrations of assisted persons in areas containing a high proportion 
of low and moderate income persons.
    (d) [Reserved]
    (e) Indirect costs. Indirect costs may be charged to the CDBG 
program under a cost allocation plan prepared in accordance with 2 CFR 
part 200, subpart E.
    (f) Submission of applications for federal programs. Preparation of 
documents required for submission to HUD to receive funds under the CDBG 
and

[[Page 28]]

UDAG programs. In addition, CDBG funds may be used to prepare 
applications for other Federal programs where the recipient determines 
that such activities are necessary or appropriate to achieve its 
community development objectives.
    (g) Administrative expenses to facilitate housing. CDBG funds may be 
used for necessary administrative expenses in planning or obtaining 
financing for housing as follows: for entitlement recipients, assistance 
authorized by this paragraph is limited to units which are identified in 
the recipient's HUD approved housing assistance plan; for HUD-
administered small cities recipients, assistance authorized by the 
paragraph is limited to facilitating the purchase or occupancy of 
existing units which are to be occupied by low and moderate income 
households, or the construction of rental or owner units where at least 
20 percent of the units in each project will be occupied at affordable 
rents/costs by low and moderate income persons. Examples of eligible 
actions are as follows:
    (1) The cost of conducting preliminary surveys and analysis of 
market needs;
    (2) Site and utility plans, narrative descriptions of the proposed 
construction, preliminary cost estimates, urban design documentation, 
and ``sketch drawings,'' but excluding architectural, engineering, and 
other details ordinarily required for construction purposes, such as 
structural, electrical, plumbing, and mechanical details;
    (3) Reasonable costs associated with development of applications for 
mortgage and insured loan commitments, including commitment fees, and of 
applications and proposals under the Section 8 Housing Assistance 
Payments Program pursuant to 24 CFR parts 880-883;
    (4) Fees associated with processing of applications for mortgage or 
insured loan commitments under programs including those administered by 
HUD, Farmers Home Administration (FmHA), Federal National Mortgage 
Association (FNMA), and the Government National Mortgage Association 
(GNMA);
    (5) The cost of issuance and administration of mortgage revenue 
bonds used to finance the acquisition, rehabilitation or construction of 
housing, but excluding costs associated with the payment or guarantee of 
the principal or interest on such bonds; and
    (6) Special outreach activities which result in greater landlord 
participation in Section 8 Housing Assistance Payments Program-Existing 
Housing or similar programs for low and moderate income persons.
    (h) Section 17 of the United States Housing Act of 1937. Reasonable 
costs equivalent to those described in paragraphs (a), (b), (e) and (f) 
of this section for overall program management of the Rental 
Rehabilitation and Housing Development programs authorized under section 
17 of the United States Housing Act of 1937, whether or not such 
activities are otherwise assisted with funds provided under this part.
    (i) 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:
    (1) A Federally designated Empowerment Zone or Enterprise Community; 
and
    (2) The HOME program under title II of the Cranston-Gonzalez 
National Affordable Housing Act (42 U.S.C. 12701 note).

[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
54 FR 37411, Sept. 8, 1989; 60 FR 56912, Nov. 9, 1995; 69 FR 32778, June 
10, 2004; 80 FR 69870, Nov. 12, 2015; 80 FR 75937, Dec. 7, 2015]



Sec. 570.207  Ineligible activities.

    The general rule is that any activity that is not authorized under 
the provisions of Secs. 570.201-570.206 is ineligible to be assisted 
with CDBG funds. This section identifies specific activities that are 
ineligible and provides guidance in determining the eligibility of other 
activities frequently associated with housing and community development.
    (a) The following activities may not be assisted with CDBG funds:
    (1) Buildings or portions thereof, used for the general conduct of 
government as defined at Sec. 570.3(d) cannot be assisted

[[Page 29]]

with CDBG funds. This does not include, however, the removal of 
architectural barriers under Sec. 570.201(c) involving any such 
building. Also, where acquisition of real property includes an existing 
improvement which is to be used in the provision of a building for the 
general conduct of government, the portion of the acquisition cost 
attributable to the land is eligible, provided such acquisition meets a 
national objective described in Sec. 570.208.
    (2) General government expenses. Except as otherwise specifically 
authorized in this subpart or under 2 CFR part 200, subpart E, expenses 
required to carry out the regular responsibilities of the unit of 
general local government are not eligible for assistance under this 
part.
    (3) Political activities. CDBG funds shall not be used to finance 
the use of facilities or equipment for political purposes or to engage 
in other partisan political activities, such as candidate forums, voter 
transportation, or voter registration. However, a facility originally 
assisted with CDBG funds may be used on an incidental basis to hold 
political meetings, candidate forums, or voter registration campaigns, 
provided that all parties and organizations have access to the facility 
on an equal basis, and are assessed equal rent or use charges, if any.
    (b) The following activities may not be assisted with CDBG funds 
unless authorized under provisions of Sec. 570.203 or as otherwise 
specifically noted herein or when carried out by an entity under the 
provisions of Sec. 570.204.
    (1) Purchase of equipment. The purchase of equipment with CDBG funds 
is generally ineligible.
    (i) Construction equipment. The purchase of construction equipment 
is ineligible, but compensation for the use of such equipment through 
leasing or depreciation pursuant to 2 CFR part 200, subpart E, as 
applicable for an otherwise eligible activity is an eligible use of CDBG 
funds. However, the purchase of construction equipment for use as part 
of a solid waste disposal facility is eligible under Sec. 570.201(c).
    (ii) Fire protection equipment. Fire protection equipment is 
considered for this purpose to be an integral part of a public facility 
and thus, purchase of such equipment would be eligible under 
Sec. 570.201(c).
    (iii) Furnishings and personal property. The purchase of equipment, 
fixtures, motor vehicles, furnishings, or other personal property not an 
integral structural fixture is generally ineligible. CDBG funds may be 
used, however, to purchase or to pay depreciation in accordance with 2 
CFR part 200, subpart E, for such items when necessary for use by a 
recipient or its subrecipients in the administration of activities 
assisted with CDBG funds, or when eligible as fire fighting equipment, 
or when such items constitute all or part of a public service pursuant 
to Sec. 570.201(e).
    (2) Operating and maintenance expenses. The general rule is that any 
expense associated with repairing, operating or maintaining public 
facilities, improvements and services is ineligible. Specific exceptions 
to this general rule are operating and maintenance expenses associated 
with public service activities, interim assistance, and office space for 
program staff employed in carrying out the CDBG program. For example, 
the use of CDBG funds to pay the allocable costs of operating and 
maintaining a facility used in providing a public service would be 
eligible under Sec. 570.201(e), even if no other costs of providing such 
a service are assisted with such funds. Examples of ineligible operating 
and maintenance expenses are:
    (i) Maintenance and repair of publicly owned streets, parks, 
playgrounds, water and sewer facilities, neighborhood facilities, senior 
centers, centers for persons with a disabilities, parking and other 
public facilities and improvements. Examples of maintenance and repair 
activities for which CDBG funds may not be used include the filling of 
pot holes in streets, repairing of cracks in sidewalks, the mowing of 
recreational areas, and the replacement of expended street light bulbs; 
and
    (ii) Payment of salaries for staff, utility costs and similar 
expenses necessary for the operation of public works and facilities.
    (3) New housing construction. For the purpose of this paragraph, 
activities in support of the development of low or

[[Page 30]]

moderate income housing including clearance, site assemblage, provision 
of site improvements and provision of public improvements and certain 
housing pre-construction costs set forth in Sec. 570.206(g), are not 
considered as activities to subsidize or assist new residential 
construction. CDBG funds may not be used for the construction of new 
permanent residential structures or for any program to subsidize or 
assist such new construction, except:
    (i) As provided under the last resort housing provisions set forth 
in 24 CFR part 42;
    (ii) As authorized under Sec. 570.201(m) or (n);
    (iii) When carried out by an entity pursuant to Sec. 570.204(a);
    (4) Income payments. The general rule is that CDBG funds may not be 
used for income payments. For purposes of the CDBG program, ``income 
payments'' means a series of subsistence-type grant payments made to an 
individual or family for items such as food, clothing, housing (rent or 
mortgage), or utilities, but excludes emergency grant payments made over 
a period of up to three consecutive months to the provider of such items 
or services on behalf of an individual or family.

[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
60 FR 1945, Jan. 5, 1995; 60 FR 56912, Nov. 9, 1995; 65 FR 70215, Nov. 
21, 2000; 80 FR 75937, Dec. 7, 2015]



Sec. 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 Sec. 570.200(a)(2):
    (a) Activities benefiting low- and moderate-income persons. 
Activities meeting the criteria in paragraph (a) (1), (2), (3), or (4) 
of this section as applicable, 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 particular area, where at least 
51 percent of the residents are low and moderate income persons. Such an 
area need not be coterminous with census tracts or other officially 
recognized boundaries but must be the entire area served by the 
activity. An activity that serves an area that is not primarily 
residential in character shall not qualify under this criterion.
    (ii) For metropolitan cities and urban counties, an activity that 
would otherwise qualify under Sec. 570.208(a)(1)(i), except that the 
area served contains less than 51 percent low- and moderate-income 
residents, will also be considered to meet the objective of benefiting 
low- and moderate-income persons where the proportion of such persons in 
the area is within the highest quartile of all areas in the recipient's 
jurisdiction in terms of the degree of concentration of such persons. 
This exception is inapplicable to non-entitlement CDBG grants in Hawaii. 
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.

[[Page 31]]

    (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) of this 
section 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 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 numbering areas, 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, 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 
moderate-income persons 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 numbering areas), the total number of persons and the 
total number of low- and moderate-income persons within each census 
division, the percentage of low- and moderate-income persons 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 Sec. 570.200(c)) levied 
against residential properties owned and occupied by persons of low and 
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 decennial census information 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

[[Page 32]]

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 low and moderate 
income. HUD will accept information obtained through such surveys, to be 
used in lieu of the decennial 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 the decennial 
census data for areas of similar size. Where there is substantial 
evidence that provides a clear basis to believe that the use of the 
decennial 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 paragraph (a)(1) of this section.
    (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 following kinds of activities may not qualify under 
paragraph (a)(2) of this section: activities, the benefits of which are 
available to all the residents of an area; activities involving the 
acquisition, construction or rehabilitation of property for housing; or 
activities where the benefit to low- and moderate-income persons to be 
considered is the creation or retention of jobs, except as provided in 
paragraph (a)(2)(iv) of this section.) To qualify under paragraph (a)(2) 
of this section, the activity must meet one of the following tests:
    (A) Benefit a clientele who are generally presumed to be principally 
low and moderate income persons. Activities that exclusively serve a 
group of persons in any one or a combination of the following categories 
may be presumed to benefit persons, 51 percent of whom are low- and 
moderate-income: abused children, battered spouses, elderly persons, 
adults meeting the Bureau of the Census' Current Population Reports 
definition of ``severely disabled,'' homeless persons, illiterate 
adults, persons living with AIDS, and migrant farm workers; or
    (B) Require information on family size and income so that it is 
evident 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 moderate income 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

[[Page 33]]

the provisions of Sec. 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 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.
    (3) Housing activities. An eligible activity carried out for the 
purpose of providing or improving permanent residential structures 
which, 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 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 Sec. 570.208 (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 moderate income 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, 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 new construction of a multifamily, non-elderly 
rental housing project;
    (B) Not less than 20 percent of the units will be occupied by low 
and moderate income 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 Sec. 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 
Sec. 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 jobs, 
computed on a full time equivalent basis, involve the employment of low- 
and moderate-income

[[Page 34]]

persons. 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 moderate-income 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 low- and moderate-income 
persons for these purposes only if:
    (A) Special skills that can only be acquired with substantial 
training or work experience or education beyond high school are not a 
prerequisite to fill such jobs, or the business agrees to hire 
unqualified persons and provide training; and
    (B) The recipient and the assisted business take actions to ensure 
that low- and 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) He/she resides within a census tract (or block numbering area) 
that either:
    (1) Meets the requirements of paragraph (a)(4)(v) of this section; 
or
    (2) Has at least 70 percent of its residents who are low- and 
moderate-income persons; or
    (B) The assisted business is located within a census tract (or block 
numbering area) that meets the requirements of paragraph (a)(4)(v) of 
this section and the job under consideration is to be located within 
that census tract.
    (v) A census tract (or block numbering area) qualifies for the 
presumptions permitted under paragraphs (a)(4)(iv)(A)(1) and (B) of this 
section if it is either part of a Federally-designated Empowerment Zone 
or Enterprise Community or meets the following criteria:
    (A) It has a poverty rate of at least 20 percent as determined by 
the most recently available decennial census information;
    (B) It does not include any portion of a central business district, 
as this term is used in the most recent Census of Retail Trade, unless 
the tract has a poverty rate of at least 30 percent as determined by the 
most recently available decennial census information; and
    (C) It evidences pervasive poverty and general distress by meeting 
at least one of the following standards:
    (1) All block groups in the census tract have poverty rates of at 
least 20 percent;
    (2) The specific activity being undertaken is located in a block 
group that has a poverty rate of at least 20 percent; or
    (3) Upon the written request of 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, and deteriorated infrastructure or 
substantial population decline.
    (vi) 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, 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

[[Page 35]]

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.
    (D) Where CDBG funds are used for activities meeting the criteria 
listed at Sec. 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 Sec. 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 area also meets the conditions in either paragraph (A) or 
(B):
    (A) At least 25 percent of properties throughout the area experience 
one or more of the following conditions:
    (1) Physical deterioration of buildings or improvements;
    (2) Abandonment of properties;
    (3) Chronic high occupancy turnover rates or chronic high vacancy 
rates in commercial or industrial buildings;
    (4) Significant declines in property values or abnormally low 
property values relative to other areas in the community; or
    (5) Known or suspected environmental contamination.
    (B) The public improvements throughout the area are in a general 
state of deterioration.
    (iii) Documentation is to be maintained by the recipient on the 
boundaries of the area and the conditions and standards used that 
qualified the area at the time of its designation. The recipient shall 
establish definitions of the conditions listed at

[[Page 36]]

Sec. 570.208(b)(1)(ii)(A), and 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 be redetermined every 
10 years for continued qualification. Documentation must be retained 
pursuant to the recordkeeping requirements contained at Sec. 570.506 
(b)(8)(ii).
    (iv) 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 for the Section 8 
Housing Assistance Payments Program-Existing Housing (24 CFR 882.109).
    (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. However, rehabilitation must be limited to 
eliminating those conditions that are detrimental to public health and 
safety. 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.
    (3) Activities to address slums or blight in an urban renewal area. 
An activity will be considered to address prevention or elimination of 
slums or blight in an urban renewal area if the activity is:
    (i) Located within an urban renewal project area or Neighborhood 
Development Program (NDP) action area; i.e., an area in which funded 
activities were authorized under an urban renewal Loan and Grant 
Agreement or an annual NDP Funding Agreement, pursuant to title I of the 
Housing Act of 1949; and
    (ii) Necessary to complete the urban renewal plan, as then in 
effect, including initial land redevelopment permitted by the plan.
    Note: Despite the restrictions in (b) (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.
    (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 Sec. 570.505.
    (2) Where the assisted activity is relocation assistance that the 
recipient is required to provide, such relocation

[[Page 37]]

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 
Sec. 570.205 and Sec. 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 Sec. 91.215(e) of this title 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 Sec. 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.

[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
60 FR 1945, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56912, Nov. 
9, 1995; 61 FR 18674, Apr. 29, 1996; 71 FR 30035, May 24, 2006; 72 FR 
46370, Aug. 17, 2007]



Sec. 570.209  Guidelines for evaluating and selecting economic
development projects.

    The following guidelines are provided to assist the recipient to 
evaluate and select activities to be carried out for economic 
development purposes. Specifically, these guidelines are applicable to 
activities that are eligible for CDBG assistance under Sec. 570.203. 
These guidelines also apply to activities carried out under the 
authority of Sec. 570.204 that would otherwise be eligible under 
Sec. 570.203, were it not for the involvement of a Community-Based 
Development Organization (CBDO). (This would include activities where a 
CBDO makes loans to for-profit businesses.) These guidelines are 
composed of two components: guidelines for evaluating project costs and 
financial requirements; and standards for evaluating public benefit. The 
standards for evaluating public benefit are mandatory, but the 
guidelines for evaluating projects costs and financial requirements are 
not.

[[Page 38]]

    (a) Guidelines and objectives for evaluating project costs and 
financial requirements. HUD has developed guidelines that are designed 
to provide the recipient with a framework for financially underwriting 
and selecting CDBG-assisted economic development projects which are 
financially viable and will make the most effective use of the CDBG 
funds. These guidelines, also referred to as the underwriting 
guidelines, are published as appendix A to this part. The use of the 
underwriting guidelines published by HUD is not mandatory. However, 
grantees electing not to use these guidelines would be expected to 
conduct basic financial underwriting prior to the provision of CDBG 
financial assistance to a for-profit business. Where appropriate, HUD's 
underwriting guidelines recognize that different levels of review are 
appropriate to take into account differences in the size and scope of a 
proposed project, and in the case of a microenterprise or other small 
business to take into account the differences in the capacity and level 
of sophistication among businesses of differing sizes. Recipients are 
encouraged, when they develop their own programs and underwriting 
criteria, to also take these factors into account. The objectives of the 
underwriting guidelines are to ensure:
    (1) That project costs are reasonable;
    (2) That all sources of project financing are committed;
    (3) That to the extent practicable, CDBG funds are not substituted 
for non-Federal financial support;
    (4) That the project is financially feasible;
    (5) That to the extent practicable, the return on the owner's equity 
investment will not be unreasonably high; and
    (6) That to the extent practicable, CDBG funds are disbursed on a 
pro rata basis with other finances provided to the project.
    (b) Standards for evaluating public benefit. The grantee is 
responsible for making sure that at least a minimum level of public 
benefit is obtained from the expenditure of CDBG funds under the 
categories of eligibility governed by these guidelines. The standards 
set forth below identify the types of public benefit that will be 
recognized for this purpose and the minimum level of each that must be 
obtained for the amount of CDBG funds used. Unlike the guidelines for 
project costs and financial requirements covered under paragraph (a) of 
this section, the use of the standards for public benefit is mandatory. 
Certain public facilities and improvements eligible under 
Sec. 570.201(c) of the regulations, which are undertaken for economic 
development purposes, are also subject to these standards, as specified 
in Sec. 570.208(a)(4)(vi)(F)(2).
    (1) Standards for activities in the aggregate. Activities covered by 
these guidelines must, in the aggregate, either:
    (i) Create or retain at least one full-time equivalent, permanent 
job per $35,000 of CDBG funds used; or
    (ii) Provide goods or services to residents of an area, such that 
the number of low- and moderate-income persons residing in the areas 
served by the assisted businesses amounts to at least one low- and 
moderate-income person per $350 of CDBG funds used.
    (2) Applying the aggregate standards. (i) A metropolitan city, an 
urban county, a non-entitlement CDBG grantee in Hawaii, or an Insular 
Area shall apply the aggregate standards under paragraph (b)(1) of this 
section to all applicable activities for which CDBG funds are first 
obligated within each single CDBG program year, without regard to the 
source year of the funds used for the activities. For Insular Areas, the 
preceding sentence applies to grants received in program years after 
Fiscal Year 2004. A grantee under the HUD-administered Small Cities 
Program, or Insular Areas CDBG grants prior to Fiscal Year 2005, shall 
apply the aggregate standards under paragraph (b)(1) of this section to 
all funds obligated for applicable activities from a given grant; 
program income obligated for applicable activities will, for these 
purposes, be aggregated with the most recent open grant. For any time 
period in which a community has no open HUD-administered or Insular 
Areas grants, the aggregate standards shall be applied to all applicable 
activities for which program income is obligated during that period.
    (ii) The grantee shall apply the aggregate standards to the number 
of jobs to be created/retained, or to the

[[Page 39]]

number of persons residing in the area served (as applicable), as 
determined at the time funds are obligated to activities.
    (iii) Where an activity is expected both to create or retain jobs 
and to provide goods or services to residents of an area, the grantee 
may elect to count the activity under either the jobs standard or the 
area residents standard, but not both.
    (iv) Where CDBG assistance for an activity is limited to job 
training and placement and/or other employment support services, the 
jobs assisted with CDBG funds shall be considered to be created or 
retained jobs for the purposes of applying the aggregate standards.
    (v) Any activity subject to these guidelines which meets one or more 
of the following criteria may, at the grantee's option, be excluded from 
the aggregate standards described in paragraph (b)(1) of this section:
    (A) Provides jobs exclusively for unemployed persons or participants 
in one or more of the following programs:
    (1) Jobs Training Partnership Act (JTPA);
    (2) Jobs Opportunities for Basic Skills (JOBS); or
    (3) Aid to Families with Dependent Children (AFDC);
    (B) Provides jobs predominantly for residents of Public and Indian 
Housing units;
    (C) Provides jobs predominantly for homeless persons;
    (D) Provides jobs predominantly for low-skilled, low- and moderate-
income persons, where the business agrees to provide clear opportunities 
for promotion and economic advancement, such as through the provision of 
training;
    (E) Provides jobs predominantly for persons residing within a census 
tract (or block numbering area) that has at least 20 percent of its 
residents who are in poverty;
    (F) Provides assistance to business(es) that operate(s) within a 
census tract (or block numbering area) that has at least 20 percent of 
its residents who are in poverty;
    (G) Stabilizes or revitalizes a neighborhood that has at least 70 
percent of its residents who are low- and moderate-income;
    (H) Provides assistance to a Community Development Financial 
Institution that serve an area that is predominantly low- and moderate-
income persons;
    (I) Provides assistance to a Community-Based Development 
Organization serving a neighborhood that has at least 70 percent of its 
residents who are low- and moderate-income;
    (J) Provides employment opportunities that are an integral component 
of a project designed to promote spatial deconcentration of low- and 
moderate-income and minority persons;
    (K) With prior HUD approval, provides substantial benefit to low-
income persons through other innovative approaches;
    (L) Provides services to the residents of an area pursuant to a 
strategy approved by HUD under the provisions of Sec. 91.215(e) of this 
title;
    (M) Creates or retains jobs through businesses assisted in an area 
pursuant to a strategy approved by HUD under the provisions of 
Sec. 91.215(e) of this title.
    (N) Directly involves the economic development or redevelopment of 
environmentally contaminated properties.
    (3) Standards for individual activities. Any activity subject to 
these guidelines which falls into one or more of the following 
categories will be considered by HUD to provide insufficient public 
benefit, and therefore may under no circumstances be assisted with CDBG 
funds:
    (i) The amount of CDBG assistance exceeds either of the following, 
as applicable:
    (A) $50,000 per full-time equivalent, permanent job created or 
retained; or
    (B) $1,000 per low- and moderate-income person to which goods or 
services are provided by the activity.
    (ii) The activity consists of or includes any of the following:
    (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

[[Page 40]]

or members clearly outweighs employment or other benefits to low- and 
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) Applying the individual activity standards. (i) Where an 
activity is expected both to create or retain jobs and to provide goods 
or services to residents of an area, it will be disqualified only if the 
amount of CDBG assistance exceeds both of the amounts in paragraph 
(b)(3)(i) of this section.
    (ii) The individual activity standards in paragraph (b)(3)(i) of 
this section shall be applied to the number of jobs to be created or 
retained, or to the number of persons residing in the area served (as 
applicable), as determined at the time funds are obligated to 
activities.
    (iii) Where CDBG assistance for an activity is limited to job 
training and placement and/or other employment support services, the 
jobs assisted with CDBG funds shall be considered to be created or 
retained jobs for the purposes of applying the individual activity 
standards in paragraph (b)(3)(i) of this section.
    (c) Amendments to economic development projects after review 
determinations. If, after the grantee enters into a contract to provide 
assistance to a project, the scope or financial elements of the project 
change to the extent that a significant contract amendment is 
appropriate, the project should be reevaluated under these and the 
recipient's guidelines. (This would include, for example, situations 
where the business requests a change in the amount or terms of 
assistance being provided, or an extension to the loan payment period 
required in the contract.) If a reevaluation of the project indicates 
that the financial elements and public benefit to be derived have also 
substantially changed, then the recipient should make appropriate 
adjustments in the amount, type, terms or conditions of CDBG assistance 
which has been offered, to reflect the impact of the substantial change. 
(For example, if a change in the project elements results in a 
substantial reduction of the total project costs, it may be appropriate 
for the recipient to reduce the amount of total CDBG assistance.) If the 
amount of CDBG assistance provided to the project is increased, the 
amended project must still comply with the public benefit standards 
under paragraph (b) of this section.
    (d) Documentation. The grantee must maintain sufficient records to 
demonstrate the level of public benefit, based on the above standards, 
that is actually achieved upon completion of the CDBG-assisted economic 
development activity(ies) and how that compares to the level of such 
benefit anticipated when the CDBG assistance was obligated. If the 
grantee's actual results show a pattern of substantial variation from 
anticipated results, the grantee is expected to take all actions 
reasonably within its control to improve the accuracy of its 
projections. If the actual results demonstrate that the recipient has 
failed the public benefit standards, HUD may require the recipient to 
meet more stringent standards in future years as appropriate.

[60 FR 1947, Jan. 5, 1995, as amended at 60 FR 17445, Apr. 6, 1995; 71 
FR 30035, May 24, 2006; 72 FR 12535, Mar. 15, 2007; 72 FR 46370, Aug. 
17, 2007]



Sec. 570.210  Prohibition on use of assistance for employment 
relocation activities.

    (a) Prohibition. CDBG funds may not be used to directly assist a 
business, including a business expansion, in the relocation of a plant, 
facility, or operation from one LMA to another LMA if the relocation is 
likely to result in a significant loss of jobs in the LMA from which the 
relocation occurs.
    (b) Definitions. The following definitions apply to this section:
    (1) Directly assist. Directly assist means the provision of CDBG 
funds for activities pursuant to:
    (i) Sec. 570.203(b); or
    (ii) Secs. 570.201(a)-(d), 570.201(l), 570.203(a), or Sec. 570.204 
when the grantee,

[[Page 41]]

subrecipient, or, in the case of an activity carried out pursuant to 
Sec. 570.204, a Community Based Development Organization (CDBO) enters 
into an agreement with a business to undertake one or more of these 
activities as a condition of the business relocating a facility, plant, 
or operation to the grantee's LMA. Provision of public facilities and 
indirect assistance that will provide benefit to multiple businesses 
does not fall under the definition of ``directly assist,'' unless it 
includes the provision of infrastructure to aid a specific business that 
is the subject of an agreement with the specific assisted business.
    (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 non-metropolitan areas, an 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, nor can a non-metropolitan 
LMA be combined with a metropolitan LMA. For the HUD-administered 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.
    (3) Operation. A business operation includes, but is not limited to, 
any equipment, employment opportunity, production capacity or product 
line of the business.
    (4) Significant loss of jobs. (i) A loss of jobs is significant if: 
The number of jobs to be lost in the LMA in which the affected business 
is currently located is equal to or greater than one-tenth of one 
percent of the total number of persons in the labor force of that LMA; 
or in all cases, a loss of 500 or more jobs. Notwithstanding the 
aforementioned, a loss of 25 jobs or fewer does not constitute a 
significant loss of jobs.
    (ii) A job is considered to be lost due to the provision of CDBG 
assistance if the job is relocated within three years of the provision 
of assistance to the business; or the time period within which jobs are 
to be created as specified by the agreement between the business and the 
recipient if it is longer than three years.
    (c) Written agreement. Before directly assisting a business with 
CDBG funds, the recipient, subrecipient, or a CDBO (in the case of an 
activity carried out pursuant to Sec. 570.204) shall sign a written 
agreement with the assisted business. The written agreement shall 
include:
    (1) Statement. A statement from the assisted business as to whether 
the assisted activity will result in the relocation of any industrial or 
commercial plant, facility, or operation from one LMA to another, and, 
if so, the number of jobs that will be relocated from each LMA;
    (2) Required information. If the assistance will not result in a 
relocation covered by this section, a certification from the assisted 
business that neither it, nor any of its subsidiaries, has plans to 
relocate jobs at the time the agreement is signed that would result in a 
significant job loss as defined in this rule; and
    (3) Reimbursement of assistance. The agreement shall provide for 
reimbursement of any assistance provided to, or expended on behalf of, 
the business in the event that assistance results in a relocation 
prohibited under this section.
    (d) Assistance not covered by this section. This section does not 
apply to:
    (1) Relocation assistance. Relocation assistance required by the 
Uniform Assistance and Real Property Acquisition Policies Act of 1970, 
(URA) (42 U.S.C. 4601-4655);

[[Page 42]]

    (2) Microenterprises. Assistance to microenterprises as defined by 
Section 102(a)(22) of the Housing and Community Development Act of 1974; 
and
    (3) Arms-length transactions. Assistance to a business that 
purchases business equipment, inventory, or other physical assets in an 
arms-length transaction, including the assets of an existing business, 
provided that the purchase does not result in the relocation of the 
sellers' business operation (including customer base or list, goodwill, 
product lines, or trade names) from one LMA to another LMA and does not 
produce a significant loss of jobs in the LMA from which the relocation 
occurs.

[70 FR 76369, Dec. 23, 2005]



                      Subpart D_Entitlement Grants

    Source: 53 FR 34449, Sept. 6, 1988, unless otherwise noted.



Sec. 570.300  General.

    This subpart describes the policies and procedures governing the 
making of community development block grants to entitlement communities 
and to non-entitlement counties in the State of Hawaii. The policies and 
procedures set forth in subparts A, C, J, K, and O of this part also 
apply to entitlement grantees and to non-entitlement grantees in the 
State of Hawaii. Sections 570.307 and 570.308 of this subpart do not 
apply to the Hawaii non-entitlement grantees.

[72 FR 46370, Aug. 17, 2007]



Sec. 570.301  Activity locations and float-funding.

    The consolidated plan, action plan, and amendment submission 
requirements referred to in this section are those in 24 CFR part 91.
    (a) For activities for which the grantee has not yet decided on a 
specific location, such as when the grantee is allocating an amount of 
funds to be used for making loans or grants to businesses or for 
residential rehabilitation, the description in the action plan or any 
amendment shall identify who may apply for the assistance, the process 
by which the grantee expects to select who will receive the assistance 
(including selection criteria), and how much and under what terms the 
assistance will be provided, or in the case of a planned public facility 
or improvement, how it expects to determine its location.
    (b) Float-funded activities and guarantees. A recipient may use 
undisbursed funds in the line of credit and its CDBG program account 
that are budgeted in statements or action plans for one or more other 
activities that do not need the funds immediately, subject to the 
limitations described below. Such funds shall be referred to as the 
``float'' for purposes of this section and the action plan. Each 
activity carried out using the float must meet all of the same 
requirements that apply to CDBG-assisted activities generally, and must 
be expected to produce program income in an amount at least equal to the 
amount of the float so used. Whenever the recipient proposes to fund an 
activity with the float, it must include the activity in its action plan 
or amend the action plan for the current program year. For purposes of 
this section, an activity that uses such funds will be called a ``float-
funded activity.''
    (1) Each float-funded activity must be individually listed and 
described as such in the action plan.
    (2)(i) The expected time period between obligation of assistance for 
a float-funded activity and receipt of program income in an amount at 
least equal to the full amount drawn from the float to fund the activity 
may not exceed 2.5 years. An activity from which program income 
sufficient to recover the full amount of the float assistance is 
expected to be generated more than 2.5 years after obligation may not be 
funded from the float, but may be included in an action plan if it is 
funded from CDBG funds other than the float (e.g., grant funds or 
proceeds from an approved Section 108 loan guarantee).
    (ii) Any extension of the repayment period for a float-funded 
activity shall be considered to be a new float-funded activity for these 
purposes and may be implemented by the grantee only if the extension is 
made subject to the same limitations and requirements as apply to a new 
float-funded activity.

[[Page 43]]

    (3) Unlike other projected program income, the full amount of income 
expected to be generated by a float-funded activity must be shown as a 
source of program income in the action plan containing the activity, 
whether or not some or all of the income is expected to be received in a 
future program year (in accordance with 24 CFR 91.220(g)(1)(ii)(D)).
    (4) The recipient must also clearly declare in the action plan that 
identifies the float-funded activity the recipient's commitment to 
undertake one of the following options:
    (i) Amend or delete activities in an amount equal to any default or 
failure to produce sufficient income in a timely manner. If the 
recipient makes this choice, it must include a description of the 
process it will use to select the activities to be amended or deleted 
and how it will involve citizens in that process; and it must amend the 
applicable statement(s) or action plan(s) showing those amendments or 
deletions promptly upon determining that the float-funded activity will 
not generate sufficient or timely program income;
    (ii) Obtain an irrevocable line of credit from a commercial lender 
for the full amount of the float-funded activity and describe the lender 
and terms of such line of credit in the action plan that identifies the 
float-funded activity. To qualify for this purpose, such line of credit 
must be unconditionally available to the recipient in the amount of any 
shortfall within 30 days of the date that the float-funded activity 
fails to generate the projected amount of program income on schedule;
    (iii) Transfer general local government funds in the full amount of 
any default or shortfall to the CDBG line of credit within 30 days of 
the float-funded activity's failure to generate the projected amount of 
the program income on schedule; or
    (iv) A method approved in writing by HUD for securing timely return 
of the amount of the float funding. Such method must ensure that funds 
are available to meet any default or shortfall within 30 days of the 
float-funded activity's failure to generate the projected amount of the 
program income on schedule.
    (5) When preparing an action plan for a year in which program income 
is expected to be received from a float-funded activity, and such 
program income has been shown in a prior statement or action plan, the 
current action plan shall identify the expected income and explain that 
the planned use of the income has already been described in prior 
statements or action plans, and shall identify the statements or action 
plans in which such descriptions may be found.

[60 FR 56913, Nov. 9, 1995]



Sec. 570.302  Submission requirements.

    In order to receive its annual CDBG entitlement grant, a grantee 
must submit a consolidated plan in accordance with 24 CFR part 91. That 
part includes requirements for the content of the consolidated plan, for 
the process of developing the consolidated plan, including citizen 
participation provisions, for the submission date, for HUD approval, and 
for the amendment process.

(Approved by the Office of Management and Budget under control number 
2506-0117)

[60 FR 1915, Jan. 5, 1995]



Sec. 570.303  Certifications.

    The jurisdiction must make the certifications that are set forth in 
24 CFR part 91 as part of the consolidated plan.

(Approved by the Office of Management and Budget under control number 
2506-0117)

[60 FR 1915, Jan. 5, 1995]



Sec. 570.304  Making of grants.

    (a) Approval of grant. HUD will approve a grant if the 
jurisdiction's submissions have been made and approved in accordance 
with 24 CFR part 91, and the certifications required therein are 
satisfactory to the Secretary. The certifications will be satisfactory 
to the Secretary for this purpose unless the Secretary has determined 
pursuant to subpart O of this part that the grantee has not complied 
with the requirements of this part, has failed to carry out its 
consolidated plan as provided under Sec. 570.903, or has determined that 
there is evidence, not directly involving the grantee's past performance

[[Page 44]]

under this program, that tends to challenge in a substantial manner the 
grantee's certification of future performance. If the Secretary makes 
any such determination, however, further assurances may be required to 
be submitted by the grantee as the Secretary may deem warranted or 
necessary to find the grantee's certification satisfactory.
    (b) Grant agreement. The grant will be made by means of a grant 
agreement executed by both HUD and the grantee.
    (c) Grant amount. The Secretary will make a grant in the full 
entitlement amount, generally within the last 30 days of the grantee's 
current program year, unless:
    (1) Either the consolidated plan is not received by August 16 of the 
federal fiscal year for which funds are appropriated or the consolidated 
plan is not approved under 24 CFR part 91, subpart F--in which case, the 
grantee will forfeit the entire entitlement amount; or
    (2) The grantee's performance does not meet the performance 
requirements or criteria prescribed in subpart O and the grant amount is 
reduced.

[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995; 60 
FR 16379, Mar. 30, 1995; 60 FR 56913, Nov. 9, 1995]



Sec. 570.307  Urban counties.

    (a) Determination of qualification. The Secretary will determine the 
qualifications of counties to receive entitlements as urban counties 
upon receipt of qualification documentation from counties at such time, 
and in such manner and form as prescribed by HUD. The Secretary shall 
determine eligibility and applicable portions of each eligible county 
for purposes of fund allocation under section 106 of the Act on the 
basis of information available from the U.S. Bureau of the Census with 
respect to population and other pertinent demographic characteristics, 
and based on information provided by the county and its included units 
of general local government.
    (b) Qualification as an urban county. (1) A county will qualify as 
an urban county if such county meets the definition at Sec. 570.3(3). As 
necessitated by this definition, the Secretary shall determine which 
counties have authority to carry out essential community development and 
housing assistance activities in their included units of general local 
government without the consent of the local governing body and which 
counties must execute cooperation agreements with such units to include 
them in the urban county for qualification and grant calculation 
purposes.
    (2) At the time of urban county qualification, HUD may refuse to 
recognize the cooperation agreement of a unit of general local 
government in an urban county where, based on past performance and other 
available information, there is substantial evidence that such unit does 
not cooperate in the implementation of the essential community 
development or housing assistance activities or where legal impediments 
to such implementation exist, or where participation by a unit of 
general local government in noncompliance with the applicable law in 
subpart K would constitute noncompliance by the urban county. In such a 
case, the unit of general local government will not be permitted to 
participate in the urban county, and its population or other needs 
characteristics will not be considered in the determination of whether 
the county qualifies as an urban county or in determining the amount of 
funds to which the urban county may be entitled. HUD will not take this 
action unless the unit of general local government and the county have 
been given an opportunity to challenge HUD's determination and to 
informally consult with HUD concerning the proposed action.
    (c) Essential activities. For purposes of this section, the term 
``essential community development and housing assistance activities'' 
means community renewal and lower income housing activities, 
specifically urban renewal and publicly assisted housing. In determining 
whether a county has the required powers, the Secretary will consider 
both its authority and, where applicable, the authority of its 
designated agency or agencies.
    (d) Period of qualification. (1) The qualification by HUD of an 
urban county shall remain effective for three successive Federal fiscal 
years regardless of changes in its population during that period, except 
as provided under

[[Page 45]]

paragraph (f) of this section and except as provided under Sec. 570.3(3) 
where the period of qualification shall be two successive Federal fiscal 
years.
    (2) During the period of qualification, no included unit of general 
local government may withdraw from nor be removed from the urban county 
for HUD's grant computation purposes.
    (3) If some portion of an urban county's unincorporated area becomes 
incorporated during the urban county qualification period, the newly 
incorporated unit of general local government shall not be excluded from 
the urban county nor shall it be eligible for a separate grant under 
subpart D, F, or I until the end of the urban county's current 
qualification period, unless the urban county fails to receive a grant 
for any year during that qualification period.
    (e) Grant ineligibility of included units of general local 
government. (1) An included unit of general local government cannot 
become eligible for an entitlement grant as a metropolitan city during 
the period of qualification of the urban county (even if it becomes a 
principal city of a metropolitan area or its population surpasses 50,000 
during that period). Rather, such a unit of general local government 
shall continue to be included as part of the urban county for the 
remainder of the urban county's qualification period, and no separate 
grant amount shall be calculated for the included unit.
    (2) An included unit of general local government which is part of an 
urban county shall be ineligible to apply for grants under subpart F, or 
to be a recipient of assistance under subpart I, during the entire 
period of urban county qualification.
    (f) Failure of an urban county to receive a grant. Failure of an 
urban county to receive a grant during any year shall terminate the 
existing qualification of that urban county, and that county shall 
requalify as an urban county before receiving an entitlement grant in 
any successive Federal fiscal year. Such termination shall release units 
of general local government included in the urban county, in subsequent 
years, from the prohibition to receive grants under paragraphs (d)(3), 
(e)(1) and (e)(2) of this section. For this purpose an urban county 
shall be deemed to have received a grant upon having satisfied the 
requirements of sections 104 (a), (b), (c), and (d) of the Act, without 
regard to adjustments which may be made to this grant amount under 
section 104(e) or 111 of the Act.
    (g) Notifications of the opportunity to be excluded. Any county 
seeking to qualify for an entitlement grant as an urban county for any 
Federal fiscal year shall notify each unit of general local government 
which is located, in whole or in part, within the county and which would 
otherwise be included in the urban county, but which is eligible to 
elect to have its population excluded from that of the urban county, 
that it has the opportunity to make such an election, and that such an 
election, or the failure to make such an election, shall be effective 
for the period for which the county qualifies as an urban county. These 
notifications shall be made by a date specified by HUD. A unit of 
general local government which elects to be excluded from participation 
as a part of the urban county shall notify the county and HUD in writing 
by a date specified by HUD. Such a unit of government may subsequently 
elect to participate in the urban county for the remaining one or two 
year period by notifying HUD and the county, in writing, of such 
election by a date specified by HUD.

[53 FR 34449, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991; 
68 FR 69582, Dec. 12, 2003]



Sec. 570.308  Joint requests.

    (a) Joint requests and cooperation agreements. (1) Any urban county 
and any metropolitan city located, in whole or in part, within that 
county may submit a joint request to HUD to approve the inclusion of the 
metropolitan city as a part of the urban county for purposes of planning 
and implementing a joint community development and housing program. Such 
a joint request shall only be considered if submitted at the time the 
county is seeking a three year qualification or requalification as an 
urban county. Such a joint request shall, upon approval by HUD, remain 
effective for the period for which the county is qualified

[[Page 46]]

as an urban county. An urban county may be joined by more than one 
metropolitan city, but a metropolitan city located in more than one 
urban county may only be included in one urban county for any program 
year. A joint request shall be deemed approved by HUD unless HUD 
notifies the city and the county of its disapproval and the reasons 
therefore within 30 days of receipt of the request by HUD.
    (2) Each metropolitan city and urban county submitting a joint 
request shall submit an executed cooperation agreement to undertake or 
to assist in the undertaking of essential community development and 
housing assistance activities, as defined in Sec. 570.307(c).
    (b) Joint grant amount. The grant amount for a joint recipient shall 
be the sum of the amounts authorized for the individual entitlement 
grantees, as described in section 106 of the Act. The urban county shall 
be the grant recipient.
    (c) Effect of inclusion. Upon urban county qualification and HUD 
approval of the joint request and cooperation agreement, the 
metropolitan city shall be considered a part of the urban county for 
purposes of program planning and implementation for the period of the 
urban county qualification, and shall be treated the same as any other 
unit of general local government which is part of the urban county.
    (d) Submission requirements. In requesting a grant under this part, 
the urban county shall make a single submission which meets the 
submission requirements of 24 CFR part 91 and covers all members of the 
joint recipient.

[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995]



Sec. 570.309  Restriction on location of activities.

    CDBG funds may assist an activity outside the jurisdiction of the 
grantee only if the grantee determines that such an activity is 
necessary to further the purposes of the Act and the recipient's 
community development objectives, and that reasonable benefits from the 
activity will accrue to residents within the jurisdiction of the 
grantee. The grantee shall document the basis for such determination 
prior to providing CDBG funds for the activity.

[60 FR 56914, Nov. 9, 1995]



                    Subpart E_Special Purpose Grants



Sec. 570.400  General.

    (a) Applicability. The policies and procedures set forth in subparts 
A, C, J, K, and O of this part shall apply to this subpart, except to 
the extent that they are specifically modified or augmented by the 
contents of this subpart, including specified exemptions described 
herein. The HUD Environmental Review Procedures contained in 24 CFR part 
58 also apply to this subpart, unless otherwise specifically provided 
herein.
    (b) Data. Wherever data are used in this subpart for selecting 
applicants for assistance or for determining grant amounts, the source 
of such data shall be the most recent information available from the 
U.S. Bureau of the Census which is referable to the same point or period 
of time.
    (c) Review of applications for discretionary assistance--(1) Review 
components. An application for assistance under this subpart shall be 
reviewed by HUD to ensure that:
    (i) The application is postmarked or received on or before any final 
date established by HUD;
    (ii) The application is complete;
    (iii) Required certifications have been included in the application; 
and
    (iv) The application meets the specific program requirements listed 
in the Federal Register Notice published in connection with a 
competition for funding, and any other specific requirements listed 
under this subpart for each of the programs.
    (2) Timing and review. HUD is not required by the Act to review and 
approve an application for assistance or a contract proposal within any 
specified time period. However, HUD will attempt to complete its review 
of any application/proposal within 75 days.
    (3) Notification to applicant/proposer. HUD will notify the 
applicant/proposer in writing that the applicant/proposal has been 
approved, partially approved,

[[Page 47]]

or disapproved. If an application/proposal is partially approved or 
disapproved, the applicant/proposer will be informed of the basis for 
HUD's decision. HUD may make conditional approvals under 
Sec. 570.304(d).
    (d) Program amendments. (1) Recipients shall request prior written 
HUD approval for all program amendments involving changes in the scope 
or the location of approved activities.
    (2) Any program amendments, whether or not they require HUD 
approval, must be fully documented in the recipient's records.
    (e) Performance reports. Any performance report required of a 
discretionary assistance recipient shall be submitted in the form 
specified in this subpart, in the award document, or (if the report 
relates to a specific competition for an assistance award) in a form 
specified in a Notice published in the Federal Register.
    (f) Performance reviews and findings. HUD may review the recipient's 
performance in carrying out the activities for which assistance is 
provided in a timely manner and in accordance with its approved 
application, all applicable requirements of this part and the terms of 
the assistance agreement. Findings of performance deficiencies may be 
cause for appropriate corrective and remedial actions under 
Sec. 570.910.
    (g) Funding sanctions. Following notice and opportunity for informal 
consultation, HUD may withhold, reduce or terminate the assistance where 
any corrective or remedial actions taken under Sec. 570.910 fail to 
remedy a recipient's performance deficiencies, and the deficiencies are 
sufficiently substantial, in the judgment of HUD, to warrant sanctions.
    (h) Publication of availability of funds. HUD will publish by Notice 
in the Federal Register each year the amount of funds available for the 
special purpose grants authorized by each section under this subpart.

[50 FR 37525, Sept. 16, 1985, as amended at 56 FR 18968, Apr. 24, 1991]



Sec. 570.401  Community adjustment and economic diversification 
planning assistance.

    (a) General--(1) Purpose. The purpose of this program is to assist 
units of general local government in nonentitlement areas to undertake 
the planning of community adjustments and economic diversification 
activities, in response to physical, social, economic or governmental 
impacts on the communities generated by the actions of the Department of 
Defense (DoD) defined in paragraph (a)(2) of this section.
    (2) Impacts. Funding under this section is available only to 
communities affected by one or more of the following DoD-related 
impacts:
    (i) The proposed or actual establishment, realignment, or closure of 
a military installation;
    (ii) The cancellation or termination of a DoD contract or the 
failure to proceed with an approved major weapon system program;
    (iii) A publicly announced planned major reduction in DoD spending 
that would directly and adversely affect a unit of general local 
government and result in the loss of 1,000 or more full-time DoD and 
contractor employee positions over a five-year period in the unit of 
general local government and the surrounding area; or
    (iv) The Secretary of HUD (in consultation with the Secretary of 
DoD) determines that an action described in paragraphs (a)(2)(i)-(iii) 
of this section is likely to have a direct and significant adverse 
consequence on the unit of general local government.
    (3) Form of awards. Planning assistance will be awarded in the form 
of grants.
    (4) Program administration. HUD will publish in the Federal Register 
early in each fiscal year the amount of funds to be available for that 
fiscal year for awards under this section. HUD will accept applications 
throughout the fiscal year, and will review and consider for funding 
each application according to the threshold and qualifying factors in 
paragraphs (f) and (g) of this section.
    (b) Definitions. In addition to the definitions in Sec. 570.3 of 
this part, the following definitions apply to this section:

[[Page 48]]

    (1) Adjustment planning. Generally, developing plans and proposals 
in direct response to contraction or expansion of the local economy, or 
changes in the physical development or the social conditions of the 
community, resulting from a DoD-generated impact. Typically, this 
planning includes one or more of the following tasks: Collecting, 
updating, and analyzing data; identifying problems; formulating 
solutions; proposing long- and short-term policies; recommending public- 
and private-sector actions to implement community adjustments and 
economic diversification activities; securing citizen involvement; and 
coordinating with Federal, State, and local entities with respect to the 
DoD-related impacts.
    (2) Community adjustment. Any proposed action to change the 
physical, economic, or social infrastructure within the jurisdiction or 
surrounding area, directly and appropriately in response to the DoD-
generated impact.
    (3) Contract. (i) Any defense contract in an amount not less than $5 
million (without regard to the date on which the contract was awarded); 
and
    (ii) Any subcontract that is entered into in connection with a 
contract (without regard to the effective date of the subcontract) and 
involves not less than $500,000.
    (4) Defense facility. Any private facility producing goods or 
services pursuant to a defense contract.
    (5) DoD. The Department of Defense.
    (6) Economic diversification activities. Any public or private 
sector actions to change the local mix of industrial, commercial, and 
service sectors, or the mix of business ventures within a sector, that 
are intended to mitigate decline in the local economy resulting from 
DoD-generated impacts or, in the case of expansion of a military 
installation or a defense facility, that are intended to respond to new 
economic growth spawned by that expansion.
    (7) Military installation. Any camp, post, station, base, yard, or 
other jurisdiction of a military department that is located within any 
of the several States, the District of Columbia, the Commonwealth of 
Puerto Rico, or Guam.
    (8) Realignment. Any action that both reduces and relocates 
functions and civilian personnel positions, but does not include a 
reduction in force resulting from workload adjustments, reduced 
personnel or funding levels, or skill imbalances.
    (9) Section 107 means section 107 of the Housing and Community 
Development Act of 1974, 42 U.S.C. 5307. Section 107(b)(6) was added by 
section 801 of the Housing and Community Development Act of 1992 (Pub. 
L. 102-550, approved October 28, 1992).
    (10) Section 2391(b). The Department of Defense adjustment planning 
program as set out in 10 U.S.C. 2391(b).
    (11) Small Cities CDBG Program. The Community Development Block 
Grant program for nonentitlement areas in which the States have elected 
not to administer available program funds. The regulations governing 
this program are set out in subpart F of this part.
    (12) Surrounding area. The labor market area as defined by the 
Bureau of Labor Statistics that:
    (i) Includes all or part of the applicant's jurisdictions; and
    (ii) Includes additional areas outside the jurisdiction.
    (c) Eligible applicants. Any unit of general local government, 
excluding units of general government that are entitlement cities or are 
included in an urban county, and which does not include Indian Tribes.
    (d) Eligible activities. Activities eligible for adjustment planning 
assistance include, generally:
    (1) Initial assessments and quick studies of physical, social, 
economic, and fiscal impacts on the community;
    (2) Preliminary identification of potential public and private 
sector actions needed for the community to initiate its response;
    (3) If timely, modification of the applicant's current comprehensive 
plan or any functional plan, such as for housing, including shelter for 
the homeless, or for transportation or other physical infrastructure;
    (4) If timely, modification of the applicant's current economic 
plans and programs, such as for business development, job training, or 
industrial or commercial development;

[[Page 49]]

    (5) Preparation for and conduct of initial community outreach 
activities to begin involving local citizens and the private sector in 
planning for adjustment and diversification;
    (6) Environmental reviews related to DoD-related impacts;
    (7) Initial identification of and coordination with Federal, State 
and local entities that may be expected to assist in the community's 
adjustment and economic development; and with State-designated 
enterprise zones, and Federal empowerment zones and enterprise 
communities when selected and announced.
    (8) Any other planning activity that may enable the community to 
organize itself, establish a start-up capacity to plan, propose specific 
plans and programs, coordinate with appropriate public or private 
entities, or qualify more quickly for the more substantial planning 
assistance available from DoD.
    (e) Ineligible activities. Activities ineligible for adjustment 
planning assistance are:
    (1) Base re-use planning.
    (2) Site planning, architectural and engineering studies, 
feasibility and cost analyses and similar planning for specific projects 
to implement community adjustment or economic diversification, unless as 
last resort funding for those applicants which are unable to obtain 
planning assistance from other sources.
    (3) Planning by communities which are encroaching on military 
installations.
    (4) Demonstration planning activities intended to evolve new 
planning techniques for impacted communities.
    (5) Any planning activity proposed to supplement or replace planning 
that has been or is being assisted by the DoD Sec. 2391(b) adjustment 
planning program.
    (6) Any other planning activity the purpose of which is not 
demonstrably in direct response to a DOD-related impact triggered by one 
or more of the four criteria specified in paragraph (a)(2) of this 
section.
    (f) Threshold requirements. No application will qualify for funding 
unless it meets the following requirements:
    (1) Verification by HUD that the applicant is a unit of general 
government in a nonentitlement area.
    (2) Verification by HUD and DoD that a triggering event described in 
paragraph (a)(2) of this section has occurred or will occur.
    (3) With respect to communities affected by the 49 base closings and 
28 realignments listed by the 1991 Base Closure and Realignment 
Commission, verification by DoD that it has provided no prior funding 
and that the applicant may benefit from start-up planning assistance 
from HUD.
    (4) Determination by HUD that the proposed planning activities are 
eligible.
    (5) Determination by HUD that the submission requirements in 
paragraph (h) of this section have been satisfied.
    (g) Qualifying factors. HUD will make funding decisions on qualified 
applications on the basis of the factors listed below, in the order of 
such applications received, while program funds remain available. HUD 
will also request and consider advise from DoD's Office of Economic 
Assistance concerning the relative merits of each application.
    (1) The adequacy of the applicant's initial assessment of actual or 
probable impacts on the community and the surrounding area;
    (2) The adequacy and appropriateness of the start-up planning 
envisioned by the applicant in response to the impacts;
    (3) The type, extent, and adequacy of coordination that the 
applicant has achieved, or plans to achieve, in order to undertake 
planning for community adjustment and economic diversification.
    (4) The cost-effectiveness of the proposed budget to carry out the 
planning work envisioned by the applicant;
    (5) The capability of the organization the applicant proposes to do 
the planning;
    (6) The credentials and experience of the key staff the applicant 
proposes to do the planning;
    (7) The presence of significant private sector impact, as measured 
by the extent to which the DoD-generated impact is projected to decrease 
or increase the employment base by 10% or more;

[[Page 50]]

    (8) The presence of significant public sector impact, as measured by 
the extent to which the DoD-generated impact is projected to decrease or 
increase the applicant's capital and operating budgets for the next 
fiscal year by 10% or more;
    (9) The degree of urgency, to the extent that a suddenly announced 
action, e.g. a plant closing, is officially scheduled to occur within a 
year of the date of application.
    (h) Submission requirements. Applicants may submit applications at 
any time to: Director, Office of Technical Assistance, room 7214, 451 
Seventh Street, SW., Washington, DC 20410. Each application (an original 
and three copies) shall include the following:
    (1) The Standard Form SF-424 as a face sheet, signed and dated by a 
person authorized to represent and contractually or otherwise commit the 
applicant;
    (2) A concise title and brief abstract of the proposed planning 
work, including the total cost;
    (3) A narrative that:
    (i) Documents one or more of the triggering events described in 
paragraph (a)(2) of this section that qualifies the applicant to apply 
for planning assistance for community adjustments and economic 
diversification;
    (ii) Provides an initial assessment of actual or probable impacts on 
the applicant community and the surrounding area;
    (iii) Provides an initial assessment of the type and extent of 
start-up planning envisioned by the applicant in response to the DoD-
generated impact; and
    (iv) Describes the measures by which the applicant has already 
coordinated, or plans to coordinate, with the DoD Office of Economic 
Assistance, the Economic Development Administration of the Department of 
Commerce, the Department of Labor, any military department, or any other 
appropriate Federal agency; appropriate State agencies, specifically 
including the agency administering the Small Cities CDBG Program; 
appropriate State-designated enterprise zones; appropriate Federal 
empowerment zones and enterprise communities, when selected and 
announced; appropriate other units of general local government in the 
nonentitlement area; appropriate businesses, corporations, and defense 
facilities concerned with impacts on the applicant community; and 
homeless nonprofit organizations, with respect to title V of the Stewart 
B. McKinney Act (42 U.S.C. 11411-11412), requiring the Federal property 
be considered for use in assisting the homeless.
    (4) A Statement of Work describing the specific project tasks 
proposed to be undertaken in order to plan for community adjustment and 
economic diversification activities;
    (5) A proposed budget showing the estimated costs and person-days of 
effort for each task, by cost categories, with supporting documentation 
of costs and a justification of the person-days of effort;
    (6) A description of the qualifications of the proposed technical 
staff, including their names and resumes;
    (7) A work plan that describes the schedule for accomplishing the 
tasks described in the Statement of Work, the time needed to do each 
task, and the elapsed time needed for all the tasks; and
    (8) Other materials, as prescribed in the application kit; these 
materials will include required certifications dealing with: Drug-Free 
Workplace Requirements; Disclosure Regarding Payments to Influence 
Certain Federal Transactions; and Prohibition Regarding Excessive Force.
    (i) Approval procedures--(1) Acceptance. HUD's acceptance of an 
application meeting the threshold requirements of paragraph (f) does not 
assure a commitment to provide funding or to provide the full amount 
requested. HUD may elect to negotiate both proposed tasks and budgets in 
order to promote more cost-effective planning.
    (2) Notification. HUD will provide notification about whether a 
project will be funded, rejected, or held for further consideration by 
HUD and DoD.
    (3) Form of award. HUD will award funds in the form of grants.
    (4) Administration. Project administration will be governed by the 
terms of individual awards and by the following provisions of this part:
    (i) Subpart A, Sec. 570.5;

[[Page 51]]

    (ii) Subpart E, Secs. 570.400(d), (e), (f), and (g);
    (iii) Subpart J, Secs. 570.500(c), 570.501, 570.502, 570.503, and 
570.509;
    (iv) Subpart K, Secs. 570.601, 570.602, 570.609, 570.610, and 
570.611.

The environmental review requirements of 24 CFR part 58 do not apply.

(Approved by the Office of Management and Budget under control number 
2535-0084)

[59 FR 15016, Mar. 30, 1994]



Sec. 570.402  Technical assistance awards.

    (a) General. (1) The purpose of the Community Development Technical 
Assistance Program is to increase the effectiveness with which States, 
units of general local government, and Indian tribes plan, develop, and 
administer assistance under title I and section 810 of the Act. Title I 
programs are the Entitlement Program (24 CFR part 570, subpart D); the 
section 108 Loan Guarantee Program (24 CFR part 570, subpart M); the 
Urban Development Action Grant Program (24 CFR part 570, subpart G); the 
HUD-administered Small Cities Program (24 CFR part 570, subpart F); the 
State-administered Program for Non-Entitlement Communities (24 CFR part 
570, subpart I); the grants for Indian Tribes program (24 CFR part 571); 
and the Special Purpose Grants for Insular Areas, Community Development 
Work Study and Historically Black Colleges and Universities (24 CFR part 
570, subpart E).
    (2) Funding under this section is awarded for the provision of 
technical expertise in planning, managing or carrying out such programs 
including the activities being or to be assisted thereunder and other 
actions being or to be undertaken for the purpose of the program, such 
as increasing the effectiveness of public service and other activities 
in addressing identified needs, meeting applicable program requirements 
(e.g., citizen participation, nondiscrimination, 2 CFR part 200, 
increasing program management or capacity building skills, attracting 
business or industry to CDBG assisted economic development sites or 
projects, assisting eligible CDBG subrecipients such as neighborhood 
nonprofits or small cities in how to obtain CDBG funding from cities and 
States. The provision of technical expertise in other areas which may 
have some tangential benefit or effect on a program is insufficient to 
qualify for funding.
    (3) Awards may be made pursuant to HUD solicitations for assistance 
applications or procurement contract proposals issued in the form of a 
publicly available document which invites the submission of applications 
or proposals within a prescribed period of time. HUD may also enter into 
agreements with other Federal agencies for awarding the technical 
assistance funds:
    (i) Where the Secretary determines that such funding procedures will 
achieve a particular technical assistance objective more effectively and 
the criteria for making the awards will be consistent with this section, 
or
    (ii) The transfer of funds to the other Federal agency for use under 
the terms of the agreement is specifically authorized by law. The 
Department will not accept or fund unsolicited proposals.
    (b) Definitions. (1) Areawide planning organization (APO) means an 
organization authorized by law or local agreement to undertake planning 
and other activities for a metropolitan or non-metropolitan area.
    (2) Technical assistance means the facilitating of skills and 
knowledge in planning, developing and administering activities under 
title I and section 810 of the Act in entities that may need but do not 
possess such skills and knowledge, and includes assessing programs and 
activities under title I.
    (c) Eligible applicants. Eligible applicants for award of technical 
assistance funding are:
    (1) States, units of general local government, APOs, and Indian 
Tribes; and
    (2) Public and private non-profit or for-profit groups, including 
educational institutions, qualified to provide technical assistance to 
assist such governmental units to carry out the title I or Urban 
Homesteading programs. An applicant group must be designated as a 
technical assistance provider to a unit of government's title I program 
or Urban Homesteading program by the chief executive officer of each 
unit to be assisted, unless the assistance is limited to conferences/
workshops attended by more than one unit of government.

[[Page 52]]

    (d) Eligible activities. Activities eligible for technical 
assistance funding include:
    (1) The provision of technical or advisory services;
    (2) The design and operation of training projects, such as 
workshops, seminars, or conferences;
    (3) The development and distribution of technical materials and 
information; and
    (4) Other methods of demonstrating and making available skills, 
information and knowledge to assist States, units of general local 
government, or Indian Tribes in planning, developing, administering or 
assessing assistance under title I and Urban Homesteading programs in 
which they are participating or seeking to participate.
    (e) Ineligible activities. Activities for which costs are ineligible 
under this section include:
    (1) In the case of technical assistance for States, the cost of 
carrying out the administration of the State CDBG program for non-
entitlement communities;
    (2) The cost of carrying out the activities authorized under the 
title I and Urban Homesteading programs, such as the provision of public 
services, construction, rehabilitation, planning and administration, for 
which the technical assistance is to be provided;
    (3) The cost of acquiring or developing the specialized skills or 
knowledge to be provided by a group funded under this section;
    (4) Research activities;
    (5) The cost of identifying units of governments needing assistance 
(except that the cost of selecting recipients of technical assistance 
under the provisions of paragraph (k) is eligible); or
    (6) Activities designed primarily to benefit HUD, or to assist HUD 
in carrying out the Department's responsibilities; such as research, 
policy analysis of proposed legislation, training or travel of HUD 
staff, or development and review of reports to the Congress.
    (f) Criteria for competitive selection. In determining whether to 
fund competitive applications or proposals under this section, the 
Department will use the following criteria:
    (1) For solicited assistance applications. The Department will use 
two types of criteria for reviewing and selecting competitive assistance 
applications solicited by HUD:
    (i) Evaluation criteria: These criteria will be used to rank 
applications according to weights which may vary with each competition:
    (A) Probable effectiveness of the application in meeting needs of 
localities and accomplishing project objectives;
    (B) Soundness and cost-effectiveness of the proposed approach;
    (C) Capacity of the applicant to carry out the proposed activities 
in a timely and effective fashion;
    (D) The extent to which the results may be transferable or 
applicable to other title I or Urban Homesteading program participants.
    (ii) Program policy criteria: These factors may be used by the 
selecting official to select a range of projects that would best serve 
program objectives for a particular competition:
    (A) Geographic distribution;
    (B) Diversity of types and sizes of applicant entities; and
    (C) Diversity of methods, approaches, or kinds of projects.

The Department will publish a Notice of Fund Availability (NOFA) in the 
Federal Register for each competition indicating the objective of the 
technical assistance, the amount of funding available, the application 
procedures, including the eligible applicants and activities to be 
funded, any special conditions applicable to the solicitation, including 
any requirements for a matching share or for commitments for CDBG or 
other title I funding to carry out eligible activities for which the 
technical assistance is to be provided, the maximum points to be awarded 
each evaluation criterion for the purpose of ranking applications, and 
any special factors to be considered in assigning the points to each 
evaluation criterion. The Notice will also indicate which program policy 
factors will be used, the impact of those factors on the selection 
process, the justification for their use and, if appropriate, the 
relative priority of each program policy factor.
    (2) For competitive procurement contract bids/proposals. The 
Department's

[[Page 53]]

criteria for review and selection of solicited bids/proposals for 
procurement contracts will be described in its public announcement of 
the availability of an Invitation for Bids (IFB) or a Request for 
Proposals (RFP). The public notice, solicitation and award of 
procurement contracts, when used to acquire technical assistance, shall 
be procured in accordance with the Federal Acquisition Regulation (48 
CFR chapter 1) and the HUD Acquisition Regulation (48 CFR chapter 24).
    (g) Submission procedures. Solicited assistance applications shall 
be submitted in accordance with the time and place and content 
requirements described in the Department's NOFA. Solicited bids/
proposals for procurement contracts shall be submitted in accordance 
with the requirements in the IFB or RFP.
    (h) Approval procedures--(1) Acceptance. HUD's acceptance of an 
application or proposal for review does not imply a commitment to 
provide funding.
    (2) Notification. HUD will provide notification of whether a project 
will be funded or rejected.
    (3) Form of award. (i) HUD will award technical assistance funds as 
a grant, cooperative agreement or procurement contract, consistent with 
this section, the Federal Grant and Cooperative Agreement Act of 1977, 
31 U.S.C. 6301-6308, the HUD Acquisition Regulation, and the Federal 
Acquisition Regulation.
    (ii) When HUD's primary purpose is the transfer of technical 
assistance to assist the recipients in support of the title I or Section 
810 programs, an assistance instrument (grant or cooperative agreement) 
will be used. A grant instrument will be used when substantial Federal 
involvement is not anticipated. A cooperative agreement will be used 
when substantial Federal involvement is anticipated. When a cooperative 
agreement is selected, the agreement will specify the nature of HUD's 
anticipated involvement in the project.
    (iii) A contract will be used when HUD's primary purpose is to 
obtain a provider of technical assistance to act on the Department's 
behalf. In such cases the Department will define the specific tasks to 
be performed. However, nothing in this section shall preclude the 
Department from awarding a procurement contract in any other case when 
it is determined to be in the Department's best interests.
    (4) Administration. Project administration will be governed by the 
terms of individual awards and relevant regulations. As a general rule, 
proposals will be funded to operate for one to two years, and periodic 
and final reports will be required.
    (i) Environmental and intergovernmental review. The requirements for 
Environmental Reviews and Intergovernmental Reviews do not apply to 
technical assistance awards.
    (j) Selection of recipients of technical assistance. Where under the 
terms of the funding award the recipient of the funding is to select the 
recipients of the technical assistance to be provided, the funding 
recipient shall publish, and publicly make available to potential 
technical assistance recipients, the availability of such assistance and 
the specific criteria to be used for the selection of the recipients to 
be assisted. Selected recipients must be entities participating or 
planning to participate in the title I or Urban Homesteading programs or 
activities for which the technical assistance is to be provided.

(Approved by the Office of Management and Budget under control numbers 
2535-0085 and 2535-0084)

[56 FR 41938, Aug. 26, 1991, as amended at 80 FR 75937, Dec. 7, 2015]



Sec. 570.403  New Communities.

    The regulations for New Communities grants in this section, that 
were effective immediately before April 19, 1996, will continue to 
govern the rights and obligations of recipients and HUD with respect to 
grants under the New Communities program.

[61 FR 11476, Mar. 20, 1996]



Sec. 570.404  Historically Black colleges and universities program.

    (a) General. Grants under this section will be awarded to 
historically Black colleges and universities to expand their role and 
effectiveness in addressing community development needs, including 
neighborhood revitalization,

[[Page 54]]

housing and economic development in their localities, consistent with 
the purposes of title I of the Housing and Community Development Act of 
1974.
    (b) Eligible applicants. Only historically Black colleges and 
universities (as determined by the Department of Education in accordance 
with that Department's responsibilities under Executive Order 12677, 
dated April 28, 1989) are eligible to submit applications.
    (c) Eligible activities. Activities that may be funded under this 
section are those eligible under Secs. 570.201 through 570.207, provided 
that any activity which is required by State or local law to be carried 
out by a governmental entity may not be funded under this section. 
Notwithstanding the provisions of Secs. 570.200(g), grants under this 
section are not subject to the 20 percent limitation on planning and 
program administration costs, as defined in Secs. 570.205 and 570.206, 
respectively.
    (d) Applications. Applications will only be accepted from eligible 
applicants in response to a Request for Applications (RFA) which will be 
issued either concurrently with or after the publication of a Notice of 
Funding Availability (NOFA) published in the Federal Register. The NOFA 
will describe any special objectives sought to be achieved by the 
funding to be provided, including any limitations on the type of 
activities to be funded to achieve the objectives, points to be awarded 
to each of the selection criteria listed in paragraph (e) of this 
section, and any special factors to be evaluated in assigning points 
under the selection factors to achieve the stated objectives. The NOFA 
will also state the deadline for the submission of applications, the 
total funding available for the competition, and the maximum amount of 
individual grants. The NOFA will include further information and 
instructions for the submission of acceptable applications to HUD.
    (e) Selection criteria. Each application submitted under this 
section will be evaluated by HUD using the following criteria:
    (1) The extent to which the applicant addresses the objectives 
published in the NOFA and the RFA.
    (2) The extent to which the applicant demonstrates to HUD that the 
proposed activities will have a substantial impact in achieving the 
stated objectives.
    (3) The special needs of the applicant or locality to be met in 
carrying out the proposed activities, particularly with respect to 
benefiting low- and moderate-income persons.
    (4) The feasibility of the proposed activities, i.e., their 
technical and financial feasibility, for achieving the stated 
objectives, including local support for activities proposed to be 
carried out in the locality and any matching funds proposed to be 
provided from other sources.
    (5) The capability of the applicant to carry out satisfactorily the 
proposed activities in a timely fashion, including satisfactory 
performance in carrying out any previous HUD-assisted projects or 
activities.
    (6) In the case of proposals/projects of approximately equal merit, 
HUD retains the right to exercise discretion in selecting projects in a 
manner that would best serve the program objectives, with consideration 
given to the needs of localities, types of activities proposed, an 
equitable geographical distribution, and program balance.
    (f) Certifications. (1) Certifications required to be submitted by 
applicants shall be as prescribed in the RFA packages.
    (2) In the absence of independent evidence which tends to challenge 
in a substantial manner the certifications made by the applicant, the 
required certifications will be accepted by HUD. If independent evidence 
is available to HUD, however, HUD may require further information or 
assurances to be submitted in order to determine whether the applicant's 
certifications are satisfactory.
    (g) Multiyear funding commitments. (1) HUD may make funding 
commitments of up to five years, subject to the availability of 
appropriations. In determining the number of years for which a 
commitment will be made, HUD will consider the nature of the activities 
proposed, the capability of the recipient to carry out the proposed 
activities, and year-by-year funding requirements.
    (2) Awards will be made on the basis of a 12-month period of 
performance.

[[Page 55]]

Once a recipient has been selected for a multi-year award, that 
recipient would not be required to compete in a competition for the 
subsequent funding years covered by the multi-year funding commitment. 
Recipients performing satisfactorily will be invited to submit 
applications for subsequent funding years in accordance with 
requirements outlined in the Notice of Funding Availability and Request 
for Grant Application. Subject to the availability of appropriations, 
subsequent-year funding will be determined by the following:
    (i) The recipient has submitted all reports required for the 
previous year or years in a timely, complete and satisfactory manner in 
accordance with the terms and conditions of the grant.
    (ii) The recipient has submitted sufficient evidence to demonstrate 
successful completion of the tasks and deliverables of the grant. A 
determination of satisfactory performance will be made by HUD based upon 
evidence of task completions provided by the recipient, along with data 
from client feedback and site evaluations.
    (iii) The recipient has submitted the next annual application.
    (iv) The subsequent year's application is consistent with that 
described in the original application.
    (3) Recipients participating in multi-year funding projects are not 
eligible to apply for additional grants for the same project or activity 
subject area for which they are receiving funds. Recipients are, 
however, eligible to compete for grants for other project or activity 
areas.
    (h) Selection and notification. The HUD decision to approve, 
disapprove or conditionally approve an application shall be communicated 
in writing to the applicant.
    (i) Environmental and intergovernmental review. The requirements for 
Intergovernmental Reviews do not apply to HBCU awards. HUD will conduct 
an environmental review in accordance with 24 CFR part 50 before giving 
its approval to a proposal.

[56 FR 18968, Apr. 24, 1991]



Sec. 570.405  The insular areas.

    (a) Eligible applicants. Eligible applicants are Guam, the Virgin 
Islands, American Samoa, the Trust Territory of the Pacific Islands, and 
the Commonwealth of the Northern Mariana Islands.
    (b) Threshold requirements. HUD shall review each grantee's progress 
on outstanding grants made under this section based on the grantee's 
performance report, the timeliness of close-outs and compliance with 
fund management requirements and pertinent regulations, taking into 
consideration the size of the grant and the degree and complexity of the 
program. If HUD determines upon such review that the applicant does not 
have the capacity effectively to administer a new grant, or a portion of 
a new grant, in addition to grants currently under administration, the 
applicant shall not be invited to submit an application for the current 
year's funding.
    (c) Previous audit findings and outstanding monetary obligations. 
HUD shall not accept for review an application from an applicant that 
has either an outstanding audit finding for any HUD program, or an 
outstanding monetary obligation to HUD that is in arrears, or for which 
a repayment schedule has not been established and agreed to. The Field 
Office manager may waive this restriction if he or she finds that the 
applicant has made a good faith effort to clear the audit. In no 
instance, however, shall a waiver be provided when funds are due HUD, 
unless a satisfactory arrangement for repayment of the debt has been 
made and payments are current.
    (d) Criteria for funding. The Secretary shall establish, for each 
fiscal year, an amount for which eligible applicants may apply. Grant 
amounts will be based on population of the applicant and its performance 
in previous years. In determining performance, HUD will consider program 
achievements and the applicant's effectiveness in using program funds. 
Effectiveness in using program funds shall be measured by reviewing 
audit, monitoring and performance reports.
    (e) Application and performance reporting. Application and 
performance reporting requirements are as follows:
    (1) Applicants must submit applications within 90 days of the 
notification of the grant amount from HUD.

[[Page 56]]

    (2) Applicants shall prepare and publish or post a proposed 
application in accordance with the citizen participation requirements of 
paragraph (h) of this section.
    (3) Applicants shall submit to HUD a final application containing 
its community development objectives and activities. This application 
shall be submitted to the appropriate HUD office, together with the 
required certifications, in a form prescribed by HUD.
    (4) Grant recipients must submit to HUD an annual performance report 
on progress achieved on previously funded grants. Grant recipients must 
submit the report at a time and in a format determined by HUD. The 
report should be made available to citizens in accordance with the 
requirements of paragraph (h)(1)(iv) of this section.
    (f) Costs incurred by the applicant. (1) Notwithstanding any other 
provision of this part, HUD will not reimburse or recognize any costs 
incurred by an applicant before submission of the application to HUD.
    (2) Normally, HUD will not reimburse or recognize costs incurred 
before HUD approval of the application for funding. However, under 
unusual circumstances, the Field office manager may consider and 
conditionally approve written requests to recognize and reimburse costs 
that will be incurred after submission of the application but before it 
is approved where failure to do so would impose undue or unreasonable 
hardship on the applicant. Conditional approvals will be made only 
before the costs are incurred and where the conditions for release of 
funds have been met in accordance with 24 CFR 58.22, and with the 
understanding that HUD has no obligation whatsoever to approve the 
application or to reimburse the applicant should the application be 
disapproved.
    (g) Criteria for conditional approval. HUD may approve a grant 
subject to specified conditions. In any such case, the obligation and 
utilization of funds may be restricted. The reasons for the conditional 
approval and the actions necessary to remove the conditions shall be 
specified. Failure of the applicant to satisfy the conditions may result 
in a termination of the grant. A conditional approval may be granted 
under any of the following circumstances:
    (1) When local environmental reviews under 24 CFR part 58 have not 
yet been completed;
    (2) To ensure that actual provision of other resources required to 
complete the proposed activities will be available within a reasonable 
period of time;
    (3) To ensure that a project can be completed within its estimated 
costs;
    (4) Where the grantee is required to satisfy an outstanding debt due 
to HUD under a payment plan executed between the grantee and the 
Department;
    (5) Pending resolution of problems related to specific projects or 
the capability of the grantee to obtain resources needed to carry out, 
operate or maintain the project; or
    (6) Pending approval of site and neighborhood standards for proposed 
housing projects.
    (h) Citizen participation. (1) The applicant shall provide for 
appropriate citizen participation in the application and amendment 
process. The applicant must, at least, do each of the following:
    (i) Furnish citizens with information concerning the amount of funds 
available for community development and housing activities and the range 
of activities that may be undertaken, including the estimated amount 
proposed to be used for activities that will benefit persons of low and 
moderate income, and the plans of the grantee for minimizing 
displacement of persons as a result of activities assisted with such 
funds and to assist persons actually displaced;
    (ii) Hold one or more public hearings (scheduled at convenient times 
and places) to obtain the views of citizens on community development and 
housing needs;
    (iii) Develop and publish or post the community development 
statement in such a manner as to afford affected citizens an opportunity 
to examine its contents and to submit comments;
    (iv) Afford citizens an opportunity to review and comment on the 
applicant's performance under any community development block grant.
    (2) Before submitting the application to HUD, the applicant shall 
certify that it has:

[[Page 57]]

    (i) Met the requirements of paragraph (h)(1) of this section;
    (ii) Considered any comments and views expressed by citizens; and
    (iii) If appropriate, modified the application accordingly and made 
the modified application available to citizens.

[50 FR 37526, Sept. 16, 1985, as amended at 60 FR 56914, Nov. 9, 1995; 
61 FR 32269, June 21, 1996]

    Effective Date Note: At 61 FR 32269, June 21, 1996, 
Sec. 570.405(e)(4) was revised. This section contains information 
collection and recordkeeping requirements and will not become effective 
until approval has been given by the Office of Management and Budget.



Sec. 570.406  Formula miscalculation grants.

    (a) General. Grants under this section will be made to States and 
units of general local government determined by the Secretary to have 
received insufficient amounts under section 106 of the Act as a result 
of a miscalculation of its share of funds under such section.
    (b) Application. Since the grant is to correct a technical error in 
the formula amount which should have been awarded under section 106, no 
application is required.
    (c) Use of funds. The use of funds shall be subject to the 
requirements, certifications and Final Statement otherwise applicable to 
the grantee's section 106 grant funds provided for the fiscal year in 
which the grant under this section is made.
    (d) Unavailability of funds. If sufficient funds are not available 
to make the grant in the fiscal year in which the Secretary makes the 
determination required in paragraph (a) of this section, the grant will 
be made, subject to the availability of appropriations for this subpart, 
in the next fiscal year.

[56 FR 41940, Aug. 26, 1991]



Sec. 570.410  Special Projects Program.

    (a) Program objectives. The Community Development Special Projects 
Program enables HUD to award grants to States and units of general local 
government, subject to availability of funds, for special projects that 
address community development activities or techniques consistent with 
the purposes of title I of the Housing and Community Development Act of 
1974, as amended.
    (b) Eligible applicants. Only States and units of general local 
government (as defined in Sec. 570.3) are eligible to submit proposals 
or applications for Special Projects grants. Proposals or applications 
may be submitted by eligible applicants on behalf of themselves, on 
behalf of other eligible applicants, or jointly by more than one 
eligible applicant.
    (c) Eligible activities. (1) Project activities that may be funded 
under this section are those eligible under 24 CFR part 570--Community 
Development Block Grants, subpart C--Eligible Activities. No more than 
twenty (20) percent of the funds awarded under this section may be used 
for overall program administration or planning activities eligible under 
Secs. 570.205 and 570.206.
    (2) The amount of funds awarded to a unit of general local 
government under this section that may be used for public service 
activities is limited. The applicant may use whichever of the following 
methods of calculation yields the highest amount:
    (i) Fifteen percent of the special projects grant;
    (ii) An amount equal to 15 percent of the sum of special project 
grant funds plus grant funds received for the same origin year under the 
Entitlement or State program, less the amount of the Entitlement or 
State program grant funds which will be used for other public service 
activities; or
    (iii) In the case of an applicant that is an Entitlement grantee 
subject to the exception in Sec. 570.201(e)(2), an amount equal to the 
amount of the Entitlement grant funds received for the same origin year 
that may be used for public service activities, less the amount of the 
Entitlement grant funds which will be used for other public service 
activities.
    (d) Proposals. Eligible applicants may submit unsolicited proposals. 
HUD may ask proposers to submit additional information if necessary for 
evaluation. There is no HUD commitment to fund any unsolicited proposal 
regardless of its merit. If HUD elects to fund a proposal, it will 
request that the proposer submit a formal application.

[[Page 58]]

    (1) Three (3) copies of a proposal must be sent to the address 
stated in (3), below. Each proposal submitted pursuant to this section 
shall be evaluated by HUD using the following criteria:
    (i) The extent to which the proposal satisfies purposes of this 
title and addresses a special community development need.
    (ii) The eligibility of proposed activities.
    (iii) The feasibility of the project; i.e., its technical and 
financial feasibility for achieving the goals stated in the proposal.
    (iv) The capacity of the proposer to carry out satisfactorily the 
proposed project activities.
    (2) If the proposal is submitted jointly by, or on behalf of, more 
than one eligible applicant, the proposal must:
    (i) Contain a cooperation agreement signed by the Chief Executive 
Officer of each participating jurisdiction which specifies concurrence 
with the purpose and intent of the proposal and intent to comply with 
grant requirements;
    (ii) Address problems faced by all jurisdictions listed in the 
proposal; and,
    (iii) Be submitted by the lead jurisdiction. The lead jurisdiction 
shall be responsible for overall coordination and administration of the 
project.
    (3) Unsolicited proposals may be submitted any time during the year. 
However, if there are no funds available for such proposals, they will 
be returned without review. Proposals shall contain a Standard Form 424 
signed by the Chief Executive Officer of the State or unit of general 
local government. They shall be sent to: Department of Housing and Urban 
Development, Office of Community Planning and Development, 451 Seventh 
Street, SW., Washington, DC 20410, Attention: Director, Office of 
Program Policy Development, CPP.
    (e) Applications. Applications are accepted only from eligible 
applicants in response to letters of solicitations, or to competition 
announcements published in Notices in the Federal Register. Submission 
requirements and criteria to be used by HUD to evaluate solicited 
applications and instructions regarding their submission shall be stated 
in each Notice or letter.
    (f) Certifications. Applications shall contain the certifications 
required by 24 CFR 570.303, except that regarding citizen participation: 
The applicant must certify that citizens likely to be affected by the 
project, particularly low- and moderate-income persons, have been 
provided an opportunity to comment on the proposal or application. If 
the application is submitted jointly, or on behalf of more than one 
jurisdiction, each jurisdiction shall submit the required 
certifications.
    (g) Selection and notification. The HUD decision to approve, 
disapprove or conditionally approve a proposal or application shall be 
communicated in writing to the applicant.

[47 FR 30054, July 12, 1982, as amended at 54 FR 31672, Aug. 1, 1989; 55 
FR 29309, July 18, 1990; 56 FR 56127, Oct. 31, 1991; 80 FR 69870, Nov. 
12, 2015]



Sec. 570.411  Joint Community Development Program.

    (a) General. Grants under this section will be awarded to 
institutions of higher education or to States and local governments 
applying jointly with institutions of higher education. Institutions of 
higher education must demonstrate the capacity to carry out activities 
under title I of the Housing and Community Development Act of 1974. For 
ease of reference, this program may be called the Joint CD Program.
    (b) Definitions.
    Demonstrated capacity to carry out eligible activities under title I 
means recent satisfactory activity by the institution of higher 
education's staff designated to work on the program, including 
subcontractors and consultants firmly committed to work on the proposed 
activities, in title I programs or similar programs without the need for 
oversight by a State or unit of general local government.
    Institution of higher education means a college or university 
granting 4-year degrees and accredited by a national or regional 
accrediting agency recognized by the U.S. Department of Education.
    (c) Eligible applicants. Institutions of higher education or States 
and units of general local government jointly with institutions of 
higher education may apply. Institutions of higher education with 
demonstrated capacity to carry

[[Page 59]]

out eligible activities under title I may apply on their own, without 
the joint participation of a State or unit of general local government. 
States or unit of general local governments must file jointly with an 
institution of higher education. For these approved joint applications, 
the grant will be made to the State or unit of general local government 
and the institution of higher education jointly. If an eligible 
applicant is an institution of higher education, it will not be funded 
more than once for the same kinds of activities. These grantees may not 
receive funding under a subsequent NOFA if it has the same program 
objectives as the one under which the grantee previously received 
funding. However, a State or unit of general local government is 
eligible to apply if it files jointly with a different institution of 
higher education in each NOFA cycle. HUD may further limit the type of 
eligible applicant to be funded. Any such limitations will be contained 
in the Notice of Funding Availability described below in paragraph (h) 
of this section.
    (d) Role of participants in joint applications. An institution of 
higher education and a State or unit of general local government may 
carry out eligible activities approved in joint applications. Where 
there are joint applicants, the grant will be made to both and both will 
be responsible for oversight, compliance, and performance. The 
application will have to clearly delineate the role of each applicant in 
the joint application. Any funding sanctions or other remedial actions 
by HUD for noncompliance or nonperformance, whether by the State or unit 
of general local government or by the institution of higher education, 
shall be taken against both grantees.
    (e) Eligible activities. Activities that may be funded under this 
section are those eligible under 24 CFR part 570--Community Development 
Block Grants, subpart C--Eligible Activities. These activities may be 
designed to assist residents of colonias, as defined in section 916(d) 
of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 5306 
note), to improve living conditions and standards within colonias. HUD 
may limit the activities to be funded. Any such limitations will be 
contained in the Notice of Funding Availability described in paragraph 
(h) of this section.
    (f) Applications. Applications will only be accepted from eligible 
applicants in response to a publication of a Notice of Funding 
Availability (NOFA) published by HUD in the Federal Register.
    (g) Local approval. (1) Where an institution of higher education is 
the applicant, each unit of general local government that is an 
entitlement jurisdiction where an activity is to take place must approve 
the activity and certify that the activity is consistent with its 
Consolidated Plan.
    (2) Where a State is the joint applicant and it proposes to carry 
out an activity within the jurisdiction of one or more units of general 
local government, then each such unit must approve the activity and 
state that the activity is consistent with its Consolidated Plan.
    (3) These approvals and findings must accompany each application and 
may take the form of a letter by the chief executive officer of each 
unit of general local government affected or a resolution of the 
legislative body of each such unit of general local government.
    (h) NOFA contents. The NOFA will describe any special objectives 
sought to be achieved by the funding to be provided, including any 
limitations on the type of activities to be funded to achieve the 
objectives, any limitations on the type of eligible applicants, and 
points to be awarded to each of the selection criteria and any special 
factors to be evaluated in assigning points under the selection criteria 
to achieve the stated objectives. The NOFA will also state the deadline 
for the submission of applications, the total funding available for the 
competition, the period of performance and the maximum and minimum 
amount of individual grants. The NOFA will also state which of the 
various possible levels of competition HUD will use: national and/or 
regional or entitlement areas vs. non-entitlement areas; and States or 
units

[[Page 60]]

of general local government vs. institutions of higher education vs. 
institutions of higher education with a demonstrated capacity. The NOFA 
will include further information and instructions for the submission of 
acceptable applications to HUD.
    (i) Selection criteria. Each application submitted under this 
section will be evaluated by HUD using the following criteria:
    (1) The extent to which the applicant addresses the objectives 
published in the NOFA and demonstrates how the proposed activities will 
have a substantial impact in achieving the objectives.
    (2) The extent of the needs to be addressed by the proposed 
activities, particularly with respect to benefiting low- and moderate-
income persons and residents of colonias, where applicable.
    (3) The feasibility of the proposed activities, i.e., their 
technical and financial feasibility, for achieving the stated 
objectives.
    (4) The capability of the applicant to carry out satisfactorily the 
proposed activities in a timely fashion, including satisfactory 
performance in carrying out any previous HUD-assisted projects or 
activities.
    (5) The extent of commitment to fair housing and equal opportunity, 
as indicated by such factors as previous HUD monitoring/compliance 
activity, actions to promote minority- and women-owned business 
enterprise, affirmatively furthering fair housing issues, and 
nondiscriminatory delivery of services.
    (j) Selection discretion. HUD retains the right to exercise 
discretion in selecting projects in a manner that would best serve the 
program objectives, with consideration given to the needs of States and 
units of general local government and institutions of higher education, 
types of activities proposed, an equitable geographical distribution, 
and program balance. The NOFA will state whether HUD will use this 
discretion in any specific competition.
    (k) Certifications. (1) Certifications, including those indicating 
that applicants have adhered to all civil rights requirements under 
subpart K of this part and the Americans with Disabilities Act of 1990, 
required to be submitted by applicants shall be as prescribed in the 
NOFA.
    (2) In the absence of independent evidence which tends to challenge 
in a substantial manner the certifications made by the applicant, the 
required certifications will be accepted by HUD. However, if independent 
evidence is available, HUD may require further information or assurances 
to be submitted in order to determine whether the applicant's 
certifications are satisfactory.
    (l) Consolidated plan. An applicant that proposes any housing 
activities as part of its application will be required to submit a 
certification that these activities are consistent with the Consolidated 
Plan of the jurisdiction to be served.
    (m) Citizen participation. The citizen participation requirements of 
Secs. 570.301, 570.431, 570.485(c) and 570.486(a) are modified to 
require the following: The applicant must certify that citizens likely 
to be affected by the project regardless of race, color, creed, sex, 
national origin, familial status, or handicap, particularly low- and 
moderate-income persons, have been provided an opportunity to comment on 
the proposal or application.
    (n) Environmental and Intergovernmental Review. The requirements for 
Intergovernmental Reviews do not apply to these awards. When required, 
an environmental review in accordance with 24 CFR part 58 must be 
carried out by the State or unit of general local government when it is 
the applicant. HUD will conduct any required environmental review when 
an institution of higher education is the applicant.

(Approved by the Office of Management and Budget under control number 
2535-0084)

[60 FR 15837, Mar. 27, 1995]



Sec. 570.415  Community Development Work Study Program.

    (a) Applicability and objectives. HUD makes grants under CDWSP to 
institutions of higher education, either directly or through areawide 
planning organizations or States, for the purpose of providing 
assistance to economically disadvantaged and minority students who 
participate in a work study program while enrolled in full-time graduate 
programs in community

[[Page 61]]

and economic development, community planning, and community management. 
The primary objectives of the program are to attract economically 
disadvantaged and minority students to careers in community and economic 
development, community planning, and community management, and to 
provide a cadre of well-qualified professionals to plan, implement and 
administer local community development programs.
    (b) Definitions. The following definitions apply to CDWSP:
    Applicant means an institution of higher education, a State, or an 
areawide planning organization that submits an application for 
assistance under CDWSP.
    Areawide planning organization (APO) means an organization 
authorized by law or by interlocal agreement to undertake planning and 
other activities for a metropolitan or nonmetropolitan area. For an 
organization operating in a nonmetropolitan area to be considered an 
APO, its jurisdiction must cover at least one county.
    CDWSP means the Community Development Work Study Program.
    Community building means community and economic development, 
community planning, community management, land use and housing 
activities.
    Community building academic program or academic program means a 
graduate degree program whose purpose and focus is to educate students 
in community building. ``Community building academic program'' or 
``academic program'' includes but is not limited to graduate degree 
programs in community and economic development, community planning, 
community management, public administration, public policy, urban 
economics, urban management, and urban planning. ``Community building 
academic program'' or ``academic program'' excludes social and 
humanistic fields such as law, economics (except for urban economics), 
education and history. ``Community building academic program'' or 
``academic program'' excludes joint degree programs except where both 
joint degree fields have the purpose and focus of educating students in 
community building.
    Economically disadvantaged and minority students means students who 
satisfy all applicable guidelines established at the participating 
institution of higher education to measure financial need for academic 
scholarship or loan assistance, including, but not limited to, students 
who are Black, American Indian/Alaskan Native, Hispanic, or Asian/
Pacific Island, and including students with disabilities.
    Institution of higher education means a public or private 
educational institution that offers a community building academic 
program and that is accredited by an accrediting agency or association 
recognized by the Secretary of Education under 34 CFR part 602.
    Recipient means an approved applicant that executes a grant 
agreement with HUD.
    Student means a student enrolled in an eligible full-time academic 
program. He/she must be a first-year student in a two-year graduate 
program. Students enrolled in Ph.D. programs are ineligible.
    Student with disabilities means a student who meets the definition 
of ``person with disabilities'' in the Americans with Disabilities Act 
of 1990.
    (c) Assistance provided--(1) Types of assistance available. HUD 
provides funding in the form of grants to recipients who make assistance 
available to eligible students. Grants are provided to cover the costs 
of student assistance and for an administrative allowance.
    (i) Student assistance. Grants are made to recipients to cover the 
costs of assistance provided to eligible students in the form of student 
stipends, tuition support, and additional support.
    (A) Student stipend. The amount of the student stipend is based upon 
the prevailing hourly rate for initial entry positions in community 
building and the number of hours worked by the student at the work 
placement assignment, except that the hourly rate used should be 
sufficiently high to allow a student to earn the full stipend without 
working over 20 hours per week during the school year and 40 hours per 
week during the summer. The amount of the stipend the student receives 
may not exceed the actual amount earned, up to $9,000 per year.

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    (B) Tuition support and additional support. The amount of support 
for tuition, fees, books, and travel related to the academic program, 
workplace assignment or conferences may not exceed actual costs incurred 
or $5,000 per year, whichever is higher. The conferences are limited to 
those dealing with community building, sponsored by professional 
organizations.
    (ii) Administrative allowance. HUD provides an allowance to 
recipients to cover the administrative costs of the program. The 
administrative allowance is $1,000 per year for each student 
participating in the program.
    (2) Number of students assisted. The minimum number of students that 
may be assisted is three students per participating institution of 
higher education. If an APO or State receives assistance for a program 
that is conducted by two or more institutions of higher education, each 
participating institution must have a minimum of three students in the 
program. The maximum number of students that may be assisted under CDWSP 
is five students per participating institution of higher education.
    (d) Recipient eligibility and responsibilities--(1) Recipient 
eligibility. (i) The following organizations are eligible to apply for 
assistance under the program:
    (A) Institutions of higher education. Institutions of higher 
education offering a community building academic program are eligible 
for assistance under CDWSP.
    (B) Areawide planning organizations and States. An APO or a State 
may apply for assistance for a program to be conducted by two or more 
institutions of higher education. Institutions participating in an APO 
program must be located within the particular area that is served by the 
APO and is identified by the State law or interlocal agreement creating 
the APO. Institutions of higher education participating in a State 
program must be located within the State.
    (ii) To be eligible in future funding competitions for CDWSP, 
recipients are required to maintain a 50-percent rate of graduation from 
a CDWSP-funded academic program.
    (iii) If an institution of higher education that submits an 
individual application is also included in the application of an APO or 
State, then the separate individual application of the institution of 
higher education will be disregarded. Additionally, if an institution of 
higher education is included in the application of both an APO and a 
State, then the references to the institution in the application of the 
State will be stricken. The State's application will then be ineligible 
if fewer than two institutions of higher education remain as 
participants in the State's application.
    (2) Recipient responsibilities. (i) The recipient is responsible for 
the administration of the program, for compliance with all program 
requirements, and for the coordination of program activities carried out 
by the work placement agencies and (if the recipient is an APO or 
State), by the participating institutions of higher education. The 
recipient must:
    (A) Recruit and select students for participation in CDWSP. The 
recipient shall establish recruitment procedures that identify 
economically disadvantaged and minority students pursuing careers in 
community building, and make such students aware of the availability of 
assistance opportunities. Students must be selected before the beginning 
of the semester for which funding has been provided.
    (B) Recruit and select work placement agencies, and negotiate and 
execute agreements covering each work placement assignment.
    (C) Refer participating students to work placement agencies and 
assist students in the selection of work placement assignments.
    (D) Assign sufficient staff to administer and supervise the program 
on a day-to-day basis, and, where the recipient is an APO or State, to 
monitor the activities of the work study coordinating committee.
    (E) Encourage participating students to obtain employment for a 
minimum of two years after graduation with a unit of State or local 
government, Indian tribe or nonprofit organization engaged in community 
building.

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    (F) Maintain records by racial and ethnic categories for each 
economically disadvantaged student enrolled in the CDWSP.
    (G) Keep records and make such reports as HUD may require.
    (H) Comply with all other applicable Federal requirements.
    (ii) If the recipient is an APO or State, the recipient must also:
    (A) Establish a committee to coordinate activities between program 
participants, to advise the recipient on policy matters, to assist the 
recipient in ranking and selection of participating students, and to 
review disputes concerning compliance with program agreements and 
performance. The committee shall be chaired by a representative of the 
recipient, and shall include representatives of the participating 
institutions of higher education, work placement agencies, students, and 
HUD.
    (B) Allocate the assistance awarded under the program to the 
participating institutions of higher education. APOs and States may not 
make fractional awards to institutions. (E.g., awards to institutions 
must assist a fixed number of students and not, for example, 6.5 
students.)
    (e) Institutions of higher education. Institutions of higher 
education participating in a program are responsible for providing its 
educational component. Where the recipient is an APO or State, the 
institution of higher education shall assist the APO or State in the 
administration and operation of the program. Responsibilities include 
assisting the recipient in the selection of students by determining the 
eligibility of students for the academic program, and by making the 
analysis of students under the financial need guidelines established by 
the institution. All institutions of higher education must comply with 
other applicable Federal requirements.
    (f) Work placement agencies eligibility and responsibilities--(1) 
Eligibility. To be eligible to participate in the CDWSP, the work 
placement agencies must be involved in community building and must be an 
agency of a State or unit of local government, an APO, an Indian tribe, 
or a nonprofit organization.
    (2) Responsibilities. Work placement agencies must:
    (i) Provide practical experience and training in community building.
    (ii) Consult with the institution of higher education (and the APO 
or State, where an APO or State is the recipient) to ensure that the 
student's work placement assignment provides the requisite experience 
and training to meet the required number of work hours specified in the 
student work placement agreement.
    (iii) Provide a sufficient number of work placement assignments to 
provide participating students with a wide choice of work experience.
    (iv) Require each student to devote 12-20 hours per week during the 
regular school year, or 35-40 hours a week during the summer, to the 
work placement assignment. Work placement agencies may provide 
flexibility in the work period, if such a schedule is consistent with 
the requirements of the student's academic program. However, a 
participating student may receive stipend payment only during the period 
that the student is placed with the work placement agency.
    (v) Comply with all other applicable Federal requirements.
    (vi) Maintain such records as HUD may require.
    (g) Student eligibility and responsibilities. Students apply 
directly to recipients receiving grants under CDWSP. Students shall be 
selected in accordance with the following eligibility requirements and 
selection procedures.
    (1) Eligibility. To be eligible for CDWSP, the student:
    (i) Must satisfy all applicable guidelines established at the 
participating institution of higher education to measure financial need 
for academic scholarship or loan assistance.
    (ii) Must be a full-time student enrolled in the first year of 
graduate study in a community building academic program at the 
participating institution of higher education. Individuals enrolled in 
doctoral programs are ineligible.
    (iii) Must demonstrate an ability to maintain a satisfactory level 
of performance in the community building academic program and in work 
placement assignments, and to comply with

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the professional standards set by the recipient and the work placement 
agencies.
    (iv) May not have previously participated in CDWSP.
    (v) Must provide appropriate written evidence that he or she is 
lawfully admitted for permanent residence in the United States, if the 
individual is not a citizen.
    (2) Selection. In selecting among eligible students, the recipient 
must consider the extent to which each student has demonstrated:
    (i) Financial need under the applicable financial need guidelines 
established at the institution of higher education;
    (ii) An interest in, and commitment to, a professional career in 
community building;
    (iii) The ability satisfactorily to complete academic and work 
placement responsibilities under CDWSP.
    (3) Student responsibilities. Participating students must:
    (i) Enroll in a two-year program. A student's academic and work 
placement responsibilities include: Full-time enrollment in an approved 
academic program; maintenance of a satisfactory level of performance in 
the community building academic program and in work placement 
assignments; and compliance with the professional conduct standards set 
by the recipient and the work placement agency. A satisfactory level of 
academic performance consists of maintaining a B average. A student's 
participation in CDWSP shall be terminated for failure to meet these 
responsibilities and standards. If a student's participation is 
terminated, the student is ineligible for further CDWSP assistance.
    (ii) Agree to make a good-faith effort to obtain employment in 
community building with a unit of State or local government, an Indian 
tribe, or a nonprofit organization. The term of employment should be for 
at least two consecutive years following graduation from the academic 
program. If the student does not obtain such employment, the student is 
not required to repay the assistance received.
    (h) Notice of fund availability. HUD will solicit grant applications 
from institutions of higher education, APO's and States by publishing a 
notice of fund availability in the Federal Register. The notice will:
    (1) Explain how application packages (requests for grant 
applications) providing specific application requirements and guidance 
may be obtained;
    (2) Specify the place for filing completed applications, and the 
date by which the applications must be physically received at that 
location;
    (3) State the amount of funding available under the notice;
    (4) Provide other appropriate program information and guidance.
    (i) Recipient selection process. The selection process for 
applications under CDWSP consists of a threshold review, ranking of 
eligible applications and final selection.
    (1) Threshold. To be eligible for ranking, applicants must meet each 
of the following threshold requirements:
    (i) The application must be filed in the application form prescribed 
by HUD, and within the required time periods;
    (ii) The applicant must demonstrate that it is eligible to 
participate;
    (iii) The applicant must demonstrate that each institution of higher 
education participating in the program as a recipient has the required 
academic programs and faculty to carry out its activities under CDWSP. 
Each work placement agency must have the required staff and community 
building work study program to carry out its activities under CDWSP.
    (2) Rating. All applications that meet the threshold requirements 
for applicant eligibility will be rated based on the following selection 
criteria:
    (i) Quality of academic program. The quality of the academic program 
offered by the institution of higher education, including without 
limitation the:
    (A) Quality of course offerings;
    (B) Appropriateness of course offerings for preparing students for 
careers in community building; and
    (C) Qualifications of faculty and percentage of their time devoted 
to teaching and research in community building.

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    (ii) Rates of graduation. The rates of graduation of students 
previously enrolled in a community building academic program at the 
institution of higher education, specifically including (where 
applicable) graduation rates from any previously funded CDWSP academic 
programs or similar programs.
    (iii) Extent of financial commitment. The commitment and ability of 
the institution of higher education to assure that CDWSP students will 
receive sufficient financial assistance (including loans, where 
necessary) above and beyond the CDWSP funding to complete their academic 
program in a timely manner and without working in excess of 20 hours per 
week during the school year.
    (iv) Quality of work placement assignments. The extent to which the 
participating students will receive a sufficient number and variety of 
work placement assignments, the assignments will provide practical and 
useful experience to students participating in the program, and the 
assignments will further the participating students' preparation for 
professional careers in community building.
    (v) Likelihood of fostering students' permanent employment in 
community building. The extent to which the proposed program will lead 
participating students directly and immediately to permanent employment 
in community building, as indicated by, without limitation:
    (A) The past success of the institution of higher education in 
placing its graduates (particularly CDWSP-funded and similar program 
graduates where applicable) in permanent employment in community 
building; and
    (B) The amount of faculty and staff time and institutional resources 
devoted to assisting students (particularly students in CDWSP-funded and 
similar programs where applicable) in finding permanent employment in 
community building.
    (vi) Effectiveness of program administration. The degree to which an 
applicant will be able effectively to coordinate and administer the 
program. HUD will allocate the maximum points available under this 
criterion equally among the following considerations set forth in 
paragraphs (i)(2)(vi) (A), (B), and (C) of this section, except that the 
maximum points available under this criterion will be allocated equally 
between the considerations set forth in paragraphs (i)(2)(vi) (A) and 
(B) of this section only where the applicant has not previously 
administered a CDWSP-funded program.
    (A) The strength and clarity of the applicant's plan for placing 
CDWSP students on rotating work placement assignments and monitoring 
CDWSP students' progress both academically and in their work placement 
assignments;
    (B) The degree to which the individual who will coordinate and 
administer the program has clear responsibility, ample available time, 
and sufficient authority to do so; and
    (C) The effectiveness of the applicant's prior coordination and 
administration of a CDWSP-funded program, where applicable (including 
the timeliness and completeness of the applicant's compliance with CDWSP 
reporting requirements).
    (vii) Commitment to meeting economically disadvantaged and minority 
students' needs. The applicant's commitment to meeting the needs of 
economically disadvantaged and minority students as demonstrated by 
policies and plans regarding, and past effort and success in, 
recruiting, enrolling and financially assisting economically 
disadvantaged and minority students. If the applicant is an APO or 
State, then HUD will consider the demonstrated commitment of each 
institution of higher education on whose behalf the APO or State is 
applying; HUD will then also consider the demonstrated commitment of the 
APO or State to recruit and hire economically disadvantaged and minority 
students.
    (3) Final selection. Eligible applications will be considered for 
selection in their rank order. HUD may make awards out of rank order to 
achieve geographic diversity, and may provide assistance to support a 
number of students that is less than the number requested under 
applications in order to provide assistance to as many highly ranked 
applications as possible.
    (j) Agreements--(1) Grant agreement. The responsibilities of the 
recipient

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under CDWSP will be incorporated in a grant agreement executed by HUD 
and the recipient.
    (2) Student agreement. The recipient and each participating student 
must execute a written agreement incorporating their mutual 
responsibilities under CDWSP. The agreement must be executed before the 
student can be enrolled in the program. A student's participation in 
CDWSP shall be terminated for failure to meet the responsibilities and 
standards in the agreement.
    (3) Work placement assignment agreement. The institution of higher 
education, the APO or state (if an APO or State is the grant recipient), 
the participating student, and the work placement agency must execute a 
written agreement covering each work placement assignment. The agreement 
must address the responsibilities of each of the parties, the 
educational objectives, the nature of supervision, the standards of 
evaluation, and the student's time commitments under the work placement 
assignment.
    (4) APO (or state) and institution of higher education. Where the 
recipient is an APO (or a State), the recipient and each participating 
institution of higher education must execute a written agreement 
incorporating their mutual responsibilities under CDWSP.
    (k) Grant administration--(1) Initial obligation of funds. When HUD 
selects an application for funding, and notifies the recipient, HUD will 
obligate funds to cover the amount of the approved grant. The initial 
obligation of funds will provide for student grants for two years.
    (2) Disbursement. Recipients will receive grant payments by direct 
deposit on a reimbursement basis. If that is not possible, grant 
payments will be made by U.S. Treasury checks.
    (3) Deobligation and recipient repayment. (i) HUD may deobligate 
amounts for grants if proposed activities are not begun or completed 
within a reasonable time after selection.
    (ii) If a student's participation in CDWSP is terminated before the 
completion of the two-year term of the student's program, the recipient 
may substitute another student to complete the two-year term of a 
student whose participation has terminated. The substituted student must 
have a sufficient number of academic credits to complete the degree 
program within the remaining portion of the terminated student's two-
year term. With respect to any CDWSP grant, there is no requirement, 
regardless of the date of grant award, for students who are terminated 
from the CDWSP to repay tuition and additional assistance or for the 
grant recipient to repay such funds to HUD. Funds must still be 
otherwise expended consistent with CDWSP regulations and the grant 
agreement, or repayment may be required under paragraph (k)(3)(iii) of 
this section.
    (iii) Consistent with 2 CFR part 200, HUD, in the grant agreement, 
will set forth in detail other circumstances under which funds may be 
deobligated, recipients may be liable for repayment, or other sanctions 
may be imposed.
    (l) Other Federal requirements--(1) Handicap provision. Recipients 
must provide a statement certifying that no otherwise qualified 
handicapped person shall, solely by reason of handicap, be excluded from 
participation in, be denied the benefits of, or otherwise be subjected 
to discrimination under the CDWSP.
    (2) Nondiscrimination. The recipient must adhere to the following 
nondiscrimination provisions: The requirements of title VIII of the 
Civil Rights Act of 1968, 42 U.S.C. 3600-20 (Fair Housing Act) and 
implementing regulations issued at subchapter A of title 24 of the Code 
of Federal Regulations; title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d-4) (Nondiscrimination in Federally Assisted Programs) and 
implementing regulations issued at 24 CFR part 1; section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations 
at 24 CFR part 8; Executive Order 11063 and implementing regulations at 
24 CFR part 107; and the Age Discrimination Act of 1975 and implementing 
regulations at 24 CFR part 146.

[54 FR 27131, June 27, 1989, as amended at 61 FR 36458, July 10, 1996; 
63 FR 31869, June 10, 1998; 80 FR 75937, Dec. 7, 2015]

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Sec. 570.416  Hispanic-serving institutions work study program.

    (a) Applicability and objectives. HUD makes grants under the 
Hispanic-serving Institutions Work Study Program (HSI-WSP) to public and 
private non-profit Hispanic-serving Institutions (HSI's) of higher 
education for the purpose of providing assistance to economically 
disadvantaged and minority students who participate in a work study 
program while enrolled in full-time community college programs in 
community building, and to provide entry to pre-professional careers in 
these fields.
    (b) Definitions. The following definitions apply to HSI-WSP:
    Applicant means a public or private non-profit Hispanic-serving 
institution of higher education that offers only two-year degree 
programs, including at least one community building academic degree 
program, and that applies for funding under HSI-WSP.
    Community building means community and economic development, 
community planning, community management, public policy, urban 
economics, urban management, urban planning, land use planning, housing, 
and related fields. Related fields include, but are not limited to, 
administration of justice, child development, and human services.
    Community building academic program or academic program means an 
undergraduate associate degree program whose purpose and focus is to 
educate students in community building. The terms ``community building 
academic program'' or ``academic program'' refer to the types of 
academic programs encompassed in the statutory phrase ``community or 
economic development, community planning or community management.'' For 
purposes of HSI-WSP, such programs include, but are not limited to, 
associate degree programs in community and economic development, 
community planning, community management, public administration, public 
policy, urban economics, urban management, urban planning, land use 
planning, housing, and related fields of study. Related fields of study 
that promote community building, such as administration of justice, 
child development, and human services are eligible, while fields such as 
natural sciences, computer sciences, mathematics, accounting, 
electronics, engineering, and the humanities (such as English or 
history) would not be eligible. A transfer program (i.e., one that leads 
to transfer to a four-year institution of higher education for the 
student's junior year) in a community building academic discipline is 
eligible only if the student is required to declare his/her major in 
this discipline while at the community college.
    Community building field means any of the fields of study eligible 
under a community building academic program.
    Economically disadvantaged and minority students means students who 
satisfy all the applicable guidelines established at the participating 
institution of higher education to measure financial need for academic 
scholarship or loan assistance, including, but not limited to, students 
with disabilities and students who are Black, American Indian/Alaska 
Native, Hispanic, Asian/Pacific Islanders, where such students satisfy 
the financial needs guidelines defined above.
    Hispanic-serving institution is an institution of higher education 
that certifies to the satisfaction of the Secretary that it meets the 
criteria set out at 20 U.S.C. 1059c(b)(1), including the following: An 
institution that has an enrollment of undergraduate full-time students 
that is at least 25 percent Hispanic; in which not less than 50 percent 
of the Hispanic students are low-income individuals (i.e., their 
families' taxable income for the preceding year did not exceed 150 
percent of the poverty level) who are first generation college students; 
and in which another 25 percent are either low-income individuals or 
first generation college students.
    HSI-WSP or HSI-WSP program means the Hispanic-serving Institutions 
Work Study program.
    Institution of higher education means a public or private 
educational institution that offers two-year associate degrees in a 
community building academic program and that is accredited by an 
accrediting agency or association recognized by the Secretary of 
Education. Institutions offering BOTH

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four-year and two-year degrees are not eligible for HSI-WSP.
    Recipient means an approved applicant that executes a grant 
agreement with HUD.
    Student means a person attending the institution of higher education 
on a full-time basis, as defined by that institution and pursuing an 
eligible community building degree. Students must have attained no more 
than half of the credits required for their degree at the time they 
first receive assistance under HSI-WSP.
    Student with disabilities means a student who meets the definition 
of a ``person with disabilities'' in the Americans with Disabilities Act 
of 1990.
    (c) Assistance provided--(1) Types of assistance available. HUD 
provides funding in the form of grants to recipients who make assistance 
available to eligible students. Grants are provided to cover the costs 
of student assistance and for an administrative allowance.
    (2) Maximum amount of assistance. The maximum amount that can be 
provided to a student is $13,200 a year, including $1,000 for an 
administrative allowance, subject to the 20% limitation described at 
570.416(c)(4) below. HUD will not set maximums on how much should be 
spent to each eligible expenditure, other than for administrative costs. 
The institution must be able to document that the amounts paid are 
customary for that institution and that it has actually paid that amount 
to the students. If a student is receiving a Pell grant, he/she may not 
receive funding for the same educational support through HSI-WSP. 
However, HSI-WSP can substitute for all or part of the Pell grant.
    (3) Student assistance. Grants are provided in the form of student 
stipends, tuition support, and additional support.
    (i) Student stipend. The amount of the student stipend should be 
based on the hourly rate for initial entry positions in the community 
building field and the number of hours worked by the student at the work 
placement assignment. The stipend should be sufficiently high to allow 
the student to earn the full stipend, as determined by the recipient, 
without working over 20 hours per week during the school year and 40 
hours per week during the summer.
    (ii) Tuition support. The amount of tuition support may not exceed 
the tuition and required fees charged at the participating institution 
of higher education.
    (iii) Additional support. The recipient may provide additional 
support for books, tutoring, and travel related to the academic program 
or work placement assignment. Costs associated with reasonable 
accommodations for students with disabilities including, but not limited 
to, interpreters for the deaf/hard of hearing, special equipment, and 
braille materials are eligible under this category.
    (4) Administrative allowance. HUD provides an allowance to 
recipients to cover the administrative costs of the program. The 
administrative allowance is $1,000 per year for each student 
participating in the program; however, no more than 20 percent of the 
grant may be used for planning and program administrative costs.
    (5) Number of students assisted. The minimum number of students that 
may be assisted is three students per participating institution of 
higher education. The maximum number of students that may be assisted is 
ten students per participating institution of higher education; however, 
a lower maximum or higher minimum may be established for a particular 
funding round by the NOFA announcing the availability of the funds.
    (d) Recipient eligibility and responsibilities--(1) Recipient 
eligibility. Public or private Hispanic-serving institutions of higher 
education offering only undergraduate two-year degrees, including 
degrees in at least one community building academic program, are 
eligible for assistance under HSI-WSP. HSIs that offer BOTH two-year and 
four-year degrees are not eligible for HSI-WSP assistance.
    (2) Recipient responsibilities. The recipient is responsible for 
administering the program, for compliance with all program requirements, 
and for coordination of program activities carried out by the work 
placement agencies. The recipient must:

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    (i) Recruit students for participation in HSI-WSP. The recipient 
shall establish recruitment procedures that identify eligible 
economically disadvantaged and minority students pursuing careers in 
community building, and make them aware of the availability of 
assistance opportunities. While the program is restricted to HSIs, the 
recipient may neither restrict the program to any particular minority 
group or groups, nor provide any preferential treatment in the selection 
process based on race or ethnicity. Only economically disadvantaged 
students, as defined herein, may be assisted.
    (ii) Select students for participation in HSI-WSP. In selecting 
among the eligible students, the recipient must consider the extent to 
which each student has demonstrated financial need under the applicable 
guidelines established at the institution of higher education; an 
interest in, and commitment to, a career in community building; and the 
ability to satisfactorily complete the academic and work placement 
responsibilities under HSI-WSP. Students must be selected before the 
beginning of the semester for which funding is being provided. If a 
student's participation terminates, the student may not be replaced; the 
grant will be reduced by the amount of unused funds allotted for that 
student.
    (iii) Provide the educational component for participating students.
    (iv) Recruit and select work placement agencies, and negotiate and 
execute an agreement covering each work placement assignment.
    (v) Refer participating students to work placement agencies and 
assist students in the selection of work placement assignments.
    (vi) Assign sufficient staff to administer and supervise the program 
on a day-to-day basis.
    (vii) Encourage participating students to either: obtain post-
graduation employment with a unit of State or local government, an 
areawide planning organization (APO), Indian tribe or nonprofit 
organization engaged in community building; or transfer to a four-year 
institution of higher education to obtain a bachelor's degree in a 
community building academic discipline.
    (viii) Maintain records by racial and ethnic categories for each 
economically disadvantaged and minority student participating in HSI-
WSP.
    (ix) Keep records and make such reports as HUD may require.
    (x) Comply with all other applicable Federal requirements.
    (e) Work placement agencies eligibility and responsibilities--(1) 
Eligibility. To be eligible to participate in HSI-WSP, the work 
placement agency must be an agency of a State or local government, an 
APO, an Indian tribe, or a private nonprofit organization involved in 
community building activities. A work placement site that is part of the 
institution of higher education (e.g., a child care center) can only be 
an eligible site if the services provided by that site are offered to 
people in the broader community outside the institution.
    (2) Responsibilities. Work placement agencies must:
    (i) Provide practical experience and training in the community 
building field to participating students through work placement 
assignments.
    (ii) Consult with the institution of higher education to ensure that 
the student's work placement assignment provides the requisite 
experience and training to meet the required number of work hours 
specified in the student work placement agreement.
    (iii) Provide a sufficient number and variety of work assignments to 
provide participating students with a wide choice of work experience.
    (iv) Require each student to devote 12-20 hours per week during the 
regular school year, and 35-40 hours a week during the summer, to the 
work placement assignment. Work placement agencies may provide 
flexibility in the work period, if such a schedule is consistent with 
the requirements of the student's academic program. However, a 
participating student may receive a stipend payment only during the 
period when the student is placed with the work placement agency.
    (v) Comply with all other applicable Federal requirements.
    (vi) Maintain such records as HUD may require.
    (f) Student eligibility and responsibilities. Students apply 
directly to recipients receiving grants under HSI-WSP.

[[Page 70]]

    (1) Eligibility. To be eligible for HSI-WSP, the student:
    (i) Must satisfy all applicable guidelines established at the 
participating institution of higher education to measure financial need 
for academic scholarship or loan assistance.
    (ii) Must be a full-time student enrolled in a community building 
associate degree program at the participating institution of higher 
education. The student must have attained no more than 50 percent of the 
credits required for his/her degree at the time the student first 
receives assistance under this program.
    (iii) Must demonstrate an ability to maintain a satisfactory level 
of performance in community building academic program (i.e., maintain a 
B average, as defined by the institution) and in work placement 
assignments, and comply with the professional standards set by the 
recipient and the work placement agencies.
    (iv) May not have previously participated in HSI-WSP.
    (2) Student responsibilities. Participating students must:
    (i) Enroll or be enrolled in a two-year community building associate 
degree program. A student's academic and work placement responsibilities 
include: Full-time enrollment in an approved academic program; 
maintenance of a satisfactory level of performance in the community 
building academic program and in work placement assignments; and 
compliance with the professional conduct standards set by the recipient 
and by the work placement agency. A satisfactory level of academic 
performance consists of maintaining a B average, as defined by the 
institution. A student's participation in HSI-WSP shall be terminated 
for failure to meet these responsibilities and standards. If the 
student's participation is terminated, the student is ineligible for 
further HSI-WSP assistance.
    (ii) Devote 12-20 hours per week during the regular school year, and 
35-40 hours a week during the summer, to the work placement assignment. 
Work placement agencies may provide flexibility in the work period, if 
such a schedule is consistent with the requirements of the student's 
academic program. However, a participating student may receive a stipend 
payment only during the period when the student is placed with the work 
placement agency.
    (iii) Agree to make a good-faith effort to either: obtain employment 
in community building with a unit of State or local government, an APO, 
an Indian tribe, or a non-profit organization; or to transfer to a four-
year institution of higher education to obtain a bachelor's degree in a 
community building academic discipline. However, if the student does not 
obtain such employment or transfer to a four-year institution, the 
student is not required to repay the assistance received.
    (g) Notice of funding availability. HUD will solicit grant 
applications from eligible institutions of higher education by 
publishing a notice of funding availability in the Federal Register. The 
notice will:
    (1) Explain how application kits providing specific application 
requirements and guidance may be obtained;
    (2) Specify the place for filing completed applications, and the 
date by which applications must be physically received at that location;
    (3) State the amount of funding available under the notice, which 
may include funds recaptured from previously awarded grants;
    (4) Provide other appropriate program information and guidance.
    (h) Agreements--(1) Grant agreement. The responsibilities of the 
recipient under HSI-WSP will be incorporated in a grant agreement 
executed by HUD and the recipient.
    (2) Student agreement. The recipient and each participating student 
must execute a written agreement incorporating their mutual 
responsibilities under HSI-WSP. The agreement must be executed before 
the student can be enrolled in the program. The Recipient shall 
terminate a student's participation in HSI-WSP for failure to meet the 
responsibilities and standards in the agreement.
    (3) Work placement assignment agreement. The recipient, the student, 
and the work placement agency must execute a written agreement covering 
each work placement assignment. The

[[Page 71]]

agreement must address the responsibilities of each of the parties, the 
educational objectives, the nature of the supervision, the standards of 
evaluation, and the student's time commitments under the work placement 
assignment.
    (i) Grant administration--(1) Initial obligation of funds. When HUD 
selects an application for funding, HUD will obligate funds to cover the 
amount of the approved grant. The term of the award will be for two 
calendar years, unless subsequently altered by HUD at its discretion for 
good cause.
    (2) Disbursement. Recipients will receive grant payments by direct 
deposit on a reimbursement basis. If that is not possible, grant 
payments will be made by U.S. Treasury checks.
    (3) Deobligation. HUD may deobligate amounts for grants if proposed 
activities are not begun or completed within a reasonable period of time 
after selection.
    (j) Other Federal requirements--(1) Applicability of part 570. HSI-
WSP shall be subject to the policies and procedures set forth in 
subparts A, K, and O of 24 CFR part 570, as applicable, except as 
modified or limited under the provisions of this Notice. The provisions 
of subparts C and J of part 570 shall not apply to HSI-WSP.
    (2) Uniform administrative requirements. Recipients under HSI-WSP 
shall comply with the requirements and standards of 2 CFR part 200, 
``Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards.'' Audits in accordance with 2 CFR part 
200, subpart F, shall be conducted annually.

[62 FR 17493, Apr. 9, 1997, as amended at 63 FR 9683, Feb. 25, 1998; 80 
FR 75937, Dec. 7, 2015]



   Subpart F_Small Cities, Non-Entitlement CDBG Grants in Hawaii and 
                         Insular Areas Programs

    Source: 62 FR 62914, Nov. 25, 1997, unless otherwise noted.



Sec. 570.420  General.

    (a) Administration of Non-entitlement CDBG funds in New York by HUD 
or Insular Areas--(1) Small cities. The Act permits each state to elect 
to administer all aspects of the CDBG program annual fund allocation for 
the non-entitlement areas within its jurisdiction. All states except 
Hawaii have elected to administer the CDBG program for non-entitlement 
areas within their jurisdiction. This section is applicable only to 
active HUD-administered small cities grants in New York. The 
requirements for the non-entitlement CDBG grants in Hawaii are set forth 
in Sec. 570.429 of this subpart. States that elected to administer the 
program after the close of Fiscal Year 1984 cannot return administration 
of the program to HUD. A decision by a state to discontinue 
administration of the program would result in the loss of CDBG funds for 
non-entitlement areas in that state and the reallocation of those funds 
to all states in the succeeding fiscal year.
    (2) Insular areas. Title V of Public Law 108-186 amended the Act to 
move the insular areas funding authorization from sections 107(a) and 
(b) to section 106(a). This revision identified a specific portion of 
the CDBG allocation for insular areas that is separate from the 
distribution for special purpose grants, as well as from the Entitlement 
and State formula distribution. The insular areas of Guam, the Northern 
Mariana Islands, the Virgin Islands, and American Samoa are permitted to 
administer all aspects of their Community Development Block Grant (CDBG) 
program under section 106 of the Act in accordance with their final 
statement as further described at Sec. 570.440.
    (b) Scope and applicability. (1) This subpart describes the policies 
and procedures of the Small Cities program that apply to non-entitlement 
areas in states where HUD administers the CDBG program. HUD currently 
administers the Small Cities program in only two states--New York (for 
grants prior to FY 2000) and Hawaii (for non-entitlement CDBG grants in 
Hawaii). The Small Cities portion of this subpart addresses the 
requirements for New York Small Cities grants in Secs. 570.421, 570.426, 
570.427, and 570.431. Section 570.429 identifies special procedures 
applicable to Hawaii.

[[Page 72]]

    (2) This subpart also describes the policies and procedures 
governing community development block grants to insular areas under 
section 106 of the Act. Sections 570.440 and 570.441 identify procedures 
applicable to the Insular Areas program under section 106 of the Act. 
Fund reservations for insular areas under section 107 of the Act shall 
remain governed by the policies and procedures described in section 
107(a)(1)(A) of the Act and Secs. 570.400 and 570.405 of this part.
    (3) The policies and procedures set forth in the following 
identified subparts of this part apply to the HUD-administered Small 
Cities and Insular Areas programs, except as modified or limited under 
the provisions thereof or this subpart:
    (i) Subpart A--General Provisions;
    (ii) Subpart C--Eligible Activities;
    (iii) Subpart J--Grant Administration;
    (iv) Subpart K--Other Program Requirements;
    (v) Subpart M--Loan Guarantees; and
    (vi) Subpart O--Performance Reviews.
    (c) Abbreviated consolidated plan. Applications for the HUD-
administered Small Cities Program and the Insular Areas program under 
section 106 of the Act that contain housing activities must include a 
certification that the proposed housing activities are consistent with 
the applicant's consolidated plan as described at 24 CFR part 91.
    (d) National and primary objectives. (1) Each activity funded 
through the Small Cities program and the Insular Areas program under 
section 106 of the Act must meet one of the following national 
objectives as defined under the criteria in Sec. 570.208:
    (i) Benefit low- and moderate-income families;
    (ii) Aid in the prevention or elimination of slums or blight; or
    (iii) Be an activity that the grantee certifies is 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 and other financial resources are not available 
to meet such needs.
    (2) In addition to the objectives described in paragraph (e)(1) of 
this section, with respect to grants made through the Small Cities 
program, not less than 70 percent of the total of grant funds from each 
grant and Section 108 loan guarantee funds received under subpart M of 
this part within a fiscal year must be expended for activities which 
benefit low- and moderate-income persons under the criteria of 
Sec. 570.208(a) or of Sec. 570.208(d)(5) or (6). In the case of 
multiyear plans in New York State approved in response to NOFAs 
published prior to calendar year 1997, not less than 70 percent of the 
total funding for grants approved pursuant to a multiyear plan for a 
time period of up to three years must be expended for activities which 
benefit low- and moderate-income persons. Thus, 70 percent of the grant 
for year 1 of a multiyear plan approved in response to NOFAs published 
prior to calendar year 1997 must meet the 70 percent requirement, 70 
percent of the combined grants from years 1 and 2 must meet the 
requirement, and 70 percent of the combined grants from years 1, 2, and 
3 must meet the requirement. In determining the percentage of funds 
expended for such activity, the provisions of Sec. 570.200(a)(3)(i), 
(iii), (iv), and (v) shall apply.
    (3) In addition to the objectives described in paragraph (e)(1) of 
this section, grants made through the Insular Areas program shall also 
comply with the primary objective of 70 percent benefit to low- and 
moderate-income persons. Insular area recipients must meet this 
requirement for each separate grant under section 107 of the Act. For 
grants made under section 106 of the Act, insular area recipients must 
ensure that over a period of time specified in their certifications not 
to exceed three years, not less than 70 percent of the aggregate of CDBG 
fund expenditures shall be for low- and moderate-income activities 
meeting the criteria under Sec. 570.208(a) or under Sec. 570.208(d)(5) 
or (6). See also Sec. 570.200(a)(3) for further discussion of the 
primary objective.
    (e) Allocation of funds--The allocation of appropriated funds for 
insular areas under section 106 of the Act shall be

[[Page 73]]

governed by the policies and procedures described in section 106(a)(2) 
of the Act and Secs. 570.440, 570.441, and 570.442 of this subpart. The 
annual appropriations described in this section shall be distributed to 
insular areas on the basis of the ratio of the population of each 
insular area to the population of all insular areas.

[69 FR 32779, June 10, 2004, as amended at 72 FR 46370, Aug. 17, 2007]



Sec. 570.421  New York Small Cities Program design.

    (a) Selection system--(1) Competitive applications. Each competitive 
application will be rated and scored against at least the following 
factors:
    (i) Need-absolute number of persons in poverty as further explained 
in the NOFA;
    (ii) Need-percent of persons in poverty as further explained in the 
NOFA;
    (iii) Program Impact; and
    (iv) Fair Housing and Equal Opportunity, which may include the 
applicant's Section 3 plan and implementation efforts with respect to 
actions to affirmatively further fair housing. The NOFA described in 
paragraph (b) of this section will contain a more detailed description 
of these factors, and the relative weight that each factor will be 
given.
    (2) In addition HUD reserves the right to establish minimal 
thresholds for selection factors and otherwise select grants in 
accordance with Sec. 570.425 and the applicable NOFA.
    (3) Imminent threats to public health and safety. The criteria for 
these grants are described in Sec. 570.424.
    (4) Repayment of Section 108 loans. The criteria for these grants 
are described in Sec. 570.432.
    (5) Economic development grants. HUD intends to use the Section 108 
loan guarantee program to the maximum extent feasible to fund economic 
development projects in the nonentitlement areas of New York. In the 
event that there are not enough Section 108 loan guarantee funds 
available to fund viable economic development projects, if a project 
needs a grant in addition to a loan guarantee to make it viable, or if 
the project does not meet the requirements of the Section 108 program 
but is eligible for a grant under this subpart, HUD may fund Economic 
Development applications as they are determined to be fundable in a 
specific amount by HUD up to the sum set aside for economic development 
projects in a notice of funding availability, notwithstanding paragraph 
(g) of this section. HUD also has the option in a NOFA of funding 
economic development activities on a competitive basis, as a competitive 
application as described in paragraph (a)(1) of this section. In order 
for an applicant to receive Small Cities grant funds on a noncompetitive 
basis, the field office must determine that the economic development 
project will have a substantial impact on the needs identified by the 
applicant.
    (b) Notice of funding availability. HUD will issue one or more 
Notice(s) of Funding Availability (NOFA) each fiscal year which will 
indicate the amount of funds available, the annual grant limits per 
grantee, type of grants available, the application requirements, and the 
rating factors that will be used for those grants which are competitive. 
A NOFA may set forth, subject to the requirements of this subpart, 
additional selection criteria for all grants.
    (c) Eligible applicants. (1) Eligible applicants in New York are 
units of general local government, excluding: Metropolitan cities, urban 
counties, units of general local government which are participating in 
urban counties or metropolitan cities, even if only part of the 
participating unit of government is located in the urban county or 
metropolitan city. Indian tribes are also ineligible for assistance 
under this subpart. An application may be submitted individually or 
jointly by eligible applicants.
    (2) Counties, cities, towns, and villages may apply and receive 
funding for separate projects to be done in the same jurisdiction. Only 
one grant will be made under each funding round for the same type of 
project to be located within the jurisdiction of a unit of general local 
government (e.g., both the county and village cannot receive funding for 
a sewer system to be located in the same village, but the county can 
receive funding for a sewer system that is located in the same village 
as a rehabilitation project for which the village

[[Page 74]]

receives funding). The NOFA will contain additional information on 
applicant eligibility.
    (3) Counties may apply on behalf of units of general local 
government located within their jurisdiction when the unit of general 
local government has authorized the county to apply. At the time that 
the county submits its application for funding, it must submit a 
resolution by the governing body of the unit of local government that 
authorizes the county to submit an application on behalf of the unit of 
general local government. The county will be considered the grantee and 
will be responsible for executing all grant documents. The county is 
responsible for ensuring compliance with all laws, regulations, and 
Executive Orders applicable to the CDBG Program. HUD will deal 
exclusively with the county with respect to issues of program 
administration and performance, including remedial actions. The unit of 
general local government will be considered the grantee for the purpose 
of determining grant limits. The unit of general local government's 
statistics will be used for purposes of the selection factors referred 
to in Sec. 570.421(a).
    (d) Public service activities cap. Public service activities may be 
funded up to a maximum of fifteen (15) percent of a State's 
nonentitlement allocation for any fiscal year. HUD may award a grant to 
a unit of general local government for public service activities with up 
to 100 percent of the funds intended for public service activities. HUD 
will apply the 15 percent statewide cap to public service activities by 
funding public service activities in the highest rated applications in 
each NOFA until the cap is reached.
    (e) Activities outside an applicant's boundaries. An applicant may 
conduct eligible CDBG activities outside its boundaries. These 
activities must be demonstrated to be appropriate to meeting the 
applicant's needs and objectives, and must be consistent with State and 
local law. This provision includes using funds provided under this 
subpart in a metropolitan city or an urban county.
    (f) Multiyear plans. HUD will not make any new multiyear commitments 
for NOFAs published in calendar year 1997 or later. HUD will continue to 
honor the terms of the multiyear plans that were approved under the 
provisions of NOFAs published prior to calendar year 1997.
    (g) Maximum grant amount. The maximum grant amount that will be 
awarded to a single unit of general local government in response to the 
annual Small Cities NOFA published in calendar year 1997 or later is 
$400,000, except that counties may apply for up to $600,000 in HUD-
administered Small Cities funds. HUD may specify lower grant limits in 
the NOFA, which may include different limits for different types of 
grants available or different types of applicants. This paragraph (g) 
does not apply to multiyear plans that were approved under the 
provisions of NOFAs published prior to calendar year 1997, nor does it 
apply to grants awarded in connection with paragraphs (a)(3) through 
(a)(5) of this section. The maximum limits in this paragraph (g) apply 
to grants for economic development projects awarded under NOFAs in which 
there is no set-aside of funds for such projects.



Secs. 570.422-425  [Reserved]



Sec. 570.426  Program income.

    (a) The provisions of Sec. 570.504(b) apply to all program income 
generated by a specific grant and received prior to grant closeout.
    (b) If the unit of general local government has another ongoing CDBG 
grant at the time of closeout, the program income will be considered to 
be program income of the ongoing grant. The grantee can choose which 
grant to credit the program income to if it has multiple open CDBG 
grants.
    (c) If the unit of general local government has no open ongoing CDBG 
grant at the time of closeout, program income of the unit of general 
local government or its subrecipients which amounts to less than $25,000 
per year will not be considered to be program income unless needed to 
repay a Section 108 guaranteed loan. When more than $25,000 of program 
income is generated from one or more closed out grants in a year after 
closeout, the entire amount of the program income is subject to the 
requirements of this

[[Page 75]]

part. This will be a subject of the closeout agreement described in 
Sec. 570.509(c).



Sec. 570.427  Program amendments.

    (a) HUD approval of certain program amendments. Grantees shall 
request prior HUD approval for all program amendments involving new 
activities or alteration of existing activities that will significantly 
change the scope, location, or objectives of the approved activities or 
beneficiaries. Approval is subject to the amended activities meeting the 
requirements of this part and being able to be completed promptly.
    (b) Documentation of program amendments. Any program amendments that 
do not require HUD approval must be fully documented in the grantee's 
records.
    (c) Citizen participation requirements. Whenever an amendment 
requires HUD approval, the requirements for citizen participation in 
Sec. 570.431 must be met.

[62 FR 62914, Nov. 25, 1997, as amended at 72 FR 46370, Aug. 17, 2007]



Sec. 570.428  [Reserved]



Sec. 570.429  Hawaii general and grant requirements.

    (a) General. This section applies to non-entitlement CDBG grants in 
Hawaii. The non-entitlement counties in the State of Hawaii will be 
treated as entitlement grantees except for the calculation of 
allocations, and the source of their funding, which will be from section 
106(d) of the Act.
    (b) Scope and applicability. Except as modified or limited under the 
provisions thereof or this subpart, the policies and procedures outlined 
in subparts A, C, D, J, K, and O of this part apply to non-entitlement 
CDBG grants in Hawaii.
    (c) Grant amounts. (1) For each eligible unit of general local 
government, a formula grant amount will be determined which bears the 
same ratio to the total amount available for the nonentitlement area of 
the State as the weighted average of the ratios between:
    (i) The population of that eligible unit of general local government 
and the population of all eligible units of general local government in 
the nonentitlement areas of the State;
    (ii) The extent of poverty in that eligible unit of general local 
government and the extent of poverty in all the eligible units of 
general local government in the nonentitlement areas of the State; and
    (iii) The extent of housing overcrowding in that eligible unit of 
general local government and the extent of housing overcrowding in all 
the eligible units of general local government in the nonentitlement 
areas of the State.
    (2) In determining the average of the ratios under this paragraph 
(c), the ratio involving the extent of poverty shall be counted twice 
and each of the other ratios shall be counted once. (0.25 + 0.50 + 0.25 
= 1.00).
    (d) Reallocation. (1) Any amounts that become available as a result 
of any reductions under subpart O of this part shall be reallocated in 
the same or future fiscal year to any remaining eligible applicants on a 
pro rata basis.
    (2) Any formula grant amounts reserved for an applicant that chooses 
not to submit an application shall be reallocated to any remaining 
eligible applicants on a pro rata basis.
    (3) No amounts shall be reallocated under paragraph (d) of this 
section in any fiscal year to any applicant whose grant amount was 
reduced under subpart O of this part.

(Approved by the Office of Management and Budget under control number 
2506-0060)

[62 FR 62914, Nov. 25, 1997, as amended at 72 FR 46371, Aug. 17, 2007]



Sec. 570.431  Citizen participation.

    (a) General. An applicant that is located in a nonentitlement area 
of a State that has not elected to distribute funds shall comply with 
the citizen participation requirements described in this section, 
including requirements for the preparation of the proposed application 
and the final application. The requirements for citizen participation do 
not restrict the responsibility or authority of the applicant for the 
development and execution of its community development program.
    (b) Citizen participation plan. The applicant must develop and 
follow a detailed citizen participation plan and must make the plan 
public. The plan must be completed and available before

[[Page 76]]

the application for assistance is submitted to HUD, and the applicant 
must certify that it is following the plan. The plan must set forth the 
applicant's policies and procedures for:
    (1) Giving citizens timely notice of local meetings and reasonable 
and timely access to local meetings, information, and records relating 
to the grantee's proposed and actual use of CDBG funds including, but 
not limited to:
    (i) The amount of CDBG funds expected to be made available for the 
coming year, including the grant and anticipated program income;
    (ii) The range of activities that may be undertaken with those 
funds;
    (iii) The estimated amount of those funds proposed to be used for 
activities that will benefit low- and moderate-income persons;
    (iv) The proposed CDBG activities likely to result in displacement 
and the applicant's plans, consistent with the policies developed under 
Sec. 570.606(b), for minimizing displacement of persons as a result of 
its proposed activities; and
    (v) The types and levels of assistance the applicant plans to make 
available (or to require others to make available) to persons displaced 
by CDBG-funded activities, even if the applicant expects no displacement 
to occur;
    (2) Providing technical assistance to groups representative of 
persons of low- and moderate-income that request assistance in 
developing proposals. The level and type of assistance to be provided is 
at the discretion of the applicant. The assistance need not include the 
provision of funds to the groups;
    (3) Holding a minimum of two public hearings, for the purpose of 
obtaining citizens' views and formulating or responding to proposals and 
questions. Each public hearing must be conducted at a different stage of 
the CDBG program. Together, the hearings must address community 
development and housing needs, development of proposed activities and 
review of program performance. There must be reasonable notice of the 
hearings and the hearings must be held at times and accessible locations 
convenient to potential or actual beneficiaries, with reasonable 
accommodations including material in accessible formats for persons with 
disabilities. The applicant must specify in its plan how it will meet 
the requirement for hearings at times and locations convenient to 
potential or actual beneficiaries;
    (4) Meeting the needs of non-English speaking residents in the case 
of public hearings where a significant number of non-English speaking 
residents can reasonably be expected to participate;
    (5) Responding to citizen complaints and grievances, including the 
procedures that citizens must follow when submitting complaints and 
grievances. The applicant's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days of the receipt of the complaint, where practicable; and
    (6) Encouraging citizen participation, particularly by low- and 
moderate-income persons who reside in slum or blighted areas, and in 
other areas in which CDBG funds are proposed to be used.
    (c) Publication of proposed application. (1) The applicant shall 
publish a proposed application consisting of the proposed community 
development activities and community development objectives in order to 
afford affected citizens an opportunity to:
    (i) Examine the application's contents to determine the degree to 
which they may be affected;
    (ii) Submit comments on the proposed application; and
    (iii) Submit comments on the performance of the applicant.
    (2) The requirement for publishing in paragraph (c)(1) of this 
section may be met by publishing a summary of the proposed application 
in one or more newspapers of general circulation, and by making copies 
of the proposed application available at libraries, government offices, 
and public places. The summary must describe the contents and purpose of 
the proposed application, and must include a list of the locations where 
copies of the entire proposed application may be examined.
    (d) Preparation of a final application. An applicant must prepare a 
final application. In the preparation of the final application, the 
applicant shall consider comments and views received

[[Page 77]]

related to the proposed application and may, if appropriate, modify the 
final application. The final application shall be made available to the 
public and shall include the community development objectives and 
projected use of funds, and the community development activities.
    (e) New York grantee amendments. To assure citizen participation on 
program amendments to final applications that require HUD approval under 
Sec. 570.427, the grantee shall:
    (1) Furnish citizens information concerning the amendment;
    (2) Hold one or more public hearings to obtain the views of citizens 
on the proposed amendment;
    (3) Develop and publish the proposed amendment in such a manner as 
to afford affected citizens an opportunity to examine the contents, and 
to submit comments on the proposed amendment;
    (4) Consider any comments and views expressed by citizens on the 
proposed amendment and, if the grantee finds it appropriate, modify the 
final amendment accordingly; and
    (5) Make the final amendment to the community development program 
available to the public before its submission to HUD.



Sec. 570.440  Application requirements for insular area grants funded
under section 106.

    (a) Applicability. The requirements of this section apply to insular 
grants funded under section 106 of the Act. An insular area jurisdiction 
may choose to prepare program statements following either:
    (1) The abbreviated consolidated plan procedures described in this 
subpart and in 24 CFR 91.235; or
    (2) The complete consolidated plan procedures applicable to local 
governments, discussed at 24 CFR 91.200 through 91.230.
    (b) Proposed statement. An insular area jurisdiction shall prepare 
and publish a proposed statement and comply with the citizen 
participation requirements described in Sec. 570.441, if it submits an 
abbreviated consolidated plan under 24 CFR 91.235. The jurisdiction 
shall follow the citizen participation requirements of 24 CFR 91.105 and 
91.100 (with the exception of Sec. 91.100(a)(4)), if it submits a 
complete consolidated plan.
    (c) Final statement. The insular area jurisdiction shall submit to 
HUD a final statement describing its community development objectives 
and activities. The statement also must include a priority nonhousing 
community development plan in accordance with 24 CFR 91.235. This final 
statement shall be submitted, together with the required certifications, 
to the appropriate field office in a form prescribed by HUD.
    (d) Submission requirement. Each insular area jurisdiction shall 
submit its final statement to HUD no later than 45 days before the start 
of its program year. Each jurisdiction may choose the start date for the 
annual period of its program year that most closely fits its own needs. 
HUD may grant an extension of the submission deadline for good cause.
    (e) Certifications. The insular area jurisdiction's final statement 
must be accompanied by appropriate certifications as further described 
under 24 CFR 91.225. The jurisdiction should submit all general 
certifications, as well as all program certifications for each program 
from which it receives funding, if it submits a complete consolidated 
plan. For insular area jurisdictions receiving CDBG funds under an 
abbreviated consolidated plan, these certifications shall include at a 
minimum:
    (1) The following general certifications described at Sec. 91.225(a) 
of this title: Affirmatively furthering fair housing; anti-displacement 
and relocation plan; drug-free workplace; anti-lobbying; authority of 
jurisdiction; consistency with plan; acquisition and relocation; and 
Section 3.
    (2) The following CDBG certifications described at Sec. 91.225(b) of 
this title: Citizen participation; community development plan; following 
a plan; use of funds; excessive force; compliance with anti-
discrimination laws; compliance with lead-based paint procedures; and 
compliance with laws.
    (f) HUD action on final statement. Following the review of the 
statement, HUD will promptly notify each jurisdiction of the action 
taken with regard to its statement. HUD will approve a grant if the 
jurisdiction's submissions

[[Page 78]]

have been made and approved in accordance with 24 CFR part 91, and if 
the certifications required in such submissions are satisfactory to HUD. 
The certifications will be satisfactory to HUD for this purpose, unless 
HUD determines pursuant to subpart O of this part that the jurisdiction 
has not complied with the requirements of this part, has failed to carry 
out its consolidated plan (or abbreviated consolidated plan) as provided 
under Sec. 570.903, or has determined that there is evidence, not 
directly involving the jurisdiction's past performance under this 
program, that tends to challenge in a substantial manner the 
jurisdiction's certification of future performance. If HUD makes any 
such determination, however, further assurances may be required to be 
submitted by the jurisdiction as HUD may deem warranted or necessary to 
find the jurisdiction's certification satisfactory.
    (g) Reimbursement for pre-award costs. Insular area jurisdictions 
may request reimbursement for pre-award costs in accordance with 
Sec. 570.200(h).
    (h) Float funding. An insular area jurisdiction may use undisbursed 
funds in the line of credit and its CDBG program account that are 
budgeted in final statements or action plans for one or more activities 
that do not need the funds immediately, subject to the limitations 
described in Sec. 570.301(b).
    (i) Program amendments. (1) The insular area jurisdiction's citizen 
participation plan (see Sec. 570.441) must specify the criteria the 
jurisdiction will use for determining what changes in the jurisdiction's 
planned or actual activities will constitute a substantial amendment to 
its final statement. It must include changes in the use of CDBG funds 
from one eligible activity to another among the changes that qualify as 
a substantial amendment.
    (2) The citizen participation plan must provide citizens with 
reasonable notice and an opportunity to comment on substantial 
amendments. The citizen participation plan must state how reasonable 
notice and an opportunity to comment will be given, as well as provide a 
period of not less than 30 days to receive comments on the substantial 
amendment before the amendment is implemented.
    (3) The citizen participation plan shall require the jurisdiction to 
consider comments or views of citizens received in writing, or orally at 
public hearings, if any, in preparing the substantial amendment of its 
statement. A summary of comments or views not accepted and the reasons 
for non-acceptance shall be attached to the substantial amendment.
    (4) Any program amendment, regardless of whether it is considered to 
be substantial, must be fully documented in the jurisdiction's records.
    (j) Performance reports. Each insular area jurisdiction must submit 
annual performance reports in accordance with 24 CFR 91.520.

[69 FR 32780, June 10, 2004]



Sec. 570.441  Citizen participation--insular areas.

    (a) General. An insular area jurisdiction submitting an abbreviated 
consolidated plan under 24 CFR 91.235 shall comply with the citizen 
participation requirements described in this section. An insular area 
jurisdiction submitting a complete consolidated plan in accordance with 
24 CFR 91.200 through 91.230 shall follow the citizen participation 
requirements of Sec. 91.100 and Sec. 91.105, except for 
Sec. 91.100(a)(4). For funding under section 106 of the Act, these 
requirements are applicable to all aspects of the Insular Areas program, 
including the preparation of the proposed statement and final statements 
as described in Sec. 570.440. The requirements for citizen participation 
do not restrict the responsibility or authority of the jurisdiction for 
the development and execution of its community development program.
    (b) Citizen participation plan. The insular area jurisdiction must 
develop and follow a detailed citizen participation plan and must make 
the plan public. The plan must be completed and available before the AFH 
and statement for assistance is submitted to HUD, and the jurisdiction 
must certify that it is following the plan. The plan must set forth the 
jurisdiction's policies and procedures for:
    (1) Giving citizens timely notice of local meetings and reasonable 
and

[[Page 79]]

timely access to local meetings consistent with accessibility and 
reasonable accommodation requirements in accordance with section 504 of 
the Rehabilitation Act of 1973 and the regulations at 24 CFR part 8, and 
the Americans with Disabilities Act and the regulations at 28 CFR parts 
35 and 36, as applicable, as well as information and records relating to 
the grantee's proposed and actual use of CDBG funds including, but not 
limited to:
    (i) The amount of CDBG funds expected to be made available for the 
coming year, including the grant and anticipated program income;
    (ii) The range of activities that may be undertaken with those 
funds;
    (iii) The estimated amount of those funds proposed to be used for 
activities that will benefit low- and moderate-income persons;
    (iv) The proposed CDBG activities likely to result in displacement 
and the jurisdiction's plans, consistent with the policies developed 
under Sec. 570.606(b), for minimizing displacement of persons as a 
result of its proposed activities; and
    (v) The types and levels of assistance the jurisdiction plans to 
make available (or to require others to make available) to persons 
displaced by CDBG-funded activities, even if the jurisdiction expects no 
displacement to occur;
    (2) Providing technical assistance to groups that are representative 
of persons of low- and moderate-income that request assistance in 
commenting on the AFH and developing proposals. The level and type of 
assistance to be provided is at the discretion of the jurisdiction. The 
assistance need not include the provision of funds to the groups;
    (3) Holding a minimum of two public hearings for the purpose of 
obtaining residents' views and formulating or responding to proposals 
and questions. Each public hearing must be conducted at a different 
stage of the CDBG program year. Together, the hearings must address 
affirmatively furthering fair housing, community development and housing 
needs, development of proposed activities, proposed strategies and 
actions for affirmatively furthering fair housing consistent with the 
AFH, and a review of program performance. There must be reasonable 
notice of the hearings, and the hearings must be held at times and 
accessible locations convenient to potential or actual beneficiaries, 
with reasonable accommodations, including materials in accessible 
formats, for persons with disabilities. The jurisdiction must specify in 
its citizen participation plan how it will meet the requirement for 
hearings at times and accessible locations convenient to potential or 
actual beneficiaries;
    (4) Assessing its language needs, identifying any need for 
translation of notices and other vital documents and, in the case of 
public hearings, meeting the needs of non-English speaking residents 
where a significant number of non-English speaking residents can 
reasonably be expected to participate. At a minimum, the citizen 
participation plan shall require the jurisdiction to make reasonable 
efforts to provide language assistance to ensure meaningful access to 
participation by non-English speaking persons;
    (5) Responding to citizen complaints and grievances, including the 
procedures that citizens must follow when submitting complaints and 
grievances. The jurisdiction's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days after the receipt of the complaint, where practicable; and
    (6) Encouraging citizen participation, particularly by low- and 
moderate-income persons who reside in areas in which CDBG funds are 
proposed to be used.
    (c) Publication of proposed AFH and proposed statement. (1) The 
insular area jurisdiction shall publish a proposed AFH and a proposed 
statement consisting of the proposed community development activities 
and community development objectives (as applicable) in order to afford 
affected residents an opportunity to:
    (i) Examine the document's contents to determine the degree to which 
they may be affected;
    (ii) Submit comments on the proposed document; and
    (iii) Submit comments on the performance of the jurisdiction.

[[Page 80]]

    (2) The requirement for publishing in paragraph (c)(1) of this 
section may be met by publishing a summary of the proposed document in 
one or more newspapers of general circulation and by making copies of 
the proposed document available on the Internet, on the grantee's 
official government Web site, and as well at libraries, government 
offices, and public places. The summary must describe the contents and 
purpose of the proposed document and must include a list of the 
locations where copies of the entire proposed document may be examined.
    (d) Preparation of the AFH and final statement. An insular area 
jurisdiction must prepare an AFH and a final statement. In the 
preparation of the AFH and final statement, the jurisdiction shall 
consider comments and views received relating to the proposed document 
and may, if appropriate, modify the final document. The final AFH and 
final statement shall be made available to the public. The final 
statement shall include the community development objectives, projected 
use of funds, and the community development activities.
    (e) Program amendments. To assure citizen participation on program 
amendments to final statements and any revision to the AFH, the insular 
area grantee shall:
    (1) Furnish its residents with information concerning the amendment 
to the consolidated plan or any revision to the AFH (as applicable);
    (2) Hold one or more public hearings to obtain the views of 
residents on the proposed amendment to the consolidated plan or revision 
to the AFH;
    (3) Develop and publish the proposed amendment to the consolidated 
plan or any revision to the AFH in such a manner as to afford affected 
residents an opportunity to examine the contents, and to submit comments 
on the proposed amendment to the consolidated plan or revision to the 
AFH, as applicable;
    (4) Consider any comments and views expressed by residents on the 
proposed amendment to the consolidated plan or revision to the AFH, and, 
if the grantee finds it appropriate, make modifications accordingly; and
    (5) Make the final amendment to the community development program or 
revision to the AFH available to the public before its submission to 
HUD.
    (f) Performance reports. (1) The citizen participation plan must 
provide citizens with reasonable notice and an opportunity to comment on 
performance reports. The citizen participation plan must state how 
reasonable notice and an opportunity to comment will be given. The 
citizen participation plan must provide a period of not less than 15 
days to receive comments on the performance report before it is to be 
submitted to HUD.
    (2) The citizen participation plan shall require the jurisdiction to 
consider comments or views of citizens received in writing or orally at 
public hearings in preparing the performance report. A summary of these 
comments or views shall be attached to the performance report.
    (g) Application for loan guarantees. Insular area jurisdictions 
intending to apply for the Section 108 Loan Guarantee program must 
ensure that they follow the applicable presubmission and citizen 
participation requirements of Sec. 570.704.

[69 FR 32780, June 10, 2004, as amended at 80 FR 42366, July 16, 2015]



Sec. 570.442  Reallocations-Insular Areas.

    (a) Any Insular Area funds that become available as a result of 
reductions under subpart O of this part, shall be reallocated in the 
same or future fiscal year to any remaining eligible Insular Area 
grantees pro rata according to population.
    (b) Any Insular Area grant funds for a fiscal year reserved for an 
applicant that chooses not to submit a final statement in accordance 
with Sec. 570.440 to receive such funds, shall be reallocated in the 
same or future fiscal year to any remaining eligible Insular Area 
grantees pro rata according to population.
    (c) No amounts shall be reallocated under this section in any fiscal 
year to any applicant whose grant amount in such fiscal year was reduced 
under subpart O of this part or who did not submit a final statement in 
accordance with Sec. 570.440 for that fiscal year.
    (d) Insular Area grantees receiving additional funds under this 
section will be evaluated for timeliness under

[[Page 81]]

Sec. 570.902 based upon the original grant amount plus the additional 
funds received. Accordingly, references in Sec. 570.902 to an Insular 
Area's grant amount for its current program year include such additional 
funds, and references to unexpended or undisbursed funds include such 
additional funds.

[72 FR 12536, Mar. 15, 2007]



                Subpart G_Urban Development Action Grants

    Source: 47 FR 7983, Feb. 23, 1982, unless otherwise noted.



Sec. 570.450  Purpose.

    The purpose of urban development action grants is to assist cities 
and urban counties that are experiencing severe economic distress to 
help stimulate economic development activity needed to aid in economic 
recovery. This subpart G contains those regulations that are essential 
for the continued operation of this grant program.

[61 FR 11476, Mar. 20, 1996]



Sec. 570.456  Ineligible activities and limitations on eligible activities.

    (a) Large cities and urban counties may not use assistance under 
this subpart for planning the project or developing the application. 
However, they may use entitlement community development block grant 
funds for this purpose, provided that the UDAG project meets the 
eligibility test of this part. Any small city which submits a project 
application which is selected for preliminary approval and for which 
legally binding grant agreement and for which a release of funds 
pursuant to 24 CFR part 58 has been issued may devote up to three (3) 
percent of the approved amount of its action grant to defray its actual 
costs in planning the project and preparing its application.
    (b) Assistance under this subpart may not be used for public 
services as described in Sec. 570.201(e).
    (c)(1) No assistance may be provided under this subpart for 
speculative projects intended to facilitate the relocation of industrial 
or commercial plants or facilities from one area to another. The 
provisions of this paragraph (c)(1) shall not apply to a relocation of 
any such plant or facility within a metropolitan area.
    (i) HUD will presume that a proposed project which includes 
speculative commercial or industrial space is intended to facilitate the 
relocation of a plant or facility from one area to another, if it is 
demonstrated to HUD's satisfaction that:
    (A) The proposed project is reasonably proximate (i.e., within 50 
miles) to an area from which there has been a significant current 
pattern of movement, to areas reasonably proximate, of jobs of the 
category for which such space is appropriate; and
    (B) There is a likelihood of continuation of the pattern, based on 
measurable comparisons between the area from which the movement has been 
occurring and the area of the proposed project in terms of tax rates, 
energy costs, and similar relevant factors.
    (ii) The restrictions established in this paragraph (c)(1) shall not 
apply if the Secretary determines that the relocation does not 
significantly and adversely affect the employment or economic base of 
the area from which the industrial or commercial plant or facility is to 
be relocated. However, the Secretary will not be required to make a 
determination whether there is a significant and adverse effect. If such 
a determination is undertaken, the Secretary will presume that there is 
a significant and adverse effect where the significant pattern of job 
movement and the likelihood of continuation of such a pattern has been 
from a distressed community.
    (iii) The presumptions established in accordance with this paragraph 
(c)(1) are rebuttable by the applicant. However, the burden of 
overcoming the presumptions will be on the applicant.
    (iv) The presumptions established in this paragraph (c)(1) will not 
apply if the speculative space contained in a commercial or industrial 
plant or facility included in a project constitutes a lesser percentage 
of the total space contained in that plant or facility than the 
threshold amounts specified below:

------------------------------------------------------------------------
         Size of plant or facility           Amount of speculative space
------------------------------------------------------------------------
0 to 50,000 sq. ft........................  10 percent.
50,001 to 250,000 sq. ft..................  5,000 sq. ft. or 8 percent,
                                             whichever is greater.

[[Page 82]]

 
250,001 to 1,000,000 sq. ft...............  20,000 sq. ft. or 5 percent,
                                             whichever is greater.
1,000,001 or more sq. ft..................  50,000 sq. ft. or 3 percent,
                                             whichever is greater.
------------------------------------------------------------------------

    (2) Projects with identified intended occupants. No assistance may 
be provided or utilized under this subpart for any project with 
identified intended occupants that is likely to facilitate:
    (i) A relocation of any operation of an industrial or commercial 
plant or facility or other business establishment from any UDAG eligible 
jurisdiction; or
    (ii) An expansion of any operation of an industrial or commercial 
plant or facility or other business establishment that results in a 
substantial reduction of any such operation in any UDAG eligible 
jurisdiction. The provisions of this paragraph (c)(2) shall not apply to 
a relocation of an operation or to an expansion of an operation within a 
metropolitan area. The provisions of this paragraph (c)(2) shall apply 
only to projects that do not have speculative space, or to projects that 
include both identified intended occupant space and speculative space.
    (iii) Significant and adverse effect. The restrictions established 
in this paragraph (c)(2) shall not apply if the Secretary determines 
that the relocation or expansion does not significantly and adversely 
affect the employment or economic base of the UDAG eligible jurisdiction 
from which the relocation or expansion occurs. However, the Secretary 
will not be required to make a determination whether there is a 
significant and adverse effect. If such a determination is undertaken, 
among the factors which the Secretary will consider are:
    (A) Whether it is reasonable to anticipate that there will be a 
significant net loss of jobs in the plant or facility being abandoned; 
and
    (B) Whether an equivalent productive use will be made of the plant 
or facility being abandoned by the relocating or expanding operation, 
thus creating no deterioration of economic base.
    (3) Within 90 days following notice of intent to withhold, deny or 
cancel assistance under paragraph (c) (1) or (2) of this section, the 
applicant may appeal in writing to the Secretary the withholding, denial 
or cancellation of assistance. The applicant will be notified and given 
an opportunity within a prescribed time for an informal consultation 
regarding the action.
    (4) Assistance for individuals adversely affected by prohibited 
relocations. (i) Any amount withdrawn by, recaptured by, or paid to the 
Secretary because of a violation (or a settlement of an alleged 
violation) of this section (or any regulation issued or contractual 
provision entered into to carry out this section) by a project with 
identified intended occupants will be made available by the Secretary as 
a grant to the UDAG eligible jurisdiction from which the operation of an 
industrial or commercial plant or facility or other business 
establishment was relocated, or in which the operation was reduced.
    (ii)(A) Any amount made available under this paragraph shall be used 
by the grantee to assist individuals who were employed by the operation 
involved before the relocation or reduction and whose employment or 
terms of employment were adversely affected by the relocation or 
reduction. The assistance shall include job training, job retraining, 
and job placement.
    (B) If any amount made available to a grantee under this paragraph 
(c)(4) is more than is required to provide the assistance described in 
paragraph (c)(4)(ii)(A) of this section, the grantee shall use the 
excess amount to carry out community development activities eligible 
under section 105(a) of the Housing and Community Development Act of 
1974.
    (iii)(A) The provisions of this paragraph (c)(4) shall be applicable 
to any amount withdrawn by, recaptured by, or paid to the Secretary 
under this section, including any amount withdrawn, recaptured, or paid 
before the effective date of this paragraph.
    (B) Grants may be made under this paragraph (c)(4) only to the 
extent of amounts provided in appropriation Acts.
    (5) For purposes of this section, the following definitions apply:

[[Page 83]]

    (i) ``Operation'' means any plant, equipment, facility, substantial 
number of positions, substantial employment opportunities, production 
capacity, or product line.
    (ii) ``Metropolitan area'' means a metropolitan area as defined in 
Sec. 570.3 and which consists of either a freestanding metropolitan area 
or a primary metropolitan statistical area where both primary and 
consolidated areas exist.
    (iii) ``Likely'' means probably or reasonably to be expected, as 
determined by firm evidence such as resolutions of a corporation to 
close a plant or facility, notifications of closure to collective 
bargaining units, correspondence and notifications of corporate 
officials relative to a closure, and supportive evidence, such as 
newspaper articles and notices to employees regarding closure of a plant 
or facility. Consultant studies and marketing studies may be submitted 
as supportive evidence, but by themselves are not firm evidence.
    (iv) ``UDAG eligible jurisdiction'' means a distressed community, a 
Pocket of Poverty, a Pocket of Poverty community, or an identifiable 
community described in section 119(p) of the Housing and Community 
Development Act of 1974.
    (6) Notwithstanding any other provision of this subpart, nothing in 
this subpart may be construed to permit an inference or conclusion that 
the policy of the urban development action grant program is to 
facilitate the relocation of businesses from one area to another.

[47 FR 7983, Feb. 23, 1982, as amended at 53 FR 33028, Aug. 29, 1988; 54 
FR 21169, May 16, 1989; 56 FR 56128, Oct. 31, 1991]



Sec. 570.457  Displacement, relocation, acquisition, and replacement
of housing.

    The displacement, relocation, acquisition, and replacement of 
housing requirements of Sec. 570.606 apply to applicants under this 
subpart G.

[55 FR 29309, July 18, 1990]



Sec. 570.461  Post-preliminary approval requirements; lead-based paint.

    The recipient may receive preliminary approval prior to the 
accomplishment of lead-based paint activities conducted pursuant to part 
35, subparts A, B, J, K, and R of this title, but no funds will be 
released until such actions are complete and evidence of compliance is 
submitted to HUD.

[64 FR 50225, Sept. 15, 1999]



Sec. 570.463  Project amendments and revisions.

    (a) Pre-approval revisions to the application. Applicants must 
submit to the HUD Area Office and to Central Office all revisions to the 
application. A revision is considered significant if it alters the 
scope, location, or scale of the project or changes the beneficiaries' 
population.

The applicant must hold at least one public hearing prior to making a 
significant revision to the application.
    (b) Post preliminary approval amendments. Applicants receiving 
preliminary approval must submit to the HUD Central Office, a request 
for approval of any significant amendment. A copy of the request must 
also be submitted to the Area Office. A significant amendment involves 
new activities or alterations thereof which will change the scope, 
location, scale, or beneficiaries of such activities or which, as a 
result of a number of smaller changes, add up to an amount that exceeds 
ten percent of the grant. HUD approval of amendments may be granted to 
those requests which meet all of the following criteria:
    (1) New or significantly altered activities must meet the criteria 
for selection applicable at the time of receipt of the program 
amendment.
    (2) The recipient must have complied with all requirements of this 
subpart.
    (3) The recipient may make amendments other than those requiring 
prior HUD approval as defined in paragraph (b) of this section but each 
recipient must notify both the Area and Central Offices of such changes.

[47 FR 7983, Feb. 23, 1982, as amended at 61 FR 11476, Mar. 20, 1996]



Sec. 570.464  Project closeout.

    HUD will advise the recipient to initiate closeout procedures when 
HUD determines, in consultation with the recipient, that there are not 
impediments to closeout. Closeout shall be

[[Page 84]]

carried out in accordance with Sec. 570.509 and applicable HUD 
guidelines.

[53 FR 8058, Mar. 11, 1988]



Sec. 570.465  Applicability of rules and regulations.

    The provisions of subparts A, B, C, J, K, and O of this part 570 
shall apply to this subpart except to the extent that they are modified 
or augmented by this subpart.



Sec. 570.466  Additional application submission requirements for Pockets
of Poverty--employment opportunities.

    Applicants for Action Grants under the Pockets of Poverty provision 
must describe the number and, to the extent possible, the types of new 
jobs (construction and permanent) that will be provided to the low- and 
moderate-income residents of the Pocket of Poverty as a direct result of 
the proposed project. If the application calls for job training programs 
(such as those related to the CETA program) or job recruiting services 
for the pocket's residents, then such proposed activities must be 
clearly and fully explained. HUD requires applicants to ensure that at 
least 75 percent of whatever permanent jobs initially result from the 
project are provided to low- and moderate-income persons and that at 
least 51 percent of whatever permanent jobs initially result from the 
project are provided to low- and moderate-income residents from the 
pocket. HUD encourages applicants to ensure that at least 20 percent of 
all permanent jobs are filled by persons from the pocket qualified to 
participate in the CETA program on a continuous basis. HUD requires all 
applicants to continuously use best efforts to ensure that at least 75 
percent of all permanent jobs resulting from any Action Grant-assisted 
project are provided to low- and moderate-income persons and that at 
least 51 percent of all permanent jobs resulting from any Action Grant-
assisted project are provided to low- and moderate-income residents from 
the pocket. The application should clearly describe how the applicant 
intends to meet initial and continuous job requirements. Private 
participating parties must meet these employment requirements in the 
aggregate. To enable the private participants to do so, lease agreements 
executed by a private participating party shall include:
    (a) Provisions requiring lessees to follow hiring practices that the 
private participating party has determined will enable it to meet these 
requirements in the aggregate; and
    (b) Provisions that will enable the private participating party to 
declare a default under the lease agreement if the lessees do not follow 
such practices.

[61 FR 11476, Mar. 20, 1996]

Subpart H [Reserved]



        Subpart I_State Community Development Block Grant Program

    Source: 57 FR 53397, Nov. 9, 1992, unless otherwise noted.



Sec. 570.480  General.

    (a) This subpart describes policies and procedures applicable to 
states that have permanently elected to receive Community Development 
Block Grant (CDBG) funds for distribution to units of general local 
government in the state's nonentitlement areas under the Housing and 
Community Development Act of 1974, as amended (the Act). Other subparts 
of part 570 are not applicable to the State CDBG program, except as 
expressly provided otherwise. Regulations of part 570 outside of this 
subpart that apply to the State CDBG program include Secs. 570.200(j) 
and 570.606.
    (b) HUD's authority for the waiver of regulations and for the 
suspension of requirements to address damage in a Presidentially-
declared disaster area is described in 24 CFR part 5 and in section 122 
of the Act, respectively.
    (c) In exercising the Secretary's obligation and responsibility to 
review a state's performance, the Secretary will give maximum feasible 
deference to the state's interpretation of the statutory requirements 
and the requirements of this regulation, provided that these 
interpretations are not plainly inconsistent with the Act and the 
Secretary's obligation to enforce compliance with the intent of the 
Congress as

[[Page 85]]

declared in the Act. The Secretary will not determine that a state has 
failed to carry out its certifications in compliance with requirements 
of the Act (and this regulation) unless the Secretary finds that 
procedures and requirements adopted by the state are insufficient to 
afford reasonable assurance that activities undertaken by units of 
general local government were not plainly inappropriate to meeting the 
primary objectives of the Act, this regulation, and the state's 
community development objectives.
    (d) Administrative action taken by the Secretary that is not 
explicitly and fully part of this regulation shall only apply to a 
specific case or issue at a specific time, and shall not be generally 
applicable to the state-administered CDBG program.
    (e) Religious organizations are eligible to participate under the 
State CDBG Program as provided in Sec. 570.200(j).
    (f) In administering the CDBG program, a state may impose additional 
or more restrictive provisions on units of general local government 
participating in the state's program, provided that such provisions are 
not inconsistent with the Act or other statutory or regulatory 
provisions that are applicable to the State CDBG program.
    (g) States shall make CDBG program grants only to units of general 
local government. This restriction does not limit a state's authority to 
make payments to other parties for state administrative expenses and 
technical assistance activities authorized in section 106(d) of the Act.
    (h) Any unexpended CDBG origin year grant funds in the United States 
Treasury account on September 30 of the fifth Federal fiscal year after 
the end of the origin year grant's period of availability for obligation 
by HUD will be canceled. HUD may require an earlier expenditure and draw 
down deadline under a grant agreement.

[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 11477, Mar. 20, 1996; 61 
FR 54921, Oct. 22, 1996; 69 FR 41718, July 9, 2004; 77 FR 24142, Apr. 
23, 2012; 80 FR 69870, Nov. 12, 2015]



Sec. 570.481  Definitions.

    (a) Except for terms defined in applicable statutes or this subpart, 
the Secretary will defer to a state's definitions, provided that these 
definitions are explicit, reasonable and not plainly inconsistent with 
the Act. As used in this subpart, the following terms shall have the 
meaning indicated:
    (1) Act means title I of the Housing and Community Development Act 
of 1974 (42 U.S.C. 5301 et seq.).
    (2) CDBG funds means Community Development Block Grant funds, in the 
form of grants under this subpart including any reimbursements, program 
income, and loans guaranteed under section 108 of the Act.
    (3) Origin year means the specific Federal fiscal year during which 
the annual grant funds were appropriated.
    (b) [Reserved]

[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 5209, Feb. 9, 1996; 74 
FR 36389, July 22, 2009; 80 FR 69871, Nov. 12, 2015]



Sec. 570.482  Eligible activities.

    (a) General. The choice of activities on which block grant funds are 
expended represents the determination by state and local participants, 
developed in accordance with the state's program design and procedures, 
as to which approach or approaches will best serve these interests. The 
eligible activities are listed at section 105(a) of the Act.
    (b) Special assessments under the CDBG program. The following 
policies relate to special assessments under the CDBG program:
    (1) Public improvements initially assisted with CDBG funds. Where 
CDBG funds are used to pay all or part of the cost of a public 
improvement, special assessments may be imposed as follows:
    (i) Special assessments to recover the CDBG funds may be made only 
against properties owned and occupied by persons not of low and moderate 
income. These assessments constitute program income.
    (ii) Special assessments to recover the non-CDBG portion may be 
made, provided that CDBG funds are used to pay the special assessment in 
behalf of all properties owned and occupied by low and moderate income 
persons; except that CDBG funds need not be used to pay the special 
assessments in behalf of properties owned and occupied

[[Page 86]]

by moderate income persons if, when permitted by the state, the unit of 
general local government certifies that it does not have sufficient CDBG 
funds to pay the assessments in behalf of all of the low and moderate 
income owner-occupant persons. Funds collected through such special 
assessments are not program income.
    (2) Public improvements not initially assisted with CDBG funds. CDBG 
funds may be used to pay special assessments levied against property 
when this form of assessment is used to recover the capital cost of 
eligible public improvements initially financed solely from sources 
other than CDBG funds. The payment of special assessments with CDBG 
funds constitutes CDBG assistance to the public improvement. Therefore, 
CDBG funds may be used to pay special assessments, provided that:
    (i) The installation of the public improvements was carried out in 
compliance with requirements applicable to activities assisted under 
this subpart, including labor, environmental and citizen participation 
requirements;
    (ii) The installation of the public improvement meets a criterion 
for national objectives. (See Sec. 570.483(b)(1), (c), and (d).)
    (iii) The requirements of Sec. 570.482(b)(1)(ii) are met.
    (c) Special eligibility provisions. (1) Microenterprise development 
activities eligible under section 105(a)(23) of the Housing and 
Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.) 
(the Act) may be carried out either through the recipient directly or 
through public and private organizations, agencies, and other 
subrecipients (including nonprofit and for-profit subrecipients).
    (2) Provision of public services. The following activities shall not 
be subject to the restrictions on public services under section 
105(a)(8) of the Act:
    (i) Support services provided under section 105(a)(23) of the Act, 
and paragraph (c) of this section;
    (ii) Services carried out under the provisions of section 105(a)(15) 
of the Act, that are specifically designed to increase economic 
opportunities through job training and placement and other employment 
support services, including, but not limited to, peer support programs, 
counseling, child care, transportation, and other similar services; and
    (iii) Services of any type carried out under the provisions of 
section 105(a)(15) of the Act pursuant to a strategy approved by a state 
under the provisions of Sec. 91.315(e)(2) of this title.
    (3) Environmental cleanup and economic development or redevelopment 
of contaminated properties. Remediation of known or suspected 
environmental contamination may be undertaken under the authority of 
section 205 of Public Law 105-276 and section 105(a)(4) of the Act. 
Economic development activities carried out under sections 105(a)(14), 
(a)(15), or (a)(17) of the Act may include costs associated with 
project-specific assessment or remediation of known or suspected 
environmental contamination.
    (4) Housing counseling, as defined in 24 CFR 5.100, that is funded 
with or provided in connection with CDBG funds must be carried out in 
accordance with 24 CFR 5.111.
    (5) Broadband infrastructure in housing. Any new construction or 
substantial rehabilitation, as substantial rehabilitation is defined by 
24 CFR 5.100, of a building with more than 4 rental units, for which 
CDBG funds are first obligated by the State's grant recipient on or 
after July 18, 2017, must include installation of broadband 
infrastructure, as this term is also defined in 24 CFR 5.100, except 
where the State or the State's grant recipient determines and documents 
the determination that:
    (i) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (ii) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (iii) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.
    (d) [Reserved]
    (e) Guidelines and objectives for evaluating project costs and 
financial requirements--(1) Applicability. The following guidelines, 
also referred to as the underwriting guidelines, are provided to

[[Page 87]]

assist the recipient to evaluate and select activities to be carried out 
for economic development purposes. Specifically, these guidelines are 
applicable to activities that are eligible for CDBG assistance under 
section 105(a)(17) of the Act, economic development activities eligible 
under section 105(a)(14) of the Act, and activities that are part of a 
community economic development project eligible under section 105(a)(15) 
of the Act. The use of the underwriting guidelines published by HUD is 
not mandatory. However, states electing not to use these guidelines 
would be expected to ensure that the state or units of general local 
government conduct basic financial underwriting prior to the provision 
of CDBG financial assistance to a for-profit business.
    (2) Objectives. The underwriting guidelines are designed to provide 
the recipient with a framework for financially underwriting and 
selecting CDBG-assisted economic development projects which are 
financially viable and will make the most effective use of the CDBG 
funds. Where appropriate, HUD's underwriting guidelines recognize that 
different levels of review are appropriate to take into account 
differences in the size and scope of a proposed project, and in the case 
of a microenterprise or other small business to take into account the 
differences in the capacity and level of sophistication among businesses 
of differing sizes. Recipients are encouraged, when they develop their 
own programs and underwriting criteria, to also take these factors into 
account. These underwriting guidelines are published as appendix A to 
this part. The objectives of the underwriting guidelines are to ensure:
    (i) That project costs are reasonable;
    (ii) That all sources of project financing are committed;
    (iii) That to the extent practicable, CDBG funds are not substituted 
for non-Federal financial support;
    (iv) That the project is financially feasible;
    (v) That to the extent practicable, the return on the owner's equity 
investment will not be unreasonably high; and
    (vi) That to the extent practicable, CDBG funds are disbursed on a 
pro rata basis with other finances provided to the project.
    (f) Standards for evaluating public benefit--(1) Purpose and 
applicability. The grantee is responsible for making sure that at least 
a minimum level of public benefit is obtained from the expenditure of 
CDBG funds under the categories of eligibility governed by these 
standards. The standards set forth below identify the types of public 
benefit that will be recognized for this purpose and the minimum level 
of each that must be obtained for the amount of CDBG funds used. These 
standards are applicable to activities that are eligible for CDBG 
assistance under section 105(a)(17) of the Act, economic development 
activities eligible under section 105(a)(14) of the Act, and activities 
that are part of a community economic development project eligible under 
section 105(a)(15) of the Act. Certain public facilities and 
improvements eligible under section 105(a)(2) of the Act, which are 
undertaken for economic development purposes, are also subject to these 
standards, as specified in Sec. 570.483(b)(4)(vi)(F)(2). Unlike the 
guidelines for project costs and financial requirements covered under 
paragraph (a) of this section, the use of the standards for public 
benefit is mandatory.
    (2) Standards for activities in the aggregate. Activities covered by 
these standards must, in the aggregate, either:
    (i) Create or retain at least one full-time equivalent, permanent 
job per $35,000 of CDBG funds used; or
    (ii) Provide goods or services to residents of an area, such that 
the number of low- and moderate-income persons residing in the areas 
served by the assisted businesses amounts to at least one low- and 
moderate-income person per $350 of CDBG funds used.
    (3) Applying the aggregate standards. (i) A state shall apply the 
aggregate standards under paragraph (e)(2) of this section to all funds 
distributed for applicable activities from each annual grant. This 
includes the amount of the annual grant, any funds reallocated by HUD to 
the state, any program income distributed by the state and any 
guaranteed loan funds made under the provisions of subpart M of this 
part covered in the method of distribution in

[[Page 88]]

the final statement for a given annual grant year.
    (ii) The grantee shall apply the aggregate standards to the number 
of jobs to be created/retained, or to the number of persons residing in 
the area served (as applicable), as determined at the time funds are 
obligated to activities.
    (iii) Where an activity is expected both to create or retain jobs 
and to provide goods or services to residents of an area, the grantee 
may elect to count the activity under either the jobs standard or the 
area residents standard, but not both.
    (iv) Where CDBG assistance for an activity is limited to job 
training and placement and/or other employment support services, the 
jobs assisted with CDBG funds shall be considered to be created or 
retained jobs for the purposes of applying the aggregate standards.
    (v) Any activity subject to these standards which meets one or more 
of the following criteria may, at the grantee's option, be excluded from 
the aggregate standards described in paragraph (f)(2) of this section:
    (A) Provides jobs exclusively for unemployed persons or participants 
in one or more of the following programs:
    (1) Jobs Training Partnership Act (JTPA);
    (2) Jobs Opportunities for Basic Skills (JOBS); or
    (3) Aid to Families with Dependent Children (AFDC);
    (B) Provides jobs predominantly for residents of Public and Indian 
Housing units;
    (C) Provides jobs predominantly for homeless persons;
    (D) Provides jobs predominantly for low-skilled, low- and moderate-
income persons, where the business agrees to provide clear opportunities 
for promotion and economic advancement, such as through the provision of 
training;
    (E) Provides jobs predominantly for persons residing within a census 
tract (or block numbering area) that has at least 20 percent of its 
residents who are in poverty;
    (F) Provides assistance to business(es) that operate(s) within a 
census tract (or block numbering area) that has at least 20 percent of 
its residents who are in poverty;
    (G) Stabilizes or revitalizes a neighborhood income that has at 
least 70 percent of its residents who are low- and moderate-income;
    (H) Provides assistance to a Community Development Financial 
Institution (as defined in the Community Development Banking and 
Financial Institutions Act of 1994, (12 U.S.C. 4701 note)) serving an 
area that has at least 70 percent of its residents who are low- and 
moderate-income;
    (I) Provides assistance to an organization eligible to carry out 
activities under section 105(a)(15) of the Act serving an area that has 
at least 70 percent of its residents who are low- and moderate-income;
    (J) Provides employment opportunities that are an integral component 
of a project designed to promote spatial deconcentration of low- and 
moderate-income and minority persons;
    (K) With prior HUD approval, provides substantial benefit to low-
income persons through other innovative approaches;
    (L) Provides services to the residents of an area pursuant to a 
strategy approved by the State under the provisions of Sec. 91.315(e)(2) 
of this title;
    (M) Creates or retains jobs through businesses assisted in an area 
pursuant to a strategy approved by the State under the provisions of 
Sec. 91.315(e)(2) of this title.
    (N) Directly involves the economic development or redevelopment of 
environmentally contaminated properties.
    (4) Standards for individual activities. Any activity subject to 
these standards which falls into one or more of the following categories 
will be considered by HUD to provide insufficient public benefit, and 
therefore may under no circumstances be assisted with CDBG funds:
    (i) The amount of CDBG assistance exceeds either of the following, 
as applicable:
    (A) $50,000 per full-time equivalent, permanent job created or 
retained; or
    (B) $1,000 per low- and moderate-income person to which goods or 
services are provided by the activity.
    (ii) The activity consists of or includes any of the following:

[[Page 89]]

    (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 
low- and 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) Applying the individual activity standards. (i) Where an 
activity is expected both to create or retain jobs and to provide goods 
or services to residents of an area, it will be disqualified only if the 
amount of CDBG assistance exceeds both of the amounts in paragraph 
(f)(4)(i) of this section.
    (ii) The individual activity tests in paragraph (f)(4)(i) of this 
section shall be applied to the number of jobs to be created or 
retained, or to the number of persons residing in the area served (as 
applicable), as determined at the time funds are obligated to 
activities.
    (iii) Where CDBG assistance for an activity is limited to job 
training and placement and/or other employment support services, the 
jobs assisted with CDBG funds shall be considered to be created or 
retained jobs for the purposes of applying the individual activity 
standards in paragraph (f)(4)(i) of this section.
    (6) Documentation. The state and its grant recipients must maintain 
sufficient records to demonstrate the level of public benefit, based on 
the above standards, that is actually achieved upon completion of the 
CDBG-assisted economic development activity(ies) and how that compares 
to the level of such benefit anticipated when the CDBG assistance was 
obligated. If a state grant recipient's actual results show a pattern of 
substantial variation from anticipated results, the state and its 
recipient are expected to take those actions reasonably within their 
respective control to improve the accuracy of the projections. If the 
actual results demonstrate that the state has failed the public benefit 
standards, HUD may require the state to meet more stringent standards in 
future years as appropriate.
    (g) Amendments to economic development projects after review 
determinations. If, after the grantee enters into a contract to provide 
assistance to a project, the scope or financial elements of the project 
change to the extent that a significant contract amendment is 
appropriate, the project should be reevaluated under these and the 
recipient's guidelines. (This would include, for example, situations 
where the business requests a change in the amount or terms of 
assistance being provided, or an extension to the loan payment period 
required in the contract.) If a reevaluation of the project indicates 
that the financial elements and public benefit to be derived have also 
substantially changed, then the recipient should make appropriate 
adjustments in the amount, type, terms or conditions of CDBG assistance 
which has been offered, to reflect the impact of the substantial change. 
(For example, if a change in the project elements results in a 
substantial reduction of the total project costs, it may be appropriate 
for the recipient to reduce the amount of total CDBG assistance.) If the 
amount of CDBG assistance provided to the project is increased, the 
amended project must still comply with the public benefit standards 
under paragraph (f) of this section.
    (h) Prohibition on use of assistance for employment relocation 
activities--(1) Prohibition. CDBG funds may not be used to directly 
assist a business, including a business expansion, in the relocation of 
a plant, facility, or operation from one labor market area (LMA) to 
another LMA if the relocation is likely to result in a significant loss 
of jobs in the LMA from which the relocation occurs.
    (2) Definitions. The following definitions apply to the section:
    (i) Directly assist. Directly assist means the provision of CDBG 
funds to a business pursuant to section

[[Page 90]]

105(a)(15) or (17) of the Housing and Community Development Act of 1974 
(42 U.S.C. 5301 et seq). Direct assistance also includes assistance 
under section 105(a)(1), (2), (4), (7), and (14) of the Housing and 
Community Development Act of 1974, when the state's grantee, 
subrecipient, or nonprofit entity eligible under section 105(a)(15) 
enters into an agreement with a business to undertake one or more of 
these activities as a condition of the business relocating a facility, 
plant, or operation to the LMA. Provision of public facilities and 
indirect assistance that will provide benefit to multiple businesses 
does not fall under the definition of ``directly assist,'' unless it 
includes the provision of infrastructure to aid a specific business that 
is the subject of an agreement with the specific assisted business.
    (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, nor can a 
non-metropolitan LMA be combined with a metropolitan LMA. For the 
Insular Areas, each jurisdiction will be considered to be an LMA. For 
the HUD-administered 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.
    (iii) Operation. A business operation includes, but is not limited 
to, any equipment, employment opportunity, production capacity, or 
product line of the business.
    (iv) Significant loss of jobs. (A) A loss of jobs is significant if: 
The number of jobs to be lost in the LMA in which the affected business 
is currently located is equal to or greater than one-tenth of one 
percent of the total number of persons in the labor force of that LMA; 
or in all cases, a loss of 500 or more jobs. Notwithstanding the 
aforementioned, a loss of 25 jobs or fewer does not constitute a 
significant loss of jobs.
    (B) A job is considered to be lost due to the provision of CDBG 
assistance if the job is relocated within three years from the date the 
assistance is provided to the business or the time period within which 
jobs are to be created as specified by the agreement among the business, 
the recipient, and the state (as applicable) if it is longer than three 
years.
    (3) Written agreement. Before directly assisting a business with 
CDBG funds, the recipient, subrecipient, or (in the case of any activity 
carried out pursuant to 105(a)(15)) nonprofit entity shall sign a 
written agreement with the assisted business. The written agreement 
shall include:
    (i) Statement. A statement from the assisted business as to whether 
the assisted activity will result in the relocation of any industrial or 
commercial plant, facility, or operation from one LMA to another and, if 
so, the number of jobs that will be relocated from each LMA;
    (ii) Required certification. If the assistance will not result in a 
relocation covered by this section, a certification from the assisted 
business that neither it, nor any of its subsidiaries, has plans to 
relocate jobs at the time the agreement is signed that would result in a 
significant job loss as defined in this rule; and

[[Page 91]]

    (iii) Reimbursement of assistance. The agreement shall provide for 
reimbursement to the recipient of any assistance provided to, or 
expended on behalf of, the business in the event that assistance results 
in a relocation prohibited under this section.
    (4) Assistance not covered by this paragraph. This paragraph does 
not apply to:
    (i) Relocation assistance. Relocation assistance required by the 
Uniform Assistance and Real Property Acquisition Policies Act of 1970 
(URA), (42 U.S.C. 4601-4655); optional relocation assistance under 
section 105(a)(11), as implemented at 570.606(d);
    (ii) Microenterprises. Assistance to microenterprises as defined by 
section 102(a)(22) of the Housing and Community Development Act of 1974; 
and
    (iii) Arms-length transactions. Assistance to a business that 
purchases business equipment, inventory, or other physical assets in an 
arms-length transaction, including the assets of an existing business, 
provided that the purchase does not result in the relocation of the 
sellers' business operation (including customer base or list, goodwill, 
product lines, or trade names) from one LMA to another LMA and does not 
produce a significant loss of jobs in the LMA from which the relocation 
occurs.

[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1949, Jan. 5, 1995; 61 
FR 54921, Oct. 22, 1996; 70 FR 76370, Dec. 23, 2005; 71 FR 30035, May 
24, 2006; 81 FR 90659, Dec. 14, 2016; 81 FR 92636, Dec. 20, 2016]



Sec. 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 
Sec. 570.480(b)).
    (b) Activities benefiting low and moderate income persons. An 
activity will be considered to address the objective of benefiting low 
and moderate income persons if it meets one of the criteria in paragraph 
(b) of this section, 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 activities, 
when taken as a whole, must 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 particular area, where at least 
51 percent of the residents are low and moderate income persons. Such an 
area need not be coterminous with census tracts or other officially 
recognized boundaries but must be the entire area served by the 
activity. Units of general local government may, at the discretion of 
the state, use either HUD-provided data comparing census data with 
appropriate low and moderate income levels or survey data that is 
methodologically sound. An activity that serves an area that is not 
primarily residential in character shall not qualify under this 
criterion.
    (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

[[Page 92]]

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) The percentage of the total costs of the system paid for by CDBG 
funds does not exceed the percentage of low and moderate income persons 
in the service area of the system. The unit of general local government 
must include a description of the boundaries of the service area of the 
system; the census tracts or enumeration districts within the 
boundaries; the total number of persons and the total number of low and 
moderate income persons in each census tract or enumeration district, 
and the percentage of low and moderate income persons in 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 paragraph (b)(1) of this 
section.
    (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 case-by-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 and moderate 
income persons. The following kinds of activities may not qualify under 
paragraph (b)(2) of this section:
    (A) Activities, the benefits of which are available to all the 
residents of an area;
    (B) Activities involving the acquisition, construction or 
rehabilitation of property for housing; or
    (C) Activities where the benefit to low- and moderate-income persons 
to

[[Page 93]]

be considered is the creation or retention of jobs, except as provided 
in paragraph (b)(2)(v) of this section.
    (ii) To qualify under paragraph (b)(2) of this section, the activity 
must meet one or the following tests:
    (A) It must benefit a clientele who are generally presumed to be 
principally low and moderate income persons. Activities that exclusively 
serve a group of persons in any one or a combination of the following 
categories may be presumed to benefit persons, 51 percent of whom are 
low and moderate income: abused children, battered spouses, elderly 
persons, adults meeting the Bureau of the Census' Current Population 
Reports definition of ``severely disabled,'' homeless persons, 
illiterate adults, persons living with AIDS, and migrant farm workers; 
or
    (B) It must require information on family size and income so that it 
is evident that at least 51 percent of the clientele are persons whose 
family income does not exceed the low and moderate income limit; or
    (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 Sec. 570.483(b)(1);
    (B) The rehabilitation of a privately owned nonresidential building 
or improvement that does not qualify under Sec. 570.483(b) (1) or (4); 
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 Sec. 570.483(b)(3).
    (iv) A microenterprise assistance activity (carried out in 
accordance with the provisions of section 105(a)(23) of the Act or 
Sec. 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.
    (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

[[Page 94]]

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 new construction of a multifamily, non-elderly 
rental housing project; and
    (B) Not less than 20 percent of the units will be occupied by low 
and moderate income 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, 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 of 
Sec. 92.252 or Sec. 92.254 of this title are met.
    (4) Job creation or retention activities. (i) An activity designed 
to create permanent jobs where at least 51 percent of the jobs, computed 
on a full time equivalent basis, involve the employment of low and 
moderate income persons. For an activity that creates jobs, the unit of 
general local government must document that at least 51 percent of the 
jobs will be held by, or will be made available to low and moderate 
income persons.
    (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 will be considered to be available to low and moderate 
income persons for these purposes only if:
    (A) Special skills that can only be acquired with substantial 
training or work experience or education beyond high school are not a 
prerequisite to fill such jobs, 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.
    (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) He/she resides within a census tract (or block numbering area) 
that either:
    (1) Meets the requirements of paragraph (b)(4)(v) of this section; 
or
    (2) Has at least 70 percent of its residents who are low- and 
moderate-income persons; or

[[Page 95]]

    (B) The assisted business is located within a census tract (or block 
numbering area) that meets the requirements of paragraph (b)(4)(v) of 
this section and the job under consideration is to be located within 
that census tract.
    (v) A census tract (or block numbering area) qualifies for the 
presumptions permitted under paragraphs (b)(4)(iv) (A)(1) and (B) of 
this section if it is either part of a Federally-designated Empowerment 
Zone or Enterprise Community or meets the following criteria:
    (A) It has a poverty rate of at least 20 percent as determined by 
the most recently available decennial census information;
    (B) It does not include any portion of a central business district, 
as this term is used in the most recent Census of Retail Trade, unless 
the tract has a poverty rate of at least 30 percent as determined by the 
most recently available decennial census information; and
    (C) It evidences pervasive poverty and general distress by meeting 
at least one of the following standards:
    (1) All block groups in the census tract have poverty rates of at 
least 20 percent;
    (2) The specific activity being undertaken is located in a block 
group that has a poverty rate of at least 20 percent; or
    (3) Upon the written request of 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, and deteriorated infrastructure or 
substantial population decline.
    (vi) 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, 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 Sec. 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.

[[Page 96]]

    (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 Sec. 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 area also meets the conditions in either paragraph 
(c)(1)(ii)(A) or(c)(1)(ii)(B) of this section.
    (A) At least 25 percent of properties throughout the area experience 
one or more of the following conditions:
    (1) Physical deterioration of buildings or improvements;
    (2) Abandonment of properties;
    (3) Chronic high occupancy turnover rates or chronic high vacancy 
rates in commercial or industrial buildings;
    (4) Significant declines in property values or abnormally low 
property values relative to other areas in the community; or
    (5) Known or suspected environmental contamination.
    (B) The public improvements throughout the area are in a general 
state of deterioration.
    (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 before 
rehabilitation, and all deficiencies making a building substandard have 
been eliminated if less critical work on the building is also 
undertaken. The State shall ensure that the unit of general local 
government has developed minimum standards for building quality which 
may take into account local conditions.
    (iv) The state keeps records sufficient to document its findings 
that a project meets the national objective of prevention or elimination 
of slums and blight. The state must establish definitions of the 
conditions listed at Sec. 570.483(c)(1)(ii)(A) and 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 be redetermined every 10 years for continued qualification. 
Documentation must be retained pursuant to the recordkeeping 
requirements contained at Sec. 570.490.
    (2) Activities to address slums or blight on a spot basis. The 
following activities can 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

[[Page 97]]

rehabilitation of buildings or improvements. However, rehabilitation 
must be limited to eliminating those conditions that are detrimental to 
public health and safety. 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.
    (3) Planning only activities. An activity involving planning (when 
the activity is the only activity for which the grant to the unit of 
general local government is given, or the planning activity is unrelated 
to any other activity assisted by the grant) if the plans are for a slum 
or blighted area, or if all elements of the planning are necessary for 
and related to an activity which, if funded, would meet one of the other 
criteria of elimination of slums or blight.
    (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 Sec. 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.

[[Page 98]]

    (5) If the unit of general local government has elected to prepare a 
community revitalization strategy pursuant to the authority of 
Sec. 91.315(e)(2) of this title, 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 Sec. 570.483(b)(1)(v) instead of the criteria at 
Sec. 570.483(b)(4); 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 Sec. 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.

[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1951, Jan. 5, 1995; 60 
FR 17445, Apr. 6, 1995; 61 FR 54921, Oct. 22, 1996; 71 FR 30036, May 24, 
2006]



Sec. 570.484  Overall benefit to low and moderate income persons.

    (a) General. The State must certify that, in the aggregate, not less 
than 70 percent of the CDBG funds received by the state during a period 
specified by the state, not to exceed three years, will be used for 
activities that benefit persons of low and moderate income. The period 
selected and certified to by the state shall be designated by fiscal 
year of annual grants, and shall be for one, two or three consecutive 
annual grants. The period shall be in effect until all included funds 
are expended. No CDBG funds may be included in more than one period 
selected, and all CDBG funds received must be included in a selected 
period.
    (b) Computation of 70 percent benefit. Determination that a state 
has carried out its certification under paragraph (a) of this section 
requires evidence that not less than 70 percent of the aggregate of the 
designated annual grant(s), any funds reallocated by HUD to the state, 
any distributed program income and any guaranteed loan funds under the 
provisions of subpart M of this part covered in the method of 
distribution in the final statement or statements for the designated 
annual grant year or years have been expended for activities meeting 
criteria as provided in Sec. 570.483(b) for activities benefiting low 
and moderate income persons. In calculating the percentage of funds 
expended for such activities:
    (1) All CDBG funds included in the period selected and certified to 
by the state shall be accounted for, except for funds used by the State, 
or by the units of general local government, for program administration, 
or for planning activities other than those which must meet a national 
objective under Sec. 570.483 (b)(5) or (c)(3).
    (2) Any funds expended by a state for the purpose of repayment of 
loans guaranteed under the provisions of subpart M of this part shall be 
excepted from inclusion in this calculation.
    (3) Except as provided in paragraph (b)(4) of this section, CDBG 
funds expended for an eligible activity meeting the criteria for 
activities benefiting low and moderate income persons shall count in 
their entirety towards meeting the 70 percent benefit to persons of low 
and moderate income requirement.
    (4) Funds expended for the acquisition, new construction or 
rehabilitation of property for housing that qualifies under 
Sec. 570.483(b)(3) shall be counted for this purpose, but shall be 
limited to an amount determined by multiplying the total cost (including 
CDBG

[[Page 99]]

and non-CDBG costs) of the acquisition, construction or rehabilitation 
by the percent of units in such housing to be occupied by low and 
moderate income persons, except that the amount counted shall not exceed 
the amount of CDBG funds provided.



Sec. 570.485  Making of grants.

    (a) Required submissions. In order to receive its annual CDBG grant 
under this subpart, a State must submit a consolidated plan in 
accordance with 24 CFR part 91. That part includes requirements for the 
content of the consolidated plan, for the process of developing the 
plan, including citizen participation provisions, for the submission 
date, for HUD approval, and for the amendment process.
    (b) Failure to make submission. The state's failure to make the 
submission required by paragraph (a) of this section within the 
prescribed deadline constitutes the state's election not to receive and 
distribute amounts allocated for its nonentitlement areas for the 
applicable fiscal year. Funds will be either:
    (1) Administered by HUD pursuant to subpart F of this part if the 
state has not administered the program in any previous fiscal year; or
    (2) Reallocated to all states in the succeeding fiscal year 
according to the formula of section 106(d) of the Act, if the state 
administered the program in any previous year.
    (c) Approval of grant. HUD will approve a grant if the State's 
submissions have been made and approved in accordance with 24 CFR part 
91, and the certifications required therein are satisfactory to the 
Secretary. The certifications will be satisfactory to the Secretary for 
this purpose unless the Secretary has determined pursuant to 
Sec. 570.493 that the State has not complied with the requirements of 
this subpart, or has determined that there is evidence, not directly 
involving the State's past performance under this program, that tends to 
challenge in a substantial manner the State's certification of future 
performance. If the Secretary makes any such determination, however, the 
State may be required to submit further assurances as the Secretary may 
deem warranted or necessary to find the grantee's certification 
satisfactory.
    (d) Specific conditions.--HUD may impose additional specific award 
conditions on States in accordance with 2 CFR 200.207.

[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1916, Jan. 5, 1995; 61 
FR 54922, Oct. 22, 1996; 80 FR 69871, Nov. 12, 2015]



Sec. 570.486  Local government requirements.

    (a) Citizen participation requirements of a unit of general local 
government. Each unit of general local government shall meet the 
following requirements as required by the state at Sec. 91.115(e) of 
this title.
    (1) Provide for and encourage citizen participation, particularly by 
low and moderate income persons who reside in slum or blighted areas and 
areas in which CDBG funds are proposed to be used;
    (2) Ensure that residents will be given reasonable and timely access 
to local meetings, consistent with accessibility and reasonable 
accommodation requirements in accordance with section 504 of the 
Rehabilitation Act of 1973 and the regulations at 24 CFR part 8, and the 
Americans with Disabilities Act and the regulations at 28 CFR parts 35 
and 36, as applicable, as well as information and records relating to 
the unit of local government's proposed and actual use of CDBG funds;
    (3) Furnish citizens information, including but not limited to:
    (i) The amount of CDBG funds expected to be made available for the 
current fiscal year (including the grant and anticipated program 
income);
    (ii) The range of activities that may be undertaken with the CDBG 
funds;
    (iii) The estimated amount of the CDBG funds proposed to be used for 
activities that will meet the national objective of benefit to low and 
moderate income persons; and
    (iv) The proposed CDBG activities likely to result in displacement 
and the unit of general local government's antidisplacement and 
relocation plans required under Sec. 570.488.
    (4) Provide technical assistance to groups that are representative 
of persons of low- and moderate-income that

[[Page 100]]

request assistance in developing proposals (including proposed 
strategies and actions to affirmatively further fair housing) in 
accordance with the procedures developed by the State. Such assistance 
need not include providing funds to such groups;
    (5) Provide for a minimum of two public hearings, each at a 
different stage of the program, for the purpose of obtaining residents' 
views and responding to proposals and questions. Together the hearings 
must cover community development and housing needs (including 
affirmatively furthering fair housing), development of proposed 
activities, and a review of program performance. The public hearings to 
cover community development and housing needs must be held before 
submission of an application to the State. There must be reasonable 
notice of the hearings and they must be held at times and accessible 
locations convenient to potential or actual beneficiaries, with 
accommodations for persons with disabilities. Public hearings shall be 
conducted in a manner to meet the needs of non-English speaking 
residents where a significant number of non-English speaking residents 
can reasonably be expected to participate;
    (6) Provide citizens with reasonable advance notice of, and 
opportunity to comment on, proposed activities in an application to the 
state and, for grants already made, activities which are proposed to be 
added, deleted or substantially changed from the unit of general local 
government's application to the state. Substantially changed means 
changes made in terms of purpose, scope, location or beneficiaries as 
defined by criteria established by the state.
    (7) Provide citizens the address, phone number, and times for 
submitting complaints and grievances, and provide timely written answers 
to written complaints and grievances, within 15 working days where 
practicable.
    (b) Activities serving beneficiaries outside the jurisdiction of the 
unit of general local government. Any activity carried out by a 
recipient of State CDBG program funds must significantly benefit 
residents of the jurisdiction of the grant recipient, and the unit of 
general local government must determine that the activity is meeting its 
needs in accordance with section 106(d)(2)(D) of the Act. For an 
activity to significantly benefit residents of the recipient 
jurisdiction, the CDBG funds expended by the unit of general local 
government must not be unreasonably disproportionate to the benefits to 
its residents.
    (c) Activities located in Entitlement jurisdictions. Any activity 
carried out by a recipient of State CDBG program funds in entitlement 
jurisdictions must significantly benefit residents of the jurisdiction 
of the grant recipient, and the State CDBG recipient must determine that 
the activity is meeting its needs in accordance with section 
106(d)(2)(D) of the Act. For an activity to significantly benefit 
residents of the recipient jurisdiction, the CDBG funds expended by the 
unit of general local government must not be unreasonably 
disproportionate to the benefits to its residents. In addition, the 
grant cannot be used to provide a significant benefit to the entitlement 
jurisdiction unless the entitlement grantee provides a meaningful 
contribution to the project.

[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996; 77 
FR 24143, Apr. 23, 2012; 80 FR 42367, July 16, 2015]



Sec. 570.487  Other applicable laws and related program requirements.

    (a) General. Certain statutes are expressly made applicable to 
activities assisted under the Act by the Act itself, while other laws 
not referred to in the Act may be applicable to such activities by their 
own terms. Certain statutes or executive orders that may be applicable 
to activities assisted under the Act by their own terms are administered 
or enforced by governmental officials, departments or agencies other 
than HUD. Paragraphs (d) and (c) of this section contain two of the 
requirements expressly made applicable to CDBG activities by the Act 
itself.
    (b) Affirmatively furthering fair housing. The Act requires the 
State to certify to the satisfaction of HUD that it will affirmatively 
further fair housing. The Act also requires each unit of general local 
government to certify that it will affirmatively further fair housing. 
The certification that the State will

[[Page 101]]

affirmatively further fair housing shall specifically require the State 
to assume the responsibility of fair housing planning by:
    (1) Taking meaningful actions to further the goals identified in an 
AFH conducted in accordance with the requirements of 24 CFR5.150 through 
5.180;
    (2) Taking no action that is materially inconsistent with its 
obligation to affirmatively further fair housing; and
    (3) Assuring that units of local government funded by the State 
comply with their certifications to affirmatively further fair housing.
    (c) Lead-Based Paint Poisoning Prevention Act. States shall devise, 
adopt and carry out procedures with respect to CDBG assistance that 
fulfill the objectives and requirements of the Lead-Based Paint 
Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-
Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and 
implementing regulations at part 35, subparts A, B, J, K, and R of this 
title.
    (d) States shall comply with section 3 of the Housing and Urban 
Development Act of 1968 (12 U.S.C. 1701u) and the implementing 
regulations in 24 CFR part 135. Section 3 requires that employment and 
other economic opportunities arising in connection with housing 
rehabilitation, housing construction, or other public construction 
projects shall, to the greatest extent feasible, and consistent with 
existing Federal, State, and local laws and regulations, be given to 
low- and very low-income persons.
    (e) Architectural Barriers Act and the Americans with Disabilities 
Act. The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) 
requires certain Federal and Federally-funded buildings and other 
facilities to be designed, constructed, or altered in accordance with 
standards that ensure accessibility to, and use by, physically 
handicapped people. A building or facility designed, constructed, or 
altered with funds allocated or reallocated under this subpart after 
November 21, 1996 and that meets the definition of residential structure 
as defined in 24 CFR 40.2, or the definition of building as defined in 
41 CFR 101-19.602(a), is subject to the requirements of the 
Architectural Barriers Act of 1968 and shall comply with the Uniform 
Federal Accessibility Standards. For general type buildings, these 
standards are in appendix A to 41 CFR part 101-19.6. For residential 
structures, these standards are available from the Department of Housing 
and Urban Development, Office of Fair Housing and Equal Opportunity, 
Disability Rights Division, Room 5240, 451 Seventh Street, SW, 
Washington, DC 20410; telephone (202) 708-2333 (voice) or (202) 708-1734 
(TTY) (these are not toll-free numbers).

[57 FR 53397, Nov. 9, 1992, as amended at 59 FR 33894, June 30, 1994; 60 
FR 1916, Jan. 5, 1995; 61 FR 54922, Oct. 22, 1996; 64 FR 50225, Sept. 
15, 1999; 80 FR 42367, July 16, 2015]



Sec. 570.488  Displacement, relocation, acquisition, and replacement
of housing.

    The requirements for States and state recipients with regard to the 
displacement, relocation, acquisition, and replacement of housing are in 
Sec. 570.606 and 24 CFR part 42.

[61 FR 11477, Mar. 20, 1996]



Sec. 570.489  Program administrative requirements.

    (a) Administrative and planning costs.--(1) State administrative and 
technical assistance costs. (i) The State is responsible for the 
administration of all CDBG funds. The State may use CDBG funds not to 
exceed $100,000, plus 50 percent of administrative expenses incurred in 
excess of $100,000. Amounts of CDBG funds used to pay administrative 
expenses in excess of $100,000 shall not, subject to paragraph 
(a)(1)(iii) of this section, exceed the sum of 3 percent of the State's 
annual grant; 3 percent of program income received by units of general 
local government during each program year, regardless of the origin year 
in which the State grant funds that generate the program income were 
appropriated (whether retained by units of general local government or 
paid to the State); and 3 percent of funds reallocated by HUD to the 
State.
    (ii) To pay the costs of providing technical assistance to local 
governments and nonprofit program recipients, a State may, subject to 
paragraph (a)(1)(iii) of this section, use CDBG funds received on or 
after January 23,

[[Page 102]]

2004, in an amount not to exceed the sum of 3 percent of its annual 
grant; 3 percent of program income received by units of general local 
government during each program year, regardless of the origin year in 
which the State grant funds that generate the program income were 
appropriated (whether retained by units of general local government or 
paid to the State); and 3 percent of funds reallocated by HUD to the 
State during each program year.
    (iii) The amount of CDBG funds used to pay the sum of administrative 
costs in excess of $100,000 paid pursuant to paragraph (a)(1)(i) of this 
section and technical assistance costs paid pursuant to paragraph 
(a)(1)(ii) of this section must not exceed the sum of 3 percent of the 
State's annual grant; 3 percent of program income received by units of 
general local government during each program year, regardless of the 
origin year in which the State grant funds that generate the program 
income were appropriated (whether retained by the unit of general local 
government or paid to the State); and 3 percent of funds reallocated by 
HUD to the State.
    (iv) In calculating the amount of CDBG funds that may be used to pay 
State administrative expenses prior to January 23, 2004, the State may 
include in the calculation the following elements only to the extent 
that they are within the following time limitations:
    (A) $100,000 per annual grant beginning with FY 1984 allocations;
    (B) Two percent of the sum of a State's annual grant and funds 
reallocated by HUD to the State within a program year, without 
limitation based on when such amounts were received;
    (C) Two percent of program income returned by units of general local 
government to States after August 21, 1985; and
    (D) Two percent of program income received and retained by units of 
general local government after February 11, 1991.
    (v) In regard to its administrative costs, for grants before origin 
year 2015, the State has the option of selecting its approach for 
demonstrating compliance with the requirements of paragraph (a)(1) of 
this section. For grants beginning with origin year 2015 grants and 
subsequent grants, the State must use the approach in paragraph 
(a)(1)(v)(A) of this section. Any State whose matching cost 
contributions toward State administrative expense matching requirements 
are in arrears must bring matching cost contributions up to the level of 
CDBG funds expended for such costs. A State grant may not be closed out 
if the State's matching cost contribution is not at least equal to the 
amount of CDBG funds in excess of $100,000 expended for administration. 
The two approaches for demonstrating compliance with this paragraph 
(a)(1) are:
    (A) Year-to-year tracking and limitation on drawdown of funds. The 
State will calculate the maximum allowable amount of CDBG funds that may 
be used for State administrative expenses from the sum of each origin 
year grant, program income received during that associated program year 
and reallocations by HUD to the State during that associated program 
year. The State will draw down amounts of those funds only upon its own 
expenditure of an equal or greater amount of matching funds from its own 
resources after the expenditure of the initial $100,000 for State 
administrative expenses. The State will be considered to be in 
compliance with the applicable requirements if the actual amount of CDBG 
funds spent on State administrative expenses does not exceed the maximum 
allowable amount, and if the amount of matching funds that the State has 
expended for that grant year is equal to or greater than the amount of 
CDBG funds in excess of $100,000 spent during that same grant year. 
Under this approach, the State must demonstrate that it has paid from 
its own funds at least 50 percent of its administrative expenses in 
excess of $100,000 by the closeout of each grant.
    (B) Cumulative accounting of administrative costs incurred by the 
State since its assumption of the CDBG program for grants before origin 
year 2015. Under this approach, the State will identify, for each grant 
it has received, the CDBG funds eligible to be used for State 
administrative expenses, as well as the minimum amount of matching funds

[[Page 103]]

that the State is required to contribute. The amounts will then be 
aggregated for all grants received. The State must keep records 
demonstrating the actual amount of CDBG funds from each grant received 
that was used for State administrative expenses, as well as matching 
amounts that were contributed by the State. The State will be considered 
to be in compliance with the applicable requirements if the aggregate of 
the actual amounts of CDBG funds spent on State administrative expenses 
does not exceed the aggregate maximum allowable amount and if the 
aggregate amount of matching funds that the State has expended is equal 
to or greater than the aggregate amount of CDBG funds in excess of 
$100,000 (for each annual grant within the subject period) spent on 
administrative expenses during its 3- to 5-year Consolidated Planning 
period. If the State grant for any grant year within the 3- to 5-year 
period has been closed out, the aggregate amount of CDBG funds spent on 
State administrative expenses, the aggregate maximum allowable amount, 
the aggregate matching funds expended, and the aggregate amount of CDBG 
funds in excess of $100,000 (for each annual grant within the subject 
period) will be reduced by amounts attributable to the grant year for 
which the State grant has been closed out.
    (2) The State may not charge fees of any entity for processing or 
considering any application for CDBG funds, or for carrying out its 
responsibilities under this subpart.
    (3)(i) Administrative costs are those described at 
Sec. 570.489(a)(1) for States and, for units of general local 
government, are those described at sections 105(a)(12) and (a)(13) of 
the Act.
    (ii) The combined expenditures by the State and its funded units of 
general local government for planning, management, and administrative 
costs shall not exceed 20 percent of the aggregate amount of the origin 
year grant, any origin year grant funds reallocated by HUD to the State, 
and the amount of any program income received during the program year.
    (iii) For origin year 2015 grants and subsequent grants, no more 
than 20 percent of any annual grant (excluding program income) shall be 
expended by the State and its funded units of general local government 
for planning, management, and administrative costs. In addition, the 
combined expenditures by the States and its unit of general local 
government for planning, management, and administrative costs shall not 
exceed 20 percent of any origin year grant funds reallocated by HUD to 
the State.
    (iv) Funds from a grant of any origin year may be used to pay 
planning and program administrative costs associated with any grant of 
any origin year.
    (b) Reimbursement of pre-agreement costs. The State may permit, in 
accordance with such procedures as the State may establish, a unit of 
general local government to incur costs for CDBG activities before the 
establishment of a formal grant relationship between the State and the 
unit of general local government and to charge these pre-agreement costs 
to the grant, provided that the activities are eligible and undertaken 
in accordance with the requirements of this part and 24 CFR part 58. A 
State may incur costs prior to entering into a grant agreement with HUD 
and charge those pre-agreement costs to the grant, provided that the 
activities are eligible and are undertaken in accordance with the 
requirements of this part, part 58 of this title, and the citizen 
participation requirements of part 91 of this title.
    (c) Federal grant payments. The State's requests for payment, and 
the Federal Government's payments upon such requests, must comply with 
31 CFR part 205. The State must use procedures to minimize the time 
elapsing between the transfer of grant funds and disbursement of funds 
by the State to units of general local government. States must also have 
procedures in place, and units of general local government must use 
these procedures to minimize the time elapsing between the transfer of 
funds by the State and disbursement for CDBG activities.
    (d) Fiscal controls and accounting procedures. (1) A State shall 
have fiscal and administrative requirements for expending and accounting 
for all funds received under this subpart. These requirements must be 
available for Federal inspection and must:

[[Page 104]]

    (i) Be sufficiently specific to ensure that funds received under 
this subpart are used in compliance with all applicable statutory and 
regulatory provisions and the terms and conditions of the award:
    (ii) Ensure that funds received under this subpart are only spent 
for reasonable and necessary costs of operating programs under this 
subpart; and
    (iii) Ensure that funds received under this subpart are not used for 
general expenses required to carry out other responsibilities of State 
and local governments.
    (2) A State may satisfy this requirement by:
    (i) Using fiscal and administrative requirements applicable to the 
use of its own funds;
    (ii) Adopting new fiscal and administrative requirements; or
    (iii) Applying the provisions in 2 CFR part 200.
    (A) A State that opts to satisfy this requirement for fiscal 
controls and administrative procedures by applying the provisions of 2 
CFR part 200 must comply with the requirements therein.
    (B) A State that opts to satisfy this requirement for fiscal 
controls and administrative procedures by applying the provisions of 2 
CFR part 200 must also ensure that recipients of the State's CDBG funds 
comply with 2 CFR part 200.
    (e) Program income. (1) For the purposes of this subpart, ``program 
income'' is defined as gross income received by a State, a unit of 
general local government, or a subgrantee of the unit of general local 
government that was generated from the use of CDBG funds, regardless of 
when the CDBG funds were appropriated and whether the activity has been 
closed out, except as provided in paragraph (e)(2) of this section. When 
income is generated by an activity that is only partially assisted with 
CDBG funds, the income must be prorated to reflect the percentage of 
CDBG funds used (e.g., a single loan supported by CDBG funds and other 
funds; or a single parcel of land purchased with CDBG funds and other 
funds). Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of real 
property purchased or improved with CDBG funds, except as provided in 
paragraph (e)(2)(v) of this section;
    (ii) Proceeds from the disposition of equipment purchased with CDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the unit of general local government or subgrantee 
of the unit of general local government with CDBG funds, less the costs 
incidental to the generation of the income;
    (iv) Gross income from the use or rental of real property, owned by 
the unit of general local government or other entity carrying out a CDBG 
activity that was constructed or improved with CDBG funds, less the 
costs incidental to the generation of the income;
    (v) Payments of principal and interest on loans made using CDBG 
funds, except as provided in paragraph (e)(2)(iii) of this section;
    (vi) Proceeds from the sale of loans made with CDBG funds, less 
reasonable legal and other costs incurred in the course of such sale 
that are not otherwise eligible costs under sections 105(a)(13) or 
106(d)(3)(A) of the Act;
    (vii) Proceeds from the sale of obligations secured by loans made 
with CDBG funds, less reasonable legal and other costs incurred in the 
course of such sale that are not otherwise eligible costs under sections 
105(a)(13) or 106(d)(3)(A) of the Act;
    (viii) Interest earned on funds held in a revolving fund account;
    (ix) Interest earned on program income pending disposition of the 
income;
    (x) Funds collected through special assessments made against 
nonresidential properties and properties owned and occupied by 
households not of low and moderate income, if the special assessments 
are used to recover all or part of the CDBG portion of a public 
improvement; and
    (xi) Gross income paid to a unit of general local government or 
subgrantee of the unit of general local government from the ownership 
interest in a for-profit entity acquired in return for the provision of 
CDBG assistance.

[[Page 105]]

    (2) ``Program income'' does not include the following:
    (i) The total amount of funds, which does not exceed $35,000 
received in a single year from activities, other than revolving loan 
funds that is retained by a unit of general local government and its 
subgrantees (all funds received from revolving loan funds are considered 
program income, regardless of amount);
    (ii) Amounts generated by activities eligible under section 
105(a)(15) of the Act and carried out by an entity under the authority 
of section 105(a)(15) of the Act;
    (iii) Payments of principal and interest made by a subgrantee 
carrying out a CDBG activity for a unit of general local government, 
toward a loan from the local government to the subgrantee, to the extent 
that program income received by the subgrantee is used for such 
payments;
    (iv) The following classes of interest, which must be remitted to 
HUD for transmittal to the Department of the Treasury, and will not be 
reallocated under section 106(c) or (d) of the Act:
    (A) Interest income from loans or other forms of assistance provided 
with CDBG funds that are used for activities determined by HUD to be not 
eligible under Sec. 570.482 or section 105(a) of the Act, to fail to 
meet a national objective in accordance with the requirements of 
Sec. 570.483, or to fail substantially to meet any other requirement of 
this subpart or the Act;
    (B) Interest income from deposits of amounts reimbursed to a State's 
CDBG program account prior to the state's disbursement of the reimbursed 
funds for eligible purposes; and
    (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 of up to $100 per year for administrative expenses otherwise 
permitted to be paid with CDBG funds.
    (v) Proceeds from the sale of real property purchased or improved 
with CDBG funds, if the proceeds are received more than 5 years after 
expiration of the grant agreement between the State and the unit of 
general local government.
    (3) The State may permit the unit of general local government which 
receives or will receive program income to retain it, subject to the 
requirements of paragraph (e)(3)(ii) of this section, or may require the 
unit of general local government to pay the program income to the State. 
The State, however, must permit the unit of general local government to 
retain the program income if it will be used to continue the activity 
from which it was derived. The State will determine when an activity is 
being continued.
    (i) Program income paid to the State. Except as described in 
paragraph (e)(3)(ii)(A) of this section, the State may require the unit 
of general local government that receives or will receive program income 
to return the program income to the State. Program income that is paid 
to the State is treated as additional CDBG funds subject to the 
requirements of this subpart. Except for program income retained and 
used by the State for administrative costs or technical assistance under 
paragraph (a) of this section, program income paid to the State must be 
distributed to units of general local government in accordance with the 
method of distribution in the action plan under 24 CFR 91.320(k)(1)(i) 
that is in effect at the time the program income is distributed. To the 
maximum extent feasible, the State must distribute program income before 
it makes additional withdrawals from the United States Treasury, except 
as provided in paragraph (f) of this section.
    (ii) Program income retained by a unit of general local government. 
A State may permit a unit of general local government that receives or 
will receive program income to retain it. Alternatively, a State may 
require that the unit of general local government pay any such income to 
the State unless the exception in paragraph (e)(3)(ii)(A) of this 
section applies.
    (A) A State must permit the unit of general local government to 
retain the program income if the program income will be used to continue 
the activity from which it was derived. A State will determine when an 
activity is being

[[Page 106]]

continued. In making such a determination, a State may consider whether 
the unit of general local government is or will be unable to comply with 
the requirements of paragraph (e)(3)(ii)(B) of this section or other 
requirements of this part, and the extent to which the program income is 
unlikely to be applied to continue the activity within the reasonably 
near future. When a State determines that the program income will be 
applied to continue the activity from which it was derived, but the 
amount of program income held by the unit of general local government 
exceeds projected cash needs for the reasonably near future, the State 
may require the local government to return all or part of the program 
income to the State until such time as it is needed by the unit of 
general local government. When a State determines that a unit of local 
government is not likely to apply any significant amount of program 
income to continue the activity within a reasonable amount of time, or 
that it is not likely to apply the program income in accordance with 
applicable requirements, the State may require the unit of general local 
government to return all of the program income to the State for 
disbursement to other units of local government. A State that intends to 
require units of general local government to return program income in 
accordance with this paragraph must describe its approach in the State's 
action plan required under 24 CFR 91.320 of this title or in a 
substantial amendment if the State intends to implement this option 
after the action plan is submitted to and approved by HUD.
    (B) Program income that is received and retained by the unit of 
general local government is treated as additional CDBG funds and is 
subject to all applicable requirements of this subpart, regardless of 
whether the activity that generated the program income has been closed 
out. If the grant between the State and the unit of general local 
government that generated the program income is still open when it is 
generated, program income permitted to be retained will be considered 
part of the unit of general local government's grant that generated the 
program income. If the grant between the State and the unit of general 
local government is closed out, program income permitted to be retained 
will be considered to be part of the unit of general local government's 
most recently awarded open grant. If the unit of general local 
government has no open grants with the State, the program income 
retained by the unit of general local government will be counted as part 
of the State's program year in which the program income was received. A 
State must employ one or more of the following methods to ensure that 
units of general local government comply with applicable program income 
requirements:
    (1) Maintaining contractual relationships with units of general 
local government for the duration of the existence of the program 
income;
    (2) Closing out the underlying activity, but requiring as a 
condition of closeout that the unit of general local government obtain 
advance State approval of either a unit of general local government's 
plan for the use of program income or of each use of program income by 
grant recipients via regularly occurring reports and requests for 
approval;
    (3) Closing out the underlying activity, but requiring as a 
condition of closeout that the unit of general local government report 
to the State when new program income is received; or
    (4) With prior HUD approval, other approaches that demonstrate that 
the State will ensure compliance with the requirements of this subpart 
by units of general local government.
    (iii) Transfer of program income to Entitlement program. A unit of 
general local government that becomes eligible to be an Entitlement 
grantee may request the State's approval to transfer State CDBG grant-
generated program income to the unit of general local government's 
Entitlement program. A State may approve the transfer, provided that the 
unit of general local government:
    (A) Has officially elected to participate in the Entitlement grant 
program;
    (B) Agrees to use such program income in accordance with Entitlement 
program requirements; and

[[Page 107]]

    (C) Has set up Integrated Disbursement Information System (IDIS) 
access and agrees to enter receipt of program income into IDIS.
    (iv) Transfer of program income of grantees losing Entitlement 
status. Upon entry into the State CDBG program, a unit of general local 
government that has lost or relinquished its Entitlement status must, 
with respect to program income that a unit of general local government 
would otherwise be permitted to retain, either:
    (A) Retain program income generated under Entitlement grants and 
continue to comply with Entitlement program requirements for program 
income; or
    (B) Retain the program income and transfer it to the State CDBG 
program, in which case the unit of general local government must comply 
with the State's rules for program income and the requirements of this 
paragraph (e).
    (4) The State must report on the receipt and use of all program 
income (whether retained by units of general local government or paid to 
the State) in its annual performance and evaluation report.
    (f) Revolving funds. (1) The State may permit units of general local 
government to establish revolving funds to carry out specific, 
identified activities. A revolving fund, for this purpose, is a separate 
fund (with a set of accounts that are independent of other program 
accounts) established to carry out specific activities which, in turn, 
generate payments to the fund for use in carrying out such activities. 
These payments to the revolving fund are program income and must be 
substantially disbursed from the revolving fund before additional grant 
funds are drawn from the Treasury for revolving fund activities. Such 
program income is not required to be disbursed for non-revolving fund 
activities.
    (2) The State may establish one or more State revolving funds to 
distribute grants to units of general local government throughout a 
State or a region of the State to carry out specific, identified 
activities. A revolving fund, for this purpose, is a separate fund (with 
a set of accounts that are independent of other program accounts) 
established to fund grants to units of general local government to carry 
out specific activities which, in turn, generate payments to the fund 
for additional grants to units of general local government to carry out 
such activities. Program income in the revolving fund must be disbursed 
from the fund before additional grant funds are drawn from the Treasury 
for payments to units of general local government which could be funded 
from the revolving fund.
    (3) A revolving fund established by either the State or unit of 
general local government shall not be directly funded or capitalized 
with grant funds.
    (g) Procurement. When procuring property or services to be paid for 
in whole or in part with CDBG funds, the State shall follow its 
procurement policies and procedures. The State shall establish 
requirements for procurement policies and procedures for units of 
general local government, based on full and open competition. Methods of 
procurement (e.g., small purchase, sealed bids/formal advertising, 
competitive proposals, and noncompetitive proposals) and their 
applicability shall be specified by the State. Cost plus a percentage of 
cost and percentage of construction costs methods of contracting shall 
not be used. The policies and procedures shall also include standards of 
conduct governing employees engaged in the award or administration of 
contracts. (Other conflicts of interest are covered by Sec. 570.489(h).) 
The State shall ensure that all purchase orders and contracts include 
any clauses required by Federal statutes, Executive orders, and 
implementing regulations. The State shall make subrecipient and 
contractor determinations in accordance with the standards in 2 CFR 
200.330.
    (h) Conflict of interest--(1) Applicability. (i) In the procurement 
of supplies, equipment, construction, and services by the States, units 
of local general governments, and subrecipients, the conflict of 
interest provisions in paragraph (g) of this section shall apply.
    (ii) In all cases not governed by paragraph (g) of this section, 
this paragraph (h) shall apply. Such cases include the acquisition and 
disposition of real property and the provision of assistance with CDBG 
funds by the unit

[[Page 108]]

of general local government or its subrecipients, to individuals, 
businesses and other private entities.
    (2) Conflicts prohibited. Except for eligible administrative or 
personnel costs, the general rule is that no persons described in 
paragraph (h)(3) of this section who exercise or have exercised any 
functions or responsibilities with respect to CDBG activities assisted 
under this subpart or who are in a position to participate in a 
decisionmaking process or gain inside information with regard to such 
activities, may obtain a financial interest or benefit from the 
activity, or have an interest or benefit from the activity, or have an 
interest in any contract, subcontract or agreement with respect thereto, 
or the proceeds thereunder, either for themselves or those with whom 
they have family or business ties, during their tenure or for one year 
thereafter.
    (3) Persons covered. The conflict of interest provisions for 
paragraph (h)(2) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected official or appointed official of 
the State, or of a unit of general local government, or of any 
designated public agencies, or subrecipients which are receiving CDBG 
funds.
    (4) Exceptions: Thresholds requirements. Upon written request by the 
State, an exception to the provisions of paragraph (h)(2) of this 
section involving an employee, agent, consultant, officer, or elected 
official or appointed official of the State may be granted by HUD on a 
case-by-case basis. In all other cases, the State may grant such an 
exception upon written request of the unit of general local government 
provided the State shall fully document its determination in compliance 
with all requirements of paragraph (h)(4) of this section including the 
State's position with respect to each factor at paragraph (h)(5) of this 
section and such documentation shall be available for review by the 
public and by HUD. An exception may be granted after it is determined 
that such an exception will serve to further the purpose of the Act and 
the effective and efficient administration of the program or project of 
the State or unit of general local government as appropriate. An 
exception may be considered only after the State or unit of general 
local government, as appropriate, has provided the following:
    (i) A disclosure of the nature of the conflict, accompanied by an 
assurance that there has been public disclosure of the conflict and a 
description of how the public disclosure was made; and
    (ii) An opinion of the attorney for the State or the unit of general 
local government, as appropriate, that the interest for which the 
exception is sought would not violate State or local law.
    (5) Factors to be considered for exceptions. In determining whether 
to grant a requested exception after the requirements of paragraph 
(h)(4) of this section have been satisfactorily met, the cumulative 
effect of the following factors, where applicable, shall be considered:
    (i) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the program or project which 
would otherwise not be available;
    (ii) Whether an opportunity was provided for open competitive 
bidding or negotiation;
    (iii) Whether the person affected is a member of a group or class of 
low or moderate income persons intended to be the beneficiaries of the 
assisted activity, and the exception will permit such person to receive 
generally the same interests or benefits as are being made available or 
provided to the group or class;
    (iv) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or the decisionmaking process with 
respect to the specific assisted activity in question;
    (v) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (h)(3) of this 
section;
    (vi) Whether undue hardship will result either to the State or the 
unit of general local government or the person affected when weighed 
against the public interest served by avoiding the prohibited conflict; 
and
    (vii) Any other relevant considerations.

[[Page 109]]

    (i) Closeout of grants to units of general local government. The 
State shall establish requirements for timely closeout of grants to 
units of general local government and shall take action to ensure the 
timely closeout of such grants.
    (j) Change of use of real property. The standards described in this 
section apply to real property within the unit of general local 
government's control (including activities undertaken by subrecipients) 
which was acquired or improved in whole or in part using CDBG funds in 
excess of the threshold for small purchase procurement (2 CFR 200.88). 
These standards shall apply from the date CDBG funds are first spent for 
the property until five years after closeout of the unit of general 
local government's grant.
    (1) A unit of general local governments may not change the use or 
planned use of any such property (including the beneficiaries of such 
use) from that for which the acquisition or improvement was made, unless 
the unit of general local government provides affected citizens with 
reasonable notice of and opportunity to comment on any proposed change, 
and either:
    (i) The new use of the property qualifies as meeting one of the 
national objectives and is not a building for the general conduct of 
government; or
    (ii) The requirements in paragraph (j)(2) of this section are met.
    (2) If the unit of general local government determines, after 
consultation with affected citizens, that it is appropriate to change 
the use of the property to a use which does not qualify under paragraph 
(j)(1) of this section, it may retain or dispose of the property for the 
changed use if the unit of general local government's CDBG program is 
reimbursed or the State's CDBG program is reimbursed, at the discretion 
of the State. The reimbursement shall be in the amount of the current 
fair market value of the property, less any portion of the value 
attributable to expenditures of non-CDBG funds for acquisition of, and 
improvements to, the property, except that if the change in use occurs 
after grant closeout but within 5 years of such closeout, the unit of 
general local government shall make the reimbursement to the State's 
CDBG program account.
    (3) Following the reimbursement of the CDBG program in accordance 
with paragraph (j)(2) of this section, the property no longer will be 
subject to any CDBG requirements.
    (k) Accountability for real and personal property. The State shall 
establish and implement requirements, consistent with State law and the 
purposes and requirements of this subpart (including paragraph (j) of 
this section) governing the use, management, and disposition of real and 
personal property acquired with CDBG funds.
    (l) Debarment and suspension. The requirements in 2 CFR part 2424 
are applicable. CDBG funds may not be provided to excluded or 
disqualified persons.
    (m) Subrecipient monitoring and management. The provisions of 2 CFR 
200.330 through 200.332 are applicable.
    (n) Audits. Notwithstanding any other provision of this title, 
audits of a State and units of general local government shall be 
conducted in accordance with 2 CFR part 200, subpart F, which implements 
the Single Audit Act. States shall develop and administer an audits 
management system to ensure that audits of units of general local 
government are conducted in accordance with 2 CFR part 200, subpart F.
    (o) Grant Closeout.--HUD will close grants to States in accordance 
with the grant closeout requirements of 2 CFR 200.343.
    (p) Cost principles and prior approval. A State must ensure that 
costs incurred by the State and by its recipients are in conformance 
with 2 CFR part 200, subpart E. All cost items described in 2 CFR part 
200, subpart E, that require Federal agency approval are allowable 
without prior approval of HUD, to the extent that they otherwise comply 
with the requirements of 2 CFR part 200, subpart E, and are otherwise 
eligible, except for the following:
    (1) Depreciation methods for fixed assets shall not be changed 
without the express approval of the cognizant Federal agency (2 CFR 
200.436).
    (2) Fines, penalties, damages, and other settlements are unallowable 
costs to the CDBG program (2 CFR 200.441).

[[Page 110]]

    (3) Costs of housing (e.g., depreciation, maintenance, utilities, 
furnishings, rent), housing allowances, and personal living expenses 
(goods or services for personal use) regardless of whether reported as 
taxable income to the employees (2 CFR 200.445).
    (4) Organization costs (2 CFR 200.455).

[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1952, Jan. 5, 1995; 61 
FR 54922, Oct. 22, 1996; 67 FR 15112, Mar. 29, 2002; 72 FR 73496, Dec. 
27, 2007; 77 FR 24143, Apr. 23, 2012; 80 FR 69871, Nov. 12, 2015; 80 FR 
71936, Nov. 18, 2015; 80 FR 75937, Dec. 7, 2015]



Sec. 570.490  Recordkeeping requirements.

    (a) State records. (1) The State shall establish and maintain such 
records as may be necessary to facilitate review and audit by HUD of the 
State's administration of CDBG funds under Sec. 570.493. The content of 
records maintained by the State shall be as jointly agreed upon by HUD 
and the States and sufficient to enable HUD to make the determinations 
described at Sec. 570.493. For fair housing and equal opportunity 
purposes, and as applicable, such records shall include documentation 
related to the State's AFH, as described in 24 CFR part 5, subpart A 
(Sec. 5.168). The records shall also permit audit of the States in 
accordance with 2 CFR 200, subpart F.
    (2) The state shall keep records to document its funding decisions 
reached under the method of distribution described in 24 CFR 
91.320(j)(1), including all the criteria used to select applications 
from local governments for funding and the relative importance of the 
criteria (if applicable), regardless of the organizational level at 
which final funding decisions are made, so that they can be reviewed by 
HUD, the Inspector General, the Government Accountability Office, and 
citizens pursuant to the requirements of Sec. 570.490(c).
    (3) Integrated Disbursement and Information System (IDIS). The state 
shall make entries into IDIS in a form prescribed by HUD to accurately 
capture the state's accomplishment and funding data, including program 
income, for each program year. It is recommended that the state enter 
IDIS data on a quarterly basis and it is required to be entered 
annually.
    (b) Unit of general local government's record. The State shall 
establish recordkeeping requirements for units of general local 
government receiving CDBG funds that are sufficient to facilitate 
reviews and audits of such units of general local government under 
Secs. 570.492 and 570.493. For fair housing and equal opportunity 
purposes, and as applicable, such records shall include documentation 
related to the State's AFH as described in 24 CFR part 5, subpart A 
(Sec. 5.168).
    (c) Access to records. (1) Representatives of HUD, the Inspector 
General, and the General Accounting Office shall have access to all 
books, accounts, records, reports, files, and other papers, or property 
pertaining to the administration, receipt and use of CDBG funds and 
necessary to facilitate such reviews and audits.
    (2) The State shall provide citizens with reasonable access to 
records regarding the past use of CDBG funds and ensure that units of 
general local government provide citizens with reasonable access to 
records regarding the past use of CDBG funds consistent with State or 
local requirements concerning the privacy of personal records.
    (d) Record retention. Records of the State and units of general 
local government, including supporting documentation, shall be retained 
for the greater of three years from closeout of the grant to the state, 
or the period required by other applicable laws and regulations as 
described in Sec. 570.487 and Sec. 570.488.

[57 FR 53397, Nov. 9, 1992, as amended at 71 FR 6971, Feb. 9, 2006; 77 
FR 24146, Apr. 23, 2012; 80 FR 42367, July 16, 2015; 80 FR 75937, Dec. 
7, 2015]



Sec. 570.491  Performance and evaluation report.

    The annual performance and evaluation report shall be submitted in 
accordance with 24 CFR part 91.

(Approved by the Office of Management and Budget under control number 
2506-0117)

[60 FR 1916, Jan. 5, 1995]



Sec. 570.492  State's reviews and audits.

    (a) The state shall make reviews and audits including on-site 
reviews, of units of general local government as

[[Page 111]]

may be necessary or appropriate to meet the requirements of section 
104(e)(2) of the Act.
    (b) In the case of noncompliance with these requirements, the State 
shall take such actions as may be appropriate to prevent a continuance 
of the deficiency, mitigate any adverse effects or consequences and 
prevent a recurrence. The state shall establish remedies for units of 
general local government noncompliance.



Sec. 570.493  HUD's reviews and audits.

    (a) General. At least on an annual basis, HUD shall make such 
reviews and audits as may be necessary or appropriate to determine:
    (1) Whether the state has distributed CDBG funds to units of general 
local government in a timely manner in conformance to the method of 
distribution described in its action plan under part 91 of this title;
    (2) Whether the state has carried out its certifications in 
compliance with the requirements of the Act and this subpart and other 
applicable laws; and
    (3) Whether the state has made reviews and audits of the units of 
general local government required by Sec. 570.492.
    (b) Information considered. In conducting performance reviews and 
audits, HUD will rely primarily on information obtained from the state's 
performance report, records maintained by the state, findings from on-
site monitoring, audit reports, and the status of the state's unexpended 
grant funds. HUD may also consider relevant information on the state's 
performance gained from other sources, including litigation, citizens' 
comments, and other information provided by the state. A State's failure 
to maintain records in accordance with Sec. 570.490 may result in a 
finding that the State has failed to meet the applicable requirement to 
which the record pertains.

[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996]



Sec. 570.494  Timely distribution of funds by states.

    (a) States are encouraged to adopt and achieve a goal of obligating 
and announcing 95 percent of funds to units of general local government 
within 12 months of the state signing its grant agreement with HUD.
    (b) HUD will review each state to determine if the state has 
distributed CDBG funds in a timely manner. The state's distribution of 
CDBG funds is timely if:
    (1) All of the state's annual grant (excluding state administration) 
has been obligated and announced to units of general local government 
within 15 months of the state signing its grant agreement with HUD; and
    (2) Recaptured funds and program income received by the state are 
expeditiously obligated and announced to units of general local 
government.
    (c) HUD may collect necessary information from states to determine 
whether CDBG funds have been distributed in a timely manner.



Sec. 570.495  Reviews and audits response.

    (a) If HUD's review and audit under Sec. 570.493 results in a 
negative determination, or if HUD otherwise determines that a state or 
unit of general local government has failed to comply with any 
requirement of this subpart, the state will be given an opportunity to 
contest the finding and will be requested to submit a plan for 
corrective action. If the state is unsuccessful in contesting the 
validity of the finding to the satisfaction of HUD, or if the state's 
plan for corrective action is not satisfactory to HUD, HUD may take one 
or more of the following actions to prevent a continuation of the 
deficiency; mitigate, to the extent possible, the adverse effects or 
consequence of the deficiency; or prevent a recurrence of the 
deficiency:
    (1) Issue a letter of warning that advises the State of the 
deficiency and puts the state on notice that additional action will be 
taken if the deficiency is not corrected or is repeated;
    (2) Advise the state that additional information or assurances will 
be required before acceptance of one or more of the certifications 
required for the succeeding year grant;
    (3) Advise the state to suspend or terminate disbursement of funds 
for a deficient activity or grant;
    (4) Advise the state to reimburse its grant in any amounts 
improperly expended;

[[Page 112]]

    (5) Change the method of payment to the state from an advance basis 
to a reimbursement basis;
    (6) Based on the state's current failure to comply with a 
requirement of this subpart which will affect the use of the succeeding 
year grant, condition the use of the succeeding fiscal years grant funds 
upon appropriate corrective action by the state. When the use of funds 
is conditioned, HUD shall specify the reasons for the conditions and the 
actions necessary to satisfy the conditions.
    (b)(1) Whenever HUD determines that a state or unit of general local 
government which is a recipient of CDBG funds has failed to comply with 
section 109 of the Act (nondiscrimination requirements), HUD shall 
notify the governor of the State or chief executive officer of the unit 
of general local government of the noncompliance and shall request the 
governor or the chief executive officer to secure compliance. If within 
a reasonable time, not to exceed sixty days, the governor or chief 
executive officer fails or refuses to secure compliance, HUD may take 
the following action:
    (i) Refer the matter to the Attorney General with a recommendation 
that an appropriate civil action be instituted;
    (ii) Exercise the powers and functions provided by title VI of the 
Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-7);
    (iii) Exercise the powers and functions provided for in 
Sec. 570.496; or
    (iv) Take such other action as may be provided by law.
    (2) When a matter is referred to the Attorney General pursuant to 
paragraph (b)(1)(i) of this section, or whenever HUD has reason to 
believe that a State or unit of general local government is engaged in a 
pattern or practice in violation of the provisions of section 109 of the 
Act, the Attorney General may bring a civil action in any appropriate 
United States district court for such relief as may be appropriate, 
including injunctive relief.



Sec. 570.496  Remedies for noncompliance; opportunity for hearing.

    (a) General. Action pursuant to this section will be taken only 
after at least one of the corrective or remedial actions specified in 
Sec. 570.495 has been taken, and only then if the State or unit of 
general local government has not made an appropriate or timely response.
    (b) Remedies. (1) If HUD finds after reasonable notice and 
opportunity for hearing that a State or unit of general local government 
has failed to comply with any provision of this subpart, until HUD is 
satisfied that there is no longer failure to comply, HUD shall:
    (i) Terminate payments to the state;
    (ii) Reduce payments for current or future grants to the state by an 
amount equal to the amount of CDBG funds distributed or used without 
compliance with the requirements of this subpart;
    (iii) Limit the availability of payments to the state to activities 
not affected by the failure to comply or to activities designed to 
overcome the failure to comply;
    (iv) Based on the state's failure to comply with a requirement of 
this subpart (other than the state's current failure to comply which 
will affect the use of the succeeding year grant), condition the use of 
the grant funds upon appropriate corrective action by the state 
specified by HUD; or
    (v) With respect to a CDBG grant awarded by the state to a unit of 
general local government, withhold, reduce, or withdraw the grant, 
require the state to withhold, reduce, or withdraw the grant, or take 
other action as appropriate, except that CDBG funds expended on eligible 
activities shall not be recaptured or deducted from future CDBG grants 
to such unit of general local government.
    (2) HUD may on due notice suspend payments at any time after the 
issuance of a notice of opportunity for hearing pursuant to paragraph 
(d) of this section, pending such hearing and a final decision, to the 
extent HUD determines such action necessary to prevent a continuation of 
the noncompliance.
    (c) In lieu of, or in addition to, the action authorized by 
paragraph (b) of this section, if HUD has reason to believe that the 
state or unit of general local government has failed to comply 
substantially with any provision of this subpart, HUD may:

[[Page 113]]

    (1) Refer the matter to the Attorney General of the United States 
with a recommendation that an appropriate civil action be instituted; 
and
    (2) Upon such a referral, the Attorney General may bring a civil 
action in any United States district court having venue thereof for such 
relief as may be appropriate, including an action to recover the amount 
of the CDBG funds which was not expended in accordance with this 
subpart, or for mandatory or injunctive relief.
    (d) Proceedings. When HUD proposes to take action pursuant to this 
section, the respondent in the proceedings will be the state. At the 
option of HUD, a unit of general local government may also be a 
respondent. These procedures are to be followed before imposition of a 
sanction described in paragraph (b)(1) of this section:
    (1) Notice of opportunity for hearing. HUD shall notify the 
respondent in writing of the proposed action and of the opportunity for 
a hearing. The notice shall be sent to the respondent by first class 
mail and shall provide notice:
    (i) In a manner which is adequate to allow the respondent to prepare 
its response, the basis upon which HUD determined that the respondent 
failed to comply with a provision of this subpart;
    (ii) That the hearing procedures are governed by these rules;
    (iii) That the respondent has 14 days from receipt of the notice 
within which to provide a written request for a hearing to the Docket 
Clerk, Office of Administrative Law Judges, and the address and 
telephone number of the Docket Clerk;
    (iv) Of the action which HUD proposes to take and that the authority 
for this action is Sec. 570.496 of this subpart;
    (v) That if the respondent fails to request a hearing within the 
time specified, HUD's determination that the respondent failed to comply 
with a provision of this subpart shall be final and HUD may proceed to 
take the proposed action.
    (2) Initiation of hearing. The respondent shall be allowed 14 days 
from receipt of the notice within which to notify HUD in writing of its 
request for a hearing. If no request is received within the time 
specified, HUD's determination that the respondent failed to comply with 
a provision of this subpart shall be final and HUD may proceed to take 
the proposed action.
    (3) Administrative Law Judge. Proceedings conducted under these 
rules shall be presided over by an Administrative Law Judge (ALJ), 
appointed as provided by section 11 of the Administrative Procedure Act 
(5 U.S.C. 3105). The case shall be referred to the ALJ by HUD at the 
time a hearing is requested. The ALJ shall promptly notify the parties 
of the time and place at which the hearing will be held. The ALJ shall 
conduct a fair and impartial hearing and take all action necessary to 
avoid delay in the disposition of proceedings and to maintain order. The 
ALJ shall have all powers necessary to those ends, including but not 
limited to the power:
    (i) To administer oaths and affirmations;
    (ii) To issue subpoenas as authorized by law;
    (iii) To rule upon offers of proof and receive relevant evidence;
    (iv) To order or limit discovery before the hearing as the interests 
of justice may require;
    (v) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (vi) To hold conferences for the settlement or simplification of the 
issues by consent of the parties;
    (vii) To consider and rule upon all procedural and other motions 
appropriate in adjudicative proceedings; and
    (viii) To make and file initial determinations.
    (4) Ex parte communications. An ex parte communication is any 
communication with an ALJ, direct or indirect, oral or written, 
concerning the merits or procedures of any pending proceeding which is 
made by a party in the absence of any other party. Ex parte 
communications are prohibited except where the purpose and content of 
the communication have been disclosed in advance or simultaneously to 
all parties, or the communication is a request for information 
concerning the status of the case. Any ALJ who receives an ex parte 
communication

[[Page 114]]

which the ALJ knows or has reason to believe is unauthorized shall 
promptly place the communication, or its substance, in all files and 
shall furnish copies to all parties. Unauthorized ex parte 
communications shall not be taken into consideration in deciding any 
matter in issue.
    (5) The hearing. All parties shall have the right to be represented 
at the hearing by counsel. The ALJ shall conduct the proceedings in an 
expeditious manner while allowing the parties to present all oral and 
written evidence which tends to support their respective positions, but 
the ALJ shall exclude irrelevant, immaterial or unduly repetitious 
evidence. HUD has the burden of proof in showing by a preponderance of 
evidence that the respondent failed to comply with a provision of this 
subpart. Each party shall be allowed to cross-examine adverse witnesses 
and to rebut and comment upon evidence presented by the other party. 
Hearings shall be open to the public. So far as the orderly conduct of 
the hearing permits, interested persons other than the parties may 
appear and participate in the hearing.
    (6) Transcripts. Hearings shall be recorded and transcribed only by 
a reporter under the supervision of the ALJ. The original transcript 
shall be a part of the record and shall constitute the sole official 
transcript. Respondents and the public, at their own expense, shall 
obtain copies of the transcript.
    (7) The ALJ's decisions. At the conclusion of the hearing, the ALJ 
shall give the parties a reasonable opportunity to submit proposed 
findings and conclusions and supporting reasons therefor. Generally, 
within 60 days after the conclusion of the hearing, the ALJ shall 
prepare a written decision which includes a Statement of findings and 
conclusions, and the reasons or basis therefor, on all the material 
issues of fact, law or discretion presented on the record and the 
appropriate sanction or denial thereof. The decision shall be based on 
consideration of the whole record or those parts thereof cited by a 
party and supported by and in accordance with the reliable, probative, 
and substantial evidence. A copy of the decision shall be furnished to 
the parties immediately by first class mail and shall include a notice 
that any requests for review by the Secretary must be made in writing to 
the Secretary within 30 days of the receipt of the decision.
    (8) Record. The transcript of testimony and exhibits, together with 
the decision of the ALJ and all papers and requests filed in the 
proceeding, constitutes the exclusive record for decision and, on 
payment of its reasonable cost, shall be made available to the parties. 
After reaching the initial decision, the ALJ shall certify to the 
complete record and forward the record to the Secretary.
    (9) Review by the Secretary. The decision by the ALJ shall 
constitute the final decision of HUD unless, within 30 days after the 
receipt of the decision, either the respondent or the Assistant 
Secretary for Community Planning and Development files an exception and 
request for review by the Secretary. The excepting party must transmit 
simultaneously to the Secretary and the other party the request for 
review and the bases of the party's exceptions to the findings of the 
ALJ. The other party shall be allowed 30 days from receipt of the 
exception to provide the Secretary and the excepting party with a 
written reply. The Secretary shall then review the record of the case, 
including the exceptions and the reply. On the basis of such review, the 
Secretary shall issue a written determination, including a Statement of 
the rationale therefor, affirming, modifying or revoking the decision of 
the ALJ. The Secretary's decision shall be made and transmitted to the 
parties within 60 days after the decision of the ALJ was furnished to 
the parties.
    (10) Judicial review. The respondent may seek judicial review of 
HUD's decision pursuant to section 111(c) of the Act.

[74 FR 4636, Jan. 26, 2009]



Sec. 570.497  Condition of State election to administer State 
CDBG Program.

    Pursuant to section 106(d)(2)(A)(i) of the Act, a State has the 
right to elect, in such manner and at such time as the Secretary may 
prescribe, to administer funds allocated under subpart A of this part 
for use in nonentitlement areas of the State. After January 26, 1995, 
any

[[Page 115]]

State which elects to administer the allocation of CDBG funds for use in 
nonentitlement areas of the State in any year must, in addition to all 
other requirements of this subpart, submit a pledge by the State in 
accordance with section 108(d)(2) of the Act, and in a form acceptable 
to HUD, of any future CDBG grants it may receive under subpart A and 
this subpart. Such pledge shall be for the purpose of assuring repayment 
of any debt obligations (as defined in Sec. 570.701), in accordance with 
their terms, that HUD may have guaranteed in the respective State on 
behalf of any nonentitlement public entity (as defined in Sec. 570.701) 
or its designated public agency prior to the State's election.

[59 FR 66604, Dec. 27, 1994]



                     Subpart J_Grant Administration

    Source: 53 FR 8058, Mar. 11, 1988, unless otherwise noted.



Sec. 570.500  Definitions.

    For the purposes of this subpart, the following terms shall apply:
    (a) Program income means gross income received by the recipient or a 
subrecipient directly generated from the use of CDBG funds, except as 
provided in paragraph (a)(4) of this section.
    (1) Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of real 
property purchased or improved with CDBG funds;
    (ii) Proceeds from the disposition of equipment purchased with CDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the recipient or by a subrecipient with CDBG funds, 
less costs incidental to generation of the income;
    (iv) Gross income from the use or rental of real property, owned by 
the recipient or by a subrecipient, that was constructed or improved 
with CDBG funds, less costs incidental to generation of the income;
    (v) Payments of principal and interest on loans made using CDBG 
funds, except as provided in paragraph (a)(3) of this section;
    (vi) Proceeds from the sale of loans made with CDBG funds;
    (vii) Proceeds from sale of obligations secured by loans made with 
CDBG funds;
    (viii) [Reserved]
    (ix) Interest earned on program income pending its disposition; and
    (x) Funds collected through special assessments made against 
properties owned and occupied by households not of low and moderate 
income, where the assessments are used to recover all or part of the 
CDBG portion of a public improvement.
    (2) Program income does not include income earned (except for 
interest described in Sec. 570.513) on grant advances from the U.S. 
Treasury. The following items of income earned on grant advances must be 
remitted to HUD for transmittal to the U.S. Treasury, and will not be 
reallocated under section 106(c) or (d) of the Act:
    (i) Interest earned from the investment of the initial proceeds of a 
grant advance by the U.S. Treasury;
    (ii) Interest earned on loans or other forms of assistance provided 
with CDBG funds that are used for activities determined by HUD either to 
be ineligible or to fail to meet a national objective in accordance with 
the requirements of subpart C of this part, or that fail substantially 
to meet any other requirement of this part; and
    (iii) Interest earned on the investment of amounts reimbursed to the 
CDBG program account prior to the use of the reimbursed funds for 
eligible purposes.
    (3) The calculation of the amount of program income for the 
recipient's CDBG program as a whole (i.e., comprising activities carried 
out by a grantee and its subrecipients) shall exclude payments made by 
subrecipients of principal and/or interest on CDBG-funded loans received 
from grantees if such payments are made using program income received by 
the subrecipient. (By making such payments, the subrecipient shall be 
deemed to have transferred program income to the grantee.) The amount of 
program income derived from this calculation shall be used for reporting 
purposes, for purposes of applying the requirement

[[Page 116]]

under Sec. 570.504(b)(2)(iii), and in determining limitations on 
planning and administration and public services activities to be paid 
for with CDBG funds.
    (4) Program income does not include:
    (i) Any income received in a single program year by the recipient 
and all its subrecipients if the total amount of such income does not 
exceed $25,000; and
    (ii) Amounts generated by activities that are financed by a loan 
guaranteed under section 108 of the Act and meet one or more of the 
public benefit criteria specified at Sec. 570.209(b)(2)(v) or are 
carried out in conjunction with a grant under section 108(q) in an area 
determined by HUD to meet the eligibility requirements for designation 
as an Urban Empowerment Zone pursuant to 24 CFR part 597, subpart B. 
Such exclusion shall not apply if CDBG funds are used to repay the 
guaranteed loan. When such a guaranteed loan is partially repaid with 
CDBG funds, the amount generated shall be prorated to reflect the 
percentage of CDBG funds used. Amounts generated by activities financed 
with loans guaranteed under section 108 which are not defined as program 
income shall be treated as miscellaneous revenue and shall not be 
subject to any of the requirements of this part, except that the use of 
such funds shall be limited to activities that are located in a 
revitalization strategy area and implement a HUD approved area 
revitalization strategy pursuant to Sec. 91.215(e) of this title. 
However, such treatment shall not affect the right of the Secretary to 
require the section 108 borrower to pledge such amounts as security for 
the guaranteed loan. The determination whether such amounts shall 
constitute program income shall be governed by the provisions of the 
contract required at Sec. 570.705(b)(1).
    (5) Examples of other receipts that are not considered program 
income are proceeds from fund raising activities carried out by 
subrecipients receiving CDBG assistance (the costs of fundraising are 
generally unallowable under the applicable OMB circulars referenced in 
24 CFR 84.27), funds collected through special assessments used to 
recover the non-CDBG portion of a public improvement, and proceeds from 
the disposition of real property acquired or improved with CDBG funds 
when the disposition occurs after the applicable time period specified 
in Sec. 570.503(b)(8) for subrecipient-controlled property, or in 
Sec. 570.505 for recipient-controlled property.
    (b) Revolving fund means a separate fund (with a set of accounts 
that are independent of other program accounts) established for the 
purpose of carrying out specific activities which, in turn, generate 
payments to the fund for use in carrying out the same activities. Each 
revolving loan fund's cash balance must be held in an interest-bearing 
account, and any interest paid on CDBG funds held in this account shall 
be considered interest earned on grant advances and must be remitted to 
HUD for transmittal to the U.S. Treasury no less frequently than 
annually. (Interest paid by borrowers on eligible loans made from the 
revolving loan fund shall be program income and treated accordingly.)
    (c) Subrecipient means a public or private nonprofit agency, 
authority, or organization, or a for-profit entity authorized under 
Sec. 570.201(o), receiving CDBG funds from the recipient or another 
subrecipient to undertake activities eligible for such assistance under 
subpart C of this part. The term excludes an entity receiving CDBG funds 
from the recipient under the authority of Sec. 570.204, unless the 
grantee explicitly designates it as a subrecipient. The term includes a 
public agency designated by a unit of general local government to 
receive a loan guarantee under subpart M of this part, but does not 
include contractors providing supplies, equipment, construction, or 
services subject to the procurement requirements in 2 CFR part 200, 
subpart D.

[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992; 60 
FR 1952, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56914, Nov. 9, 
1995; 80 FR 75937, Dec. 7, 2015]



Sec. 570.501  Responsibility for grant administration.

    (a) One or more public agencies, including existing local public 
agencies, may be designated by the chief executive officer of the 
recipient to undertake activities assisted by this part. A public agency 
so designated shall be

[[Page 117]]

subject to the same requirements as are applicable to subrecipients.
    (b) The recipient is responsible for ensuring that CDBG funds are 
used in accordance with all program requirements. The use of designated 
public agencies, subrecipients, or contractors does not relieve the 
recipient of this responsibility. The recipient is also responsible for 
determining the adequacy of performance under subrecipient agreements 
and procurement contracts, and for taking appropriate action when 
performance problems arise, such as the actions described in 
Sec. 570.910. Where a unit of general local government is participating 
with, or as part of, an urban county, or as part of a metropolitan city, 
the recipient is responsible for applying to the unit of general local 
government the same requirements as are applicable to subrecipients, 
except that the five-year period identified under Sec. 570.503(b)(8)(i) 
shall begin with the date that the unit of general local government is 
no longer considered by HUD to be a part of the metropolitan city or 
urban county, as applicable, instead of the date that the subrecipient 
agreement expires.

[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992]



Sec. 570.502  Applicability of uniform administrative requirements.

    (a) Grantees and subrecipients shall comply with 2 CFR part 200, 
``Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards'', except that:
    (1) Section 200.305 ``Payment'' is modified for lump sum drawdown 
for financing of property rehabilitation activities, in accordance with 
Sec. 570.513.
    (2) Section 200.306 ``Cost sharing or matching'' does not apply.
    (3) Section 200.307 ``Program income'' does not apply. Program 
income is governed by Sec. 570.504.
    (4) Section 200.308 ``Revisions of budget and program plans'' does 
not apply.
    (5) Section 200.311 ``Real property'' does not apply, except as 
provided in Sec. 570.200(j). Real property is governed by Sec. 570.505.
    (6) Section 200.313 ``Equipment'' applies, except that when the 
equipment is sold, the proceeds shall be program income. Equipment not 
needed by the subrecipient for CDBG activities shall be transferred to 
the recipient for the CDBG program or shall be retained after 
compensating the recipient.
    (7) Section 200.333 ``Retention requirements for records'' applies 
except that:
    (i) For recipients:
    (A) The period shall be 4 years from the date of execution of the 
closeout agreement for a grant, as further described in this part;
    (B) Records for individual activities subject to the reversion of 
assets provisions at Sec. 570.503(b)(7) or the change of use provisions 
at Sec. 570.505 must be maintained for 3 years after those provisions no 
longer apply to the activity;
    (C) Records for individual activities for which there are 
outstanding loan balances, other receivables, or contingent liabilities 
must be retained for 3 years after the receivables or liabilities have 
been satisfied.
    (ii) For subrecipients:
    (A) The retention period for individual CDBG activities shall be the 
longer of 3 years after the expiration or termination of the 
subrecipient agreement under Sec. 570.503, or 3 years after the 
submission of the annual performance and evaluation report, as 
prescribed in Sec. 91.520 of this title, in which the specific activity 
is reported on for the final time;
    (B) Records for individual activities subject to the reversion of 
assets provisions at Sec. 570.503(b)(7) or change of use provisions at 
Sec. 570.505 must be maintained for as long as those provisions continue 
to apply to the activity; and
    (C) Records for individual activities for which there are 
outstanding loan balances, other receivables, or contingent liabilities 
must be retained until such receivables or liabilities have been 
satisfied.
    (8) Section 200.343 ``Closeout'' applies to closeout of 
subrecipients.
    (b) [Reserved]

[80 FR 75937, Dec. 7, 2015]



Sec. 570.503  Agreements with subrecipients.

    (a) Before disbursing any CDBG funds to a subrecipient, the 
recipient shall sign a written agreement with the subrecipient. The 
agreement shall remain

[[Page 118]]

in effect during any period that the subrecipient has control over CDBG 
funds, including program income.
    (b) At a minimum, the written agreement with the subrecipient shall 
include provisions concerning the following items:
    (1) Statement of work. The agreement shall include a description of 
the work to be performed, a schedule for completing the work, and a 
budget. These items shall be in sufficient detail to provide a sound 
basis for the recipient effectively to monitor performance under the 
agreement.
    (2) Records and reports. The recipient shall specify in the 
agreement the particular records the subrecipient must maintain and the 
particular reports the subrecipient must submit in order to assist the 
recipient in meeting its recordkeeping and reporting requirements.
    (3) Program income. The agreement shall include the program income 
requirements set forth in Sec. 570.504(c). The agreement shall also 
specify that, at the end of the program year, the grantee may require 
remittance of all or part of any program income balances (including 
investments thereof) held by the subrecipient (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 security needs).
    (4) Uniform requirements. The agreement shall require the 
subrecipient to comply with applicable uniform requirements, as 
described in Sec. 570.502.
    (5) Other program requirements. The agreement shall require the 
subrecipient to carry out each activity in compliance with all Federal 
laws and regulations described in subpart K of these regulations, except 
that:
    (i) The subrecipient does not assume the recipient's environmental 
responsibilities described at Sec. 570.604; and
    (ii) The subrecipient does not assume the recipient's responsibility 
for initiating the review process under the provisions of 24 CFR part 
52.
    (6) Suspension and termination. The agreement shall set forth 
remedies for noncompliance and provisions on termination in accordance 
with 2 CFR part 200, subpart D.
    (7) Reversion of assets. The agreement shall specify that upon its 
expiration the subrecipient shall transfer to the recipient any CDBG 
funds on hand at the time of expiration and any accounts receivable 
attributable to the use of CDBG funds. It shall also include provisions 
designed to ensure that any real property under the subrecipient's 
control that was acquired or improved in whole or in part with CDBG 
funds (including CDBG funds provided to the subrecipient in the form of 
a loan) in excess of $25,000 is either:
    (i) Used to meet one of the national objectives in Sec. 570.208 
(formerly Sec. 570.901) until five years after expiration of the 
agreement, or for such longer period of time as determined to be 
appropriate by the recipient; or
    (ii) Not used in accordance with paragraph (b)(7)(i) of this 
section, in which event the subrecipient shall pay to the recipient an 
amount equal to the current market value of the property less any 
portion of the value attributable to expenditures of non-CDBG funds for 
the acquisition of, or improvement to, the property. The payment is 
program income to the recipient. (No payment is required after the 
period of time specified in paragraph (b)(7)(i) of this section.)

[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988; 57 
FR 27120, June 17, 1992; 60 FR 56915, Nov. 9, 1995; 68 FR 56405, Sept. 
30, 2003; 80 FR 69873, Nov. 12, 2015; 80 FR 75938, Dec. 7, 2015]



Sec. 570.504  Program income.

    (a) Recording program income. The receipt and expenditure of program 
income as defined in Sec. 570.500(a) shall be recorded as part of the 
financial transactions of the grant program.
    (b) Disposition of program income received by recipients. (1) 
Program income received before grant closeout may be retained by the 
recipient if the income is treated as additional CDBG funds subject to 
all applicable requirements governing the use of CDBG funds.
    (2) If the recipient chooses to retain program income, that program 
income shall be disposed of as follows:
    (i) Program income in the form of repayments to, or interest earned 
on, a revolving fund as defined in Sec. 570.500(b) shall be 
substantially disbursed from

[[Page 119]]

the fund before additional cash withdrawals are made from the U.S. 
Treasury for the same activity. (This rule does not prevent a lump sum 
disbursement to finance the rehabilitation of privately owned properties 
as provided for in Sec. 570.513.)
    (ii) Substantially all other program income shall be disbursed for 
eligible activities before additional cash withdrawals are made from the 
U.S. Treasury.
    (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 Sec. 570.304 shall be remitted to HUD as soon as practicable 
thereafter, to be placed in the recipient's line of credit. 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.)
    (3) Program income on hand at the time of closeout shall continue to 
be subject to the eligibility requirements in subpart C and all other 
applicable provisions of this part until it is expended.
    (4) Unless otherwise provided in any grant closeout agreement, and 
subject to the requirements of paragraph (b)(5) of this section, income 
received after closeout shall not be governed by the provisions of this 
part, except that, if at the time of closeout the recipient has another 
ongoing CDBG grant received directly from HUD, funds received after 
closeout shall be treated as program income of the ongoing grant 
program.
    (5) If the recipient does not have another ongoing grant received 
directly from HUD at the time of closeout, income received after 
closeout from the disposition of real property or from loans outstanding 
at the time of closeout shall not be governed by the provisions of this 
part, except that such income shall be used for activities that meet one 
of the national objectives in Sec. 570.901 and the eligibility 
requirements described in section 105 of the Act.
    (c) Disposition of program income received by subrecipients. The 
written agreement between the recipient and the subrecipient, as 
required by Sec. 570.503, shall specify whether program income received 
is to be returned to the recipient or retained by the subrecipient. 
Where program income is to be retained by the subrecipient, the 
agreement shall specify the activities that will be undertaken with the 
program income and that all provisions of the written agreement shall 
apply to the specified activities. When the subrecipient retains program 
income, transfers of grant funds by the recipient to the subrecipient 
shall be adjusted according to the principles described in paragraphs 
(b)(2) (i) and (ii) of this section. Any program income on hand when the 
agreement expires, or received after the agreement's expiration, shall 
be paid to the recipient as required by Sec. 570.503(b)(8).
    (d) Disposition of certain program income received by urban 
counties. Program income derived from urban county program activities 
undertaken by or within the jurisdiction of a unit of general local 
government which thereafter terminates its participation in the urban 
county shall continue to be program income of the urban county. The 
urban county may transfer the program income to the unit of general 
local government, upon its termination of urban county participation, 
provided that the unit of general local government has become an 
entitlement grantee and agrees to use the program income in its own CDBG 
entitlement program.
    (e)(1) Transfer of program income to Entitlement program. A unit of 
general local government that becomes eligible to be an Entitlement 
grantee may request the state's approval to transfer State CDBG grant-
generated program income to the unit of general local government's 
Entitlement program. A state may approve the transfer, provided that the 
unit of general local government:

[[Page 120]]

    (i) Has officially elected to participate in the Entitlement grant 
program;
    (ii) Agrees to use such program income in accordance with 
Entitlement program requirements; and
    (iii) Has set up Integrated Disbursement and Information System 
(IDIS) access and agrees to enter receipt of program income into IDIS.
    (2) Transfer of program income of grantees losing Entitlement 
status. Upon entry into the State CDBG program, a unit of general local 
government that has lost or relinquished its Entitlement status must, 
with respect to program income that a unit of general local government 
would otherwise be permitted to retain, either:
    (i) Retain the program income generated under Entitlement grants and 
continue to comply with Entitlement program requirements for program 
income; or
    (ii) Retain the program income and transfer it to the State CDBG 
program, in which case the unit of general local government must comply 
with the state's rules for program income and the requirements of 
Sec. 570.489(e).

[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 56915, Nov. 9, 1995; 77 
FR 24146, Apr. 23, 2012]



Sec. 570.505  Use of real property.

    The standards described in this section apply to real property 
within the recipient's control which was acquired or improved in whole 
or in part using CDBG funds in excess of $25,000. These standards shall 
apply from the date CDBG funds are first spent for the property until 
five years after closeout of an entitlement recipient's participation in 
the entitlement CDBG program or, with respect to other recipients, until 
five years after the closeout of the grant from which the assistance to 
the property was provided.
    (a) A recipient may not change the use or planned use of any such 
property (including the beneficiaries of such use) from that for which 
the acquisition or improvement was made unless the recipient provides 
affected citizens with reasonable notice of, and opportunity to comment 
on, any proposed change, and either:
    (1) The new use of such property qualifies as meeting one of the 
national objectives in Sec. 570.208 (formerly Sec. 570.901) and is not a 
building for the general conduct of government; or
    (2) The requirements in paragraph (b) of this section are met.
    (b) If the recipient determines, after consultation with affected 
citizens, that it is appropriate to change the use of the property to a 
use which does not qualify under paragraph (a)(1) of this section, it 
may retain or dispose of the property for the changed use if the 
recipient's CDBG program is reimbursed in the amount of the current fair 
market value of the property, less any portion of the value attributable 
to expenditures of non-CDBG funds for acquisition of, and improvements 
to, the property.
    (c) If the change of use occurs after closeout, the provisions 
governing income from the disposition of the real property in 
Sec. 570.504(b)(4) or (5), as applicable, shall apply to the use of 
funds reimbursed.
    (d) Following the reimbursement of the CDBG program in accordance 
with paragraph (b) of this section, the property no longer will be 
subject to any CDBG requirements.

[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988]



Sec. 570.506  Records to be maintained.

    Each recipient shall establish and maintain sufficient records to 
enable the Secretary to determine whether the recipient has met the 
requirements of this part. At a minimum, the following records are 
needed:
    (a) Records providing a full description of each activity assisted 
(or being assisted) with CDBG funds, including its location (if the 
activity has a geographical locus), the amount of CDBG funds budgeted, 
obligated and expended for the activity, and the provision in subpart C 
under which it is eligible.
    (b) Records demonstrating that each activity undertaken meets one of 
the criteria set forth in Sec. 570.208. (Where information on income by 
family size is required, the recipient may substitute evidence 
establishing that the person assisted qualifies under another program 
having income qualification criteria at least as restrictive as that 
used in the definitions of ``low and moderate income person'' and ``low 
and

[[Page 121]]

moderate income household'' (as applicable) at Sec. 570.3, such as Job 
Training Partnership Act (JTPA) and welfare programs; or the recipient 
may substitute evidence that the assisted person is homeless; or the 
recipient may substitute a copy of a verifiable certification from the 
assisted person that his or her family income does not exceed the 
applicable income limit established in accordance with Sec. 570.3; or 
the recipient may substitute a notice that the assisted person is a 
referral from a state, county or local employment agency or other entity 
that agrees to refer individuals it determines to be low and moderate 
income persons based on HUD's criteria and agrees to maintain 
documentation supporting these determinations.) Such records shall 
include the following information:
    (1) For each activity determined to benefit low and moderate income 
persons, the income limits applied and the point in time when the 
benefit was determined.
    (2) For each activity determined to benefit low and moderate income 
persons based on the area served by the activity:
    (i) The boundaries of the service area;
    (ii) The income characteristics of families and unrelated 
individuals in the service area; and
    (iii) If the percent of low and moderate income persons in the 
service area is less than 51 percent, data showing that the area 
qualifies under the exception criteria set forth at 
Sec. 570.208(a)(1)(ii).
    (3) For each activity determined to benefit low and moderate income 
persons because the activity involves a facility or service designed for 
use by a limited clientele consisting exclusively or predominantly of 
low and moderate income persons:
    (i) Documentation establishing that the facility or service is 
designed for the particular needs of or used exclusively by senior 
citizens, adults meeting the Bureau of the Census' Current Population 
Reports definition of ``severely disabled,'' persons living with AIDS, 
battered spouses, abused children, the homeless, illiterate adults, or 
migrant farm workers, for which the regulations provide a presumption 
concerning the extent to which low- and moderate-income persons benefit; 
or
    (ii) Documentation describing how the nature and, if applicable, the 
location of the facility or service establishes that it is used 
predominantly by low and moderate income persons; or
    (iii) Data showing the size and annual income of the family of each 
person receiving the benefit.
    (4) For each activity carried out for the purpose of providing or 
improving housing which is determined to benefit low and moderate income 
persons:
    (i) A copy of a written agreement with each landlord or developer 
receiving CDBG assistance indicating the total number of dwelling units 
in each multifamily structure assisted and the number of those units 
which will be occupied by low and moderate income households after 
assistance;
    (ii) The total cost of the activity, including both CDBG and non-
CDBG funds.
    (iii) For each unit occupied by a low and moderate income household, 
the size and income of the household;
    (iv) For rental housing only:
    (A) The rent charged (or to be charged) after assistance for each 
dwelling unit in each structure assisted; and
    (B) Such information as necessary to show the affordability of units 
occupied (or to be occupied) by low and moderate income households 
pursuant to criteria established and made public by the recipient;
    (v) For each property acquired on which there are no structures, 
evidence of commitments ensuring that the criteria in Sec. 570.208(a)(3) 
will be met when the structures are built;
    (vi) Where applicable, records demonstrating that the activity 
qualifies under the special conditions at Sec. 570.208(a)(3)(i);
    (vii) For any homebuyer assistance activity qualifying under 
Sec. 570.201(e), 570.201(n), or 570.204, identification of the 
applicable eligibility paragraph and evidence that the activity meets 
the eligibility criteria for that provision; for any such activity 
qualifying under Sec. 570.208(a), the size and income of each 
homebuyer's household; and
    (viii) For a Sec. 570.201(k) housing services activity, 
identification of the

[[Page 122]]

HOME project(s) or assistance that the housing services activity 
supports, and evidence that project(s) or assistance meet the HOME 
program income targeting requirements at 24 CFR 92.252 or 92.254.
    (5) For each activity determined to benefit low and moderate income 
persons based on the creation of jobs, the recipient shall provide the 
documentation described in either paragraph (b)(5)(i) or (ii) of this 
section.
    (i) Where the recipient chooses to document that at least 51 percent 
of the jobs will be available to low and moderate income persons, 
documentation for each assisted business shall include:
    (A) A copy of a written agreement containing:
    (1) A commitment by the business that it will make at least 51 
percent of the jobs available to low and moderate income persons and 
will provide training for any of those jobs requiring special skills or 
education;
    (2) A listing by job title of the permanent jobs to be created 
indicating which jobs will be available to low and moderate income 
persons, which jobs require special skills or education, and which jobs 
are part-time, if any; and
    (3) A description of actions to be taken by the recipient and 
business to ensure that low and moderate income persons receive first 
consideration for those jobs; and
    (B) A listing by job title of the permanent jobs filled, and which 
jobs of those were available to low and moderate income persons, and a 
description of how first consideration was given to such persons for 
those jobs. The description shall include what hiring process was used; 
which low and moderate income persons were interviewed for a particular 
job; and which low and moderate income persons were hired.
    (ii) Where the recipient chooses to document that at least 51 
percent of the jobs will be held by low and moderate income persons, 
documentation for each assisted business shall include:
    (A) A copy of a written agreement containing:
    (1) A commitment by the business that at least 51 percent of the 
jobs, on a full-time equivalent basis, will be held by low and moderate 
income persons; and
    (2) A listing by job title of the permanent jobs to be created, 
identifying which are part-time, if any;
    (B) A listing by job title of the permanent jobs filled and which 
jobs were initially held by low and moderate income persons; and
    (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.
    (6) For each activity determined to benefit low and moderate income 
persons based on the retention of jobs:
    (i) Evidence that in the absence of CDBG assistance jobs would be 
lost;
    (ii) For each business assisted, a listing by job title of permanent 
jobs retained, indicating which of those jobs are part-time and (where 
it is known) which are held by low and moderate income persons at the 
time the CDBG assistance is provided. Where applicable, identification 
of any of the retained jobs (other than those known to be held by low 
and moderate income persons) which are projected to become available to 
low and moderate income persons through job turnover within two years of 
the time CDBG assistance is provided. Information upon which the job 
turnover projections were based shall also be included in the record;
    (iii) For each retained job claimed to be held by a low and moderate 
income person, information on the size and annual income of the person's 
family;
    (iv) For jobs claimed to be available to low and moderate income 
persons based on job turnover, a description covering the items required 
for ``available to'' jobs in paragraph (b)(5) of this section; and
    (v) Where jobs were claimed to be available to low and moderate 
income persons through turnover, a listing of each job which has turned 
over to date, indicating which of those jobs were either taken by, or 
available to, low and moderate income persons. For jobs made available, 
a description of how first consideration was given to such persons for 
those jobs shall also be included in the record.
    (7) For purposes of documenting, pursuant to paragraph (b)(5)(i)(B),

[[Page 123]]

(b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(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 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 Sec. 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; and
    (ii) A description of the conditions which qualified the area at the 
time of its designation in sufficient detail to demonstrate how the area 
met the criteria in Sec. 570.208(b)(1).
    (9) For each residential rehabilitation activity determined to aid 
in the prevention or elimination of slums or blight in a slum or 
blighted area:
    (i) The local definition of ``substandard'';
    (ii) A pre-rehabilitation inspection report describing the 
deficiencies in each structure to be rehabilitated; and
    (iii) Details and scope of CDBG assisted rehabilitation, by 
structure.
    (10) For each activity determined to aid in the prevention or 
elimination of slums or blight based on the elimination of specific 
conditions of blight or physical decay not located in a slum or blighted 
area:
    (i) A description of the specific condition of blight or physical 
decay treated; and
    (ii) For rehabilitation carried out under this category, a 
description of the specific conditions detrimental to public health and 
safety which were identified and the details and scope of the CDBG 
assisted rehabilitation by structure.
    (11) For each activity determined to aid in the prevention or 
elimination of slums or blight based on addressing slums or blight in an 
urban renewal area, a copy of the Urban Renewal Plan, as in effect at 
the time the activity is carried out, including maps and supporting 
documentation.
    (12) For each activity determined to meet a community development 
need having a particular urgency:
    (i) Documentation concerning the nature and degree of seriousness of 
the condition requiring assistance;
    (ii) Evidence that the recipient certified that the CDBG activity 
was designed to address the urgent need;
    (iii) Information on the timing of the development of the serious 
condition; and
    (iv) Evidence confirming that other financial resources to alleviate 
the need were not available.
    (c)(1) Records that demonstrate that the recipient has made the 
determinations required as a condition of eligibility of certain 
activities, as prescribed in Secs. 570.201(f), 570.201(i)(2), 
570.201(p), 570.201(q), 570.202(b)(3), 570.206(f), 570.209, 570.210, and 
570.309.
    (2) Where applicable, records which either demonstrate compliance 
with the requirements of Sec. 570.202(g) or Sec. 570.204(a)(5) or 
document the State's or State's grant recipient's basis for an exception 
to the requirements of those paragraphs.
    (d) Records which demonstrate compliance with Sec. 570.503(b)(7) or 
Sec. 570.505 regarding any 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.
    (f) Records which demonstrate compliance with the requirements in 
Sec. 570.606 regarding acquisition, displacement, relocation, and 
replacement housing.

[[Page 124]]

    (g) Fair housing and equal opportunity records containing:
    (1) Documentation related to the recipient's AFH, as described in 24 
CFR part 5, subpart A (Sec. 5.168).
    (2) Data on the extent to which each racial and ethnic group and 
single-headed households (by gender of household head) have applied for, 
participated in, or benefited from, any program or activity funded in 
whole or in part with CDBG funds. Such information shall be used only as 
a basis for further investigation as to compliance with 
nondiscrimination requirements. No recipient is required to attain or 
maintain any particular statistical measure by race, ethnicity, or 
gender in covered programs.
    (3) Data on employment in each of the recipient's operating units 
funded in whole or in part with CDBG funds, with such data maintained in 
the categories prescribed on the Equal Employment Opportunity 
Commission's EEO-4 form; and documentation of any actions undertaken to 
assure equal employment opportunities to all persons regardless of race, 
color, national origin, sex or handicap in operating units funded in 
whole or in part under this part.
    (4) Data indicating the race and ethnicity of households (and gender 
of single heads of households) displaced as a result of CDBG funded 
activities, together with the address and census tract of the housing 
units to which each displaced household relocated. Such information 
shall be used only as a basis for further investigation as to compliance 
with nondiscrimination requirements. No recipient is required to attain 
or maintain any particular statistical measure by race, ethnicity, or 
gender in covered programs.
    (5) Documentation of actions undertaken to meet the requirements of 
Sec. 570.607(b) which implements section 3 of the Housing Development 
Act of 1968, as amended (12 U.S.C. 1701U) relative to the hiring and 
training of low and moderate income persons and the use of local 
businesses.
    (6) Data indicating the racial/ethnic character of each business 
entity receiving a contract or subcontract of $25,000 or more paid, or 
to be paid, with CDBG funds, data indicating which of those entities are 
women's business enterprises as defined in Executive Order 12138, the 
amount of the contract or subcontract, and documentation of recipient's 
affirmative steps to assure that minority business and women's business 
enterprises have an equal opportunity to obtain or compete for contracts 
and subcontracts as sources of supplies, equipment, construction and 
services. Such affirmative steps may include, but are not limited to, 
technical assistance open to all businesses but designed to enhance 
opportunities for these enterprises and special outreach efforts to 
inform them of contract opportunities. Such steps shall not include 
preferring any business in the award of any contract or subcontract 
solely or in part on the basis of race or gender.
    (7) Documentation of the affirmative action measures the recipient 
has taken to overcome prior discrimination, where the courts or HUD have 
found that the recipient has previously discriminated against persons on 
the ground of race, color, national origin or sex in administering a 
program or activity funded in whole or in part with CDBG funds.
    (h) Financial records, in accordance with the applicable 
requirements listed in Sec. 570.502, including source documentation for 
entities not subject to 2 CFR part 200. Grantees shall maintain evidence 
to support how the CDBG funds provided to such entities are expended. 
Such documentation must include, to the extent applicable, invoices, 
schedules containing comparisons of budgeted amounts and actual 
expenditures, construction progress schedules signed by appropriate 
parties (e.g., general contractor and/or a project architect), and/or 
other documentation appropriate to the nature of the activity. Grantee 
records pertaining to obligations, expenditures, and drawdowns must be 
able to relate financial transactions to either a specific origin year 
grant or to program income received during a specific program year.
    (i) Agreements and other records related to lump sum disbursements 
to private financial institutions for financing rehabilitation as 
prescribed in Sec. 570.513; and

[[Page 125]]

    (j) Records required to be maintained in accordance with other 
applicable laws and regulations set forth in subpart K of this part.

(Approved by the Office of Management and Budget under control number 
2506-0077)

[53 FR 34454, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
60 FR 1916, 1953, Jan. 5, 1995; 60 FR 56915, Nov. 9, 1995; 61 FR 18674, 
Apr. 29, 1996; 64 FR 38813, July 19, 1999; 70 FR 76370, Dec. 23, 2005; 
80 FR 42368, July 16, 2015; 80 FR 69873, Nov. 12, 2015; 81 FR 92637, 
Dec. 20, 2016]



Sec. 570.507  Reports.

    (a) Performance and evaluation report--(1) Entitlement grant 
recipients and HUD-administered small cities recipients in Hawaii. The 
annual performance and evaluation report shall be submitted in 
accordance with 24 CFR part 91.
    (2) HUD-administered Small Cities recipients in New York, and Hawaii 
recipients for pre-FY 1995 grants--(i) Content. Each performance and 
evaluation report must contain completed copies of all forms and 
narratives prescribed by HUD, including a summary of the citizen 
comments received on the report.
    (ii) Timing. The performance and evaluation report on each grant 
shall be submitted:
    (A) No later than October 31 for all grants executed before April 1 
of the same calendar year. The first report should cover the period from 
the execution of the grant until September 30. Reports on grants made 
after March 31 of a calendar year will be due October 31 of the 
following calendar year, and the reports will cover the period of time 
from the execution of the grant until September 30 of the calendar year 
following grant execution. After the initial submission, the performance 
and evaluation report will be submitted annually on October 31 until 
completion of the activities funded under the grant;
    (B) Hawaii grantees will submit their small cities performance and 
evaluation report for each pre-FY 1995 grant no later than 90 days after 
the completion of their most recent program year. After the initial 
submission, the performance and evaluation report will be submitted 
annually until completion of the activities funded under the grant; and
    (C) No later than 90 days after the criteria for grant closeout, as 
described in Sec. 570.509(a), have been met.
    (iii) Citizen comments on the report. Each recipient shall make 
copies of the performance and evaluation report available to its 
citizens in sufficient time to permit the citizens to comment on the 
report before its submission to HUD. Each recipient may determine the 
specific manner and times the report will be made available to citizens 
consistent with the preceding sentence.
    (b) Equal employment opportunity reports. Recipients of entitlement 
grants or HUD-administered small cities grants shall submit to HUD each 
year a report (HUD/EEO-4) on recipient employment containing data as of 
June 30.
    (c) Minority business enterprise reports. Recipients of entitlement 
grants, HUD-administered small cities grants or Urban Development Action 
Grants shall submit to HUD, by April 30, a report on contracts and 
subcontract activity during the first half of the fiscal year and by 
October 31 a report on such activity during the second half of the year.
    (d) 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.

(Approved by the Office of Management and Budget under control numbers 
2506-0077 for paragraph (a) and 2529-0008 for paragraph (b) and 2506-
0066 for paragraph (c))

[53 FR 34456, Sept. 6, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 61 
FR 32269, June 21, 1996]



Sec. 570.508  Public access to program records.

    Notwithstanding 2 CFR 200.337, recipients shall provide citizens 
with reasonable access to records regarding the past use of CDBG funds, 
consistent with applicable State and local laws regarding privacy and 
obligations of confidentiality.

[53 FR 8058, Mar. 11, 1988, as amended at 80 FR 75938, Dec. 7, 2015]

[[Page 126]]



Sec. 570.509  Grant closeout procedures.

    (a) Criteria for closeout. HUD may make grant closeout 
determinations for individual grants or multiple grants simultaneously. 
A grant will be closed out when HUD determines, in consultation with the 
recipient, that the following criteria have been met:
    (1) All costs to be paid with CDBG funds from a given origin year's 
grant have been expended and drawn down, with the exception of closeout 
costs (e.g., audit costs) and costs resulting from contingent 
liabilities described in the closeout agreement pursuant to paragraph 
(c) of this section. Contingent liabilities include, but are not limited 
to, third-party claims against the recipient, as well as related 
administrative costs.
    (2) All activities for which funds were expended from the origin 
year grant are physically completed, are eligible, have met a national 
objective under Sec. 570.208, and the grantee has reported on all 
accomplishments resulting from the activity.
    (3) A final performance and expenditure report for completed 
activities has been submitted to HUD pursuant to 24 CFR 91.520, and HUD 
has determined the plan is satisfactory.
    (4) All program income received by the grantee during the grantee 
program year associated with the origin year grant has been expended, or 
identified in a more recent program year's Action Plan, pursuant to 24 
CFR 91.220(l).
    (5) For origin year 2015 grants and subsequent grants, the grantee 
has expended no more than 20 percent of the origin year grant for 
planning and program administrative costs, under Sec. 570.200(g)(1).
    (6) Other responsibilities of the recipient under the grant 
agreement and applicable laws and regulations appear to have been 
carried out satisfactorily or there is no further Federal interest in 
keeping the grant agreement open for the purpose of securing 
performance.
    (b) Closeout actions.
    (1) Based on the information provided in the performance report and 
other relevant information, HUD, in consultation with the recipient, 
will prepare a closeout agreement in accordance with paragraph (c) of 
this section.
    (2) HUD will cancel any unused portion of the awarded grant, as 
shown in the signed 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).
    (3) 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.
    (c) Closeout agreement. Any obligations remaining as of the date of 
the closeout shall be covered by the terms of a closeout agreement. The 
agreement shall be prepared by the HUD field office in consultation with 
the recipient. The agreement shall identify the grant being closed out, 
and include provisions with respect to the following:
    (1) Identification of any closeout costs or contingent liabilities 
subject to payment with CDBG funds after the closeout agreement is 
signed;
    (2) Identification of any unused grant funds to be canceled by HUD;
    (3) Description of the recipient's responsibility after closeout 
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 Secs. 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 Sec. 570.504(b)(4) and (5);
    (iv) Ensuring that flood insurance coverage for affected property 
owners

[[Page 127]]

is maintained for the mandatory period; and
    (4) Other provisions appropriate to any special circumstances of the 
grant closeout, in modification of or in addition to the obligations in 
paragraphs (c)(1) through (4) of this section. The agreement shall 
authorize monitoring by HUD, and shall provide that findings of 
noncompliance may be taken into account by HUD, as unsatisfactory 
performance of the recipient, in the consideration of any future grant 
award under this part.
    (d) Status of consolidated plan after closeout. Unless otherwise 
provided in a closeout agreement, the Consolidated Plan will remain in 
effect after closeout until the expiration of the program year covered 
by the last approved consolidated plan.
    (e) Termination of grant 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 200.339. 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.
    (f) Termination 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 
200.342) on the effects of termination shall also apply. HUD shall 
determine whether an environmental assessment or finding of 
inapplicability is required, and if such review is required, HUD shall 
perform it in accordance with 24 CFR part 50.

[53 FR 8058, Mar. 11, 1988, as amended at 56 FR 56128, Oct. 31, 1991; 60 
FR 1916, Jan. 5, 1995; 60 FR 16379, Mar. 30, 1995; 80 FR 69873, Nov. 12, 
2015; 80 FR 75938, Dec. 7, 2015]



Sec. 570.510  Transferring projects from urban counties to metropolitan
cities.

    Section 106(c)(3) of the Act authorizes the Secretary to transfer 
unobligated grant funds from an urban county to a new metropolitan city, 
provided: the city was an included unit of general local government in 
the urban county immediately before its qualification as a metropolitan 
city; the funds to be transferred were received by the county before the 
qualification of the city as a metropolitan city; the funds to be 
transferred had been programmed by the urban county for use in the city 
before such qualification; and the city and county agree to transfer 
responsibility for the administration of the funds being transferred 
from the county's letter of credit to the city's letter of credit. The 
following rules apply to the transfer of responsibility for an activity 
from an urban county to the new metropolitan city.
    (a) The urban county and the metropolitan city must execute a 
legally binding agreement which shall specify:
    (1) The amount of funds to be transferred from the urban county's 
letter of credit to the metropolitan city's letter of credit;
    (2) The activities to be carried out by the city with the funds 
being transferred;
    (3) The county's responsibility for all expenditures and 
unliquidated obligations associated with the activities before the time 
of transfer, including a statement that responsibility for all audit and 
monitoring findings associated with those expenditures and obligations 
shall remain with the county;
    (4) The responsibility of the metropolitan city for all other audit 
and monitoring findings;
    (5) How program income (if any) from the activities specified shall 
be divided between the metropolitan city and the urban county; and
    (6) Such other provisions as may be required by HUD.

[[Page 128]]

    (b) Upon receipt of a request for the transfer of funds from an 
urban county to a metropolitan city and a copy of the executed 
agreement, HUD, in consultation with the Department of the Treasury, 
shall establish a date upon which the funds shall be transferred from 
the letter of credit of the urban county to the letter of credit of the 
metropolitan city, and shall take all necessary actions to effect the 
requested transfer of funds.
    (c) HUD shall notify the metropolitan city and urban county of any 
special audit and monitoring rules which apply to the transferred funds 
when the date of the transfer is communicated to the city and the 
county.



Sec. 570.511  Use of escrow accounts for rehabilitation of privately
owned residential property.

    (a) Limitations. A recipient may withdraw funds from its letter of 
credit for immediate deposit into an escrow account for use in funding 
loans and grants for the rehabilitation of privately owned residential 
property under Sec. 570.202(a)(1). The following additional limitations 
apply to the use of escrow accounts for residential rehabilitation loans 
and grants closed after September 7, 1990:
    (1) The use of escrow accounts under this section is limited to 
loans and grants for the rehabilitation of primarily residential 
properties containing no more than four dwelling units (and accessory 
neighborhood-scale non-residential space within the same structure, if 
any, e.g., a store front below a dwelling unit).
    (2) An escrow account shall not be used unless the contract between 
the property owner and the contractor selected to do the rehabilitation 
work specifically provides that payment to the contractor shall be made 
through an escrow account maintained by the recipient, by a subrecipient 
as defined in Sec. 570.500(c), by a public agency designated under 
Sec. 570.501(a), or by an agent under a procurement contact governed by 
the requirements of 2 CFR part 200, subpart D. No deposit to the escrow 
account shall be made until after the contract has been executed between 
the property owner and the rehabilitation contractor.
    (3) All funds withdrawn under this section shall be deposited into 
one interest earning account with a financial institution. Separate bank 
accounts shall not be established for individual loans and grants.
    (4) The amount of funds deposited into an escrow account shall be 
limited to the amount expected to be disbursed within 10 working days 
from the date of deposit. If the escrow account, for whatever reason, at 
any time contains funds exceeding 10 days cash needs, the grantee 
immediately shall transfer the excess funds to its program account. In 
the program account, the excess funds shall be treated as funds 
erroneously drawn in accordance with the requirements of U.S. Treasury 
Financial Manual, paragraph 6-2075.30.
    (5) Funds deposited into an escrow account shall be used only to pay 
the actual costs of rehabilitation incurred by the owner under the 
contract with a private contractor. Other eligible costs related to the 
rehabilitation loan or grant, e.g., the recipient's administrative costs 
under Sec. 570.206 or rehabilitation services costs under 
Sec. 570.202(b)(9), are not permissible uses of escrowed funds. Such 
other eligible rehabilitation costs shall be paid under normal CDBG 
payment procedures (e.g., from withdrawals of grant funds under the 
recipient's letter of credit with the Treasury).
    (b) Interest. Interest earned on escrow accounts established in 
accordance with this section, less any service charges for the account, 
shall be remitted to HUD at least quarterly but not more frequently than 
monthly. Interest earned on escrow accounts is not required to be 
remitted to HUD to the extent the interest is attributable to the 
investment of program income.
    (c) Remedies for noncompliance. If HUD determines that a recipient 
has failed to use an escrow account in accordance with this section, HUD 
may, in addition to imposing any other sanctions provided for under this 
part, require the recipient to discontinue the use of escrow accounts, 
in whole or in part.

[55 FR 32369, Aug. 8, 1990, as amended at 80 FR 75938, Dec. 7, 2015]

[[Page 129]]



Sec. 570.512  [Reserved]



Sec. 570.513  Lump sum drawdown for financing of property 
rehabilitation activities.

    Subject to the conditions prescribed in this section, recipients may 
draw funds from the letter of credit in a lump sum to establish a 
rehabilitation fund in one or more private financial institutions for 
the purpose of financing the rehabilitation of privately owned 
properties. The fund may be used in conjunction with various 
rehabilitation financing techniques, including loans, interest 
subsidies, loan guarantees, loan reserves, or such other uses as may be 
approved by HUD consistent with the objectives of this section. The fund 
may also be used for making grants, but only for the purpose of 
leveraging non-CDBG funds for the rehabilitation of the same property.
    (a) Limitation on drawdown of grant funds. (1) The funds that a 
recipient deposits to a rehabilitation fund shall not exceed the grant 
amount that the recipient reasonably expects will be required, together 
with anticipated program income from interest and loan repayments, for 
the rehabilitation activities during the period specified in the 
agreement to undertake activities, based on either:
    (i) Prior level of rehabilitation activity; or
    (ii) Rehabilitation staffing and management capacity during the 
period specified in the agreement to undertake activities.
    (2) No grant funds may be deposited under this section solely for 
the purpose of investment, notwithstanding that the interest or other 
income is to be used for the rehabilitation activities.
    (3) The recipient's rehabilitation program administrative costs and 
the administrative costs of the financial institution may not be funded 
through lump sum drawdown. Such costs must be paid from periodic letter 
of credit withdrawals in accordance with standard procedures or from 
program income, other than program income generated by the lump sum 
distribution.
    (b) Standards to be met. The following standards shall apply to all 
lump sum drawdowns of CDBG funds for rehabilitation:
    (1) Eligible rehabilitation activities. The rehabilitation fund 
shall be used to finance the rehabilitation of privately owned 
properties eligible under the general policies in Sec. 570.200 and the 
specific provisions of either Sec. 570.202, including the acquisition of 
properties for rehabilitation, or Sec. 570.203.
    (2) Requirements for agreement. The recipient shall execute a 
written agreement with one or more private financial institutions for 
the operation of the rehabilitation fund. The agreement shall specify 
the obligations and responsibilities of the parties, the terms and 
conditions on which CDBG funds are to be deposited and used or returned, 
the anticipated level of rehabilitation activities by the financial 
institution, the rate of interest and other benefits to be provided by 
the financial institution in return for the lump sum deposit, and such 
other terms as are necessary for compliance with the provisions of this 
section. Upon execution of the agreement, a copy must be provided to the 
HUD field office for its record and use in monitoring. Any modifications 
made during the term of the agreement must also be provided to HUD.
    (3) Period to undertake activities. The agreement must provide that 
the rehabilitation fund may only be used for authorized activities 
during a period of no more than two years. The lump sum deposit shall be 
made only after the agreement is fully executed.
    (4) Time limit on use of deposited funds. Use of the deposited funds 
for rehabilitation financing assistance must start (e.g., first loan 
must be made, subsidized or guaranteed) within 45 days of the deposit. 
In addition, substantial disbursements from the fund must occur within 
180 days of the receipt of the deposit. (Where CDBG funds are used as a 
guarantee, the funds that must be substantially disbursed are the 
guaranteed funds.) For a recipient with an agreement specifying two 
years to undertake activities, the disbursement of 25 percent of the 
fund (deposit plus any interest earned) within 180 days

[[Page 130]]

will be regarded as meeting this requirement. If a recipient with an 
agreement specifying two years to undertake activities determines that 
it has had substantial disbursement from the fund within the 180 days 
although it had not met this 25 percent threshold, the justification for 
the recipient's determination shall be included in the program file. 
Should use of deposited funds not start within 45 days, or substantial 
disbursement from such fund not occur within 180 days, the recipient may 
be required by HUD to return all or part of the deposited funds to the 
recipient's letter of credit.
    (5) Program activity. Recipients shall review the level of program 
activity on a yearly basis. Where activity is substantially below that 
anticipated, program funds shall be returned to the recipient's letter 
of credit.
    (6) Termination of agreement. In the case of substantial failure by 
a private financial institution to comply with the terms of a lump sum 
drawdown agreement, the recipient shall terminate its agreement, provide 
written justification for the action, withdraw all unobligated deposited 
funds from the private financial institution, and return the funds to 
the recipient's letter of credit.
    (7) Return of unused deposits. At the end of the period specified in 
the agreement for undertaking activities, all unobligated deposited 
funds shall be returned to the recipient's letter of credit unless the 
recipient enters into a new agreement conforming to the requirements of 
this section. Any program income which will be governed by a new 
agreement must be identified in the current program year Action Plan, 
pursuant to 24 CFR 91.220(l). In addition, the recipient shall reserve 
the right to withdraw any unobligated deposited funds required by HUD in 
the exercise of corrective or remedial actions authorized under 
Sec. 570.910(b), Sec. 570.911, Sec. 570.912 or Sec. 570.913.
    (8) Rehabilitation loans made with non-CDBG funds. If the deposited 
funds or program income derived from deposited funds are used to 
subsidize or guarantee repayment of rehabilitation loans made with non-
CDBG funds, or to provide a supplemental loan or grant to the borrower 
of the non-CDBG funds, the rehabilitation activities are considered to 
be CDBG-assisted activities subject to the requirements applicable to 
such activities, except that repayment of non-CDBG funds shall not be 
treated as program income.
    (9) Provision of consideration. In consideration for the lump sum 
deposit by the recipient in a private financial institution, the deposit 
must result in appropriate benefits in support of the recipient's local 
rehabilitation program. Minimum requirements for such benefits are:
    (i) Grantees shall require the financial institution to pay interest 
on the lump sum deposit.
    (A) The interest rate paid by the financial institution shall be no 
more than three points below the rate on one year Treasury obligations 
at constant maturity.
    (B) When an agreement sets a fixed interest rate for the entire term 
of the agreement, the rate should be based on the rate at the time the 
agreement is excuted.
    (C) The agreement may provide for an interest rate that would 
fluctuate periodically during the term of the agreement, but at no time 
shall the rate be established at more than three points below the rate 
on one year Treasury obligations at constant maturity.
    (ii) In addition to the payment of interest, at least one of the 
following benefits must be provided by the financial institution:
    (A) Leverage of the deposited funds so that the financial 
institution commits private funds for loans in the rehabilitation 
program in an amount substantially in excess of the amount of the lump 
sum deposit;
    (B) Commitment of private funds by the financial institution for 
rehabilitation loans at below market interest rates, at higher than 
normal risk, or with longer than normal repayment periods; or
    (C) Provision of administrative services in support of the 
rehabilitation program by the participating financial institution at no 
cost or at lower than actual cost.
    (c) Program income. Interest earned on lump sum deposits and 
payments on

[[Page 131]]

loans made from such deposits are program income and, during the period 
of the agreement, shall be used for rehabilitation activities under the 
provisions of this section.
    (d) Outstanding findings. Notwithstanding any other provision of 
this section, no recipient shall enter into a new agreement during any 
period of time in which an audit or monitoring finding on a previous 
lump sum drawdown agreement remains unresolved.
    (e) Prior notification. The recipient shall provide the HUD field 
office with written notification of the amount of funds to be 
distributed to a private financial institution before distribution under 
the provisions of this section.
    (f) Recordkeeping requirements. The recipient shall maintain in its 
files a copy of the written agreement and related documents establishing 
conformance with this section and concerning performance by a financial 
institution in accordance with the agreement.

[53 FR 8058, Mar. 11, 1988, as amended at 80 FR 69873, Nov. 12, 2015]



                  Subpart K_Other Program Requirements

    Source: 53 FR 34456, Sept. 6, 1988, unless otherwise noted.



Sec. 570.600  General.

    (a) This subpart K enumerates laws that the Secretary will treat as 
applicable to grants made under section 106 of the Act, other than 
grants to states made pursuant to section 106(d) of the Act, for 
purposes of the Secretary's determinations under section 104(e)(1) of 
the Act, including statutes expressly made applicable by the Act and 
certain other statutes and Executive Orders for which the Secretary has 
enforcement responsibility. This subpart K applies to grants made under 
the Insular Areas Program in Sec. 570.405 and Sec. 570.440 with the 
exception of Sec. 570.612. The absence of mention herein of any other 
statute for which the Secretary does not have direct enforcement 
responsibility is not intended to be taken as an indication that, in the 
Secretary's opinion, such statute or Executive Order is not applicable 
to activities assisted under the Act. For laws that the Secretary will 
treat as applicable to grants made to states under section 106(d) of the 
Act for purposes of the determination required to be made by the 
Secretary pursuant to section 104(e)(2) of the Act, see Sec. 570.487.
    (b) This subpart also sets forth certain additional program 
requirements which the Secretary has determined to be applicable to 
grants provided under the Act as a matter of administrative discretion.
    (c) In addition to grants made pursuant to section 106(b) and 
106(d)(2)(B) of the Act (subparts D and F, respectively), the 
requirements of this subpart K are applicable to grants made pursuant to 
sections 107 and 119 of the Act (subparts E and G, respectively), and to 
loans guaranteed pursuant to subpart M.

[53 FR 34456, Sept. 6, 1988, as amended at 61 FR 11477, Mar. 20, 1996; 
72 FR 12536, Mar. 15, 2007]



Sec. 570.601  Public Law 88-352 and Public Law 90-284; affirmatively
furthering fair housing; Executive Order 11063.

    (a) The following requirements apply according to sections 104(b) 
and 107 of the Act:
    (1) Public Law 88-352, which is title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24 CFR 
part 1.
    (2) Public Law 90-284, which is the Fair Housing Act (42 U.S.C. 
3601-3620). In accordance with the Fair Housing Act, the Secretary 
requires that grantees administer all programs and activities related to 
housing and urban development in a manner to affirmatively further the 
policies of the Fair Housing Act. Furthermore, in accordance with 
section 104(b)(2) of the Act, for each community receiving a grant under 
subpart D of this part, the certification that the grantee will 
affirmatively further fair housing shall specifically require the 
grantee to take meaningful actions to further the goals identified in 
the grantee's AFH conducted in accordance with the requirements of 24 
CFR 5.150 through 5.180 and take no action that is materially 
inconsistent with its obligation to affirmatively further fair housing.

[[Page 132]]

    (b) Executive Order 11063, as amended by Executive Order 12259 (3 
CFR, 1959-1963 Comp., p. 652; 3 CFR, 1980 Comp., p. 307) (Equal 
Opportunity in Housing), and implementing regulations in 24 CFR part 
107, also apply.

[61 FR 11477, Mar. 20, 1996, as amended at 80 FR 42368, July 16, 2015]



Sec. 570.602  Section 109 of the Act.

    Section 109 of the Act requires that no person in the United States 
shall on the grounds of race, color, national origin, religion, or sex 
be excluded from participation in, be denied the benefits of, or be 
subjected to discrimination under any program or activity receiving 
Federal financial assistance made available pursuant to the Act. Section 
109 also directs that the prohibitions against discrimination on the 
basis of age under the Age Discrimination Act and the prohibitions 
against discrimination on the basis of disability under Section 504 
shall apply to programs or activities receiving Federal financial 
assistance under Title I programs. The policies and procedures necessary 
to ensure enforcement of section 109 are codified in 24 CFR part 6.

[64 FR 3802, Jan. 25, 1999]



Sec. 570.603  Labor standards.

    (a) Section 110(a) of the Act contains labor standards that apply to 
nonvolunteer labor financed in whole or in part with assistance received 
under the Act. In accordance with section 110(a) of the Act, the 
Contract Work Hours and Safety Standards Act (40 U.S.C. 327 et seq.) 
also applies. However, these requirements apply to the rehabilitation of 
residential property only if such property contains not less than 8 
units.
    (b) The regulations in 24 CFR part 70 apply to the use of 
volunteers.

[61 FR 11477, Mar. 20, 1996]



Sec. 570.604  Environmental standards.

    For purposes of section 104(g) of the Act, the regulations in 24 CFR 
part 58 specify the other provisions of law which further the purposes 
of the National Environmental Policy Act of 1969, and the procedures by 
which grantees must fulfill their environmental responsibilities. In 
certain cases, grantees assume these environmental review, 
decisionmaking, and action responsibilities by execution of grant 
agreements with the Secretary.

[61 FR 11477, Mar. 20, 1996]



Sec. 570.605  National Flood Insurance Program.

    Notwithstanding the date of HUD approval of the recipient's 
application (or, in the case of grants made under subpart D of this part 
or HUD-administered small cities recipients in Hawaii, the date of 
submission of the grantee's consolidated plan, in accordance with 24 CFR 
part 91), section 202(a) of the Flood Disaster Protection Act of 1973 
(42 U.S.C. 4106) and the regulations in 44 CFR parts 59 through 79 apply 
to funds provided under this part 570.

[61 FR 11477, Mar. 20, 1996]



Sec. 570.606  Displacement, relocation, acquisition, and replacement
of housing.

    (a) General policy for minimizing displacement. Consistent with the 
other goals and objectives of this part, grantees (or States or state 
recipients, as applicable) shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organizations, and farms) as a result 
of activities assisted under this part.
    (b) Relocation assistance for displaced persons at URA levels. (1) A 
displaced person shall be provided with relocation assistance at the 
levels described in, and in accordance with the requirements of 49 CFR 
part 24, which contains the government-wide regulations implementing the 
Uniform Relocation Assistance and Real Property Acquisition Policies Act 
of 1970 (URA) (42 U.S.C. 4601-4655).
    (2) Displaced person. (i) For purposes of paragraph (b) of this 
section, the term ``displaced person'' means any person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves his or her personal property from real property, 
permanently and involuntarily, as a direct result of rehabilitation, 
demolition, or acquisition for an

[[Page 133]]

activity assisted under this part. A permanent, involuntary move for an 
assisted activity includes a permanent move from real property that is 
made:
    (A) After notice by the grantee (or the state recipient, if 
applicable) to move permanently from the property, if the move occurs 
after the initial official submission to HUD (or the State, as 
applicable) for grant, loan, or loan guarantee funds under this part 
that are later provided or granted.
    (B) After notice by the property owner to move permanently from the 
property, if the move occurs after the date of the submission of a 
request for financial assistance by the property owner (or person in 
control of the site) that is later approved for the requested activity.
    (C) Before the date described in paragraph (b)(2)(i)(A) or (B) of 
this section, if either HUD or the grantee (or State, as applicable) 
determines that the displacement directly resulted from acquisition, 
rehabilitation, or demolition for the requested activity.
    (D) After the ``initiation of negotiations'' if the person is the 
tenant-occupant of a dwelling unit and any one of the following three 
situations occurs:
    (1) The tenant has not been provided with a reasonable opportunity 
to lease and occupy a suitable decent, safe, and sanitary dwelling in 
the same building/complex upon the completion of the project, including 
a monthly rent that does not exceed the greater of the tenant's monthly 
rent and estimated average utility costs before the initiation of 
negotiations or 30 percent of the household's average monthly gross 
income; or
    (2) The tenant is required to relocate temporarily for the activity 
but the tenant is not offered payment for all reasonable out-of-pocket 
expenses incurred in connection with the temporary relocation, including 
the cost of moving to and from the temporary location and any increased 
housing costs, or other conditions of the temporary relocation are not 
reasonable; and the tenant does not return to the building/complex; or
    (3) The tenant is required to move to another unit in the building/
complex, but is not offered reimbursement for all reasonable out-of-
pocket expenses incurred in connection with the move.
    (ii) Notwithstanding the provisions of paragraph (b)(2)(i) of this 
section, the term ``displaced person-'' does not include:
    (A) A person who is evicted for cause based upon serious or repeated 
violations of material terms of the lease or occupancy agreement. To 
exclude a person on this basis, the grantee (or State or state 
recipient, as applicable) must determine that the eviction was not 
undertaken for the purpose of evading the obligation to provide 
relocation assistance under this section;
    (B) A person who moves into the property after the date of the 
notice described in paragraph (b)(2)(i)(A) or (B) of this section, but 
who received a written notice of the expected displacement before 
occupancy.
    (C) A person who is not displaced as described in 49 CFR 24.2(g)(2).
    (D) A person who the grantee (or State, as applicable) determines is 
not displaced as a direct result of the acquisition, rehabilitation, or 
demolition for an assisted activity. To exclude a person on this basis, 
HUD must concur in that determination.
    (iii) A grantee (or State or state recipient, as applicable) may, at 
any time, request HUD to determine whether a person is a displaced 
person under this section.
    (3) Initiation of negotiations. For purposes of determining the type 
of replacement housing assistance to be provided under paragraph (b) of 
this section, if the displacement is the direct result of privately 
undertaken rehabilitation, demolition, or acquisition of real property, 
the term ``initiation of negotiations'' means the execution of the grant 
or loan agreement between the grantee (or State or state recipient, as 
applicable) and the person owning or controlling the real property.
    (c) Residential antidisplacement and relocation assistance plan. The 
grantee shall comply with the requirements of 24 CFR part 42, subpart B.
    (d) Optional relocation assistance. Under section 105(a)(11) of the 
Act, the grantee may provide (or the State may permit the state 
recipient to provide, as applicable) relocation payments and other 
relocation assistance to persons

[[Page 134]]

displaced by activities that are not subject to paragraph (b) or (c) of 
this section. The grantee may also provide (or the State may also permit 
the state recipient to provide, as applicable) relocation assistance to 
persons receiving assistance under paragraphs (b) or (c) of this section 
at levels in excess of those required by these paragraphs. Unless such 
assistance is provided under State or local law, the grantee (or state 
recipient, as applicable) shall provide such assistance only upon the 
basis of a written determination that the assistance is appropriate 
(see, e.g., 24 CFR 570.201(i), as applicable). The grantee (or state 
recipient, as applicable) must adopt a written policy available to the 
public that describes the relocation assistance that the grantee (or 
state recipient, as applicable) has elected to provide and that provides 
for equal relocation assistance within each class of displaced persons.
    (e) Acquisition of real property. The acquisition of real property 
for an assisted activity is subject to 49 CFR part 24, subpart B.
    (f) Appeals. If a person disagrees with the determination of the 
grantee (or the state recipient, as applicable) concerning the person's 
eligibility for, or the amount of, a relocation payment under this 
section, the person may file a written appeal of that determination with 
the grantee (or state recipient, as applicable). The appeal procedures 
to be followed are described in 49 CFR 24.10. In addition, a low- or 
moderate-income household that has been displaced from a dwelling may 
file a written request for review of the grantee's decision to the HUD 
Field Office. For purposes of the State CDBG program, a low- or 
moderate-income household may file a written request for review of the 
state recipient's decision with the State.
    (g) Responsibility of grantee or State. (1) The grantee (or State, 
if applicable) is responsible for ensuring compliance with the 
requirements of this section, notwithstanding any third party's 
contractual obligation to the grantee to comply with the provisions of 
this section. For purposes of the State CDBG program, the State shall 
require state recipients to certify that they will comply with the 
requirements of this section.
    (2) The cost of assistance required under this section may be paid 
from local public funds, funds provided under this part, or funds 
available from other sources.
    (3) The grantee (or State and state recipient, as applicable) must 
maintain records in sufficient detail to demonstrate compliance with the 
provisions of this section.

(Approved by the Office of Management and Budget under OMB control 
number 2506-0102)

[61 FR 11477, Mar. 20, 1996, as amended at 61 FR 51760, Oct. 3, 1996]



Sec. 570.607  Employment and contracting opportunities.

    To the extent that they are otherwise applicable, grantees shall 
comply with:
    (a) Executive Order 11246, as amended by Executive Orders 11375, 
11478, 12086, and 12107 (3 CFR 1964-1965 Comp. p. 339; 3 CFR, 1966-1970 
Comp., p. 684; 3 CFR, 1966-1970., p. 803; 3 CFR, 1978 Comp., p. 230; 3 
CFR, 1978 Comp., p. 264 (Equal Employment Opportunity), and Executive 
Order 13279 (Equal Protection of the Laws for Faith-Based and Community 
Organizations), 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and the 
implementing regulations at 41 CFR chapter 60; and
    (b) Section 3 of the Housing and Urban Development Act of 1968 (12 
U.S.C. 1701u) and implementing regulations at 24 CFR part 135.

[68 FR 56405, Sept. 30, 2003]



Sec. 570.608  Lead-based paint.

    The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), 
the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 
4851-4856), and implementing regulations at part 35, subparts A, B, J, 
K, and R of this part apply to activities under this program.

[64 FR 50226, Sept. 15, 1999]



Sec. 570.609  Use of debarred, suspended or ineligible contractors or
subrecipients.

    The requirements set forth in 24 CFR part 5 apply to this program.

[61 FR 5209, Feb. 9, 1996]

[[Page 135]]



Sec. 570.610  Uniform administrative requirements, cost principles,
and audit requirements for Federal awards.

    The recipient, its agencies or instrumentalities, and subrecipients 
shall comply with 2 CFR part 200, ``Uniform Administrative Requirements, 
Cost Principles, and Audit Requirements for Federal Awards'', as set 
forth at Sec. 570.502.

[80 FR 75938, Dec. 7, 2015]



Sec. 570.611  Conflict of interest.

    (a) Applicability. (1) In the procurement of supplies, equipment, 
construction, and services by recipients and by subrecipients, the 
conflict of interest provisions in 2 CFR 200.317 and 200.318 shall 
apply.
    (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 
Sec. 570.202; or grants, loans, and other assistance to businesses, 
individuals, and other private entities pursuant to Sec. 570.203, 
570.204, 570.455, or 570.703(i)).
    (b) Conflicts prohibited. The general rule is that no persons 
described in paragraph (c) of this section who exercise or have 
exercised any functions or responsibilities with respect to CDBG 
activities assisted under this part, or who are in a position to 
participate in a decisionmaking process or gain inside information with 
regard to such activities, may obtain a financial interest or benefit 
from a CDBG-assisted activity, or have a financial interest in any 
contract, subcontract, or agreement with respect to a CDBG-assisted 
activity, or with respect to the proceeds of the CDBG-assisted activity, 
either for themselves or those with whom they have business or immediate 
family ties, during their tenure or for one year thereafter. For the 
UDAG program, the above restrictions shall apply to all activities that 
are a part of the UDAG project, and shall cover any such financial 
interest or benefit during, or at any time after, such person's tenure.
    (c) Persons covered. The conflict of interest provisions of 
paragraph (b) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected official or appointed official of 
the recipient, or of any designated public agencies, or of subrecipients 
that are receiving funds under this part.
    (d) Exceptions. Upon the written request of the recipient, HUD may 
grant an exception to the provisions of paragraph (b) of this section on 
a case-by-case basis when it has satisfactorily met the threshold 
requirements of (d)(1) of this section, taking into account the 
cumulative effects of paragraph (d)(2) of this section.
    (1) Threshold requirements. HUD will consider an exception only 
after the recipient has provided the following documentation:
    (i) A disclosure of the nature of the conflict, accompanied by an 
assurance that there has been public disclosure of the conflict and a 
description of how the public disclosure was made; and
    (ii) An opinion of the recipient's attorney that the interest for 
which the exception is sought would not violate State or local law.
    (2) Factors to be considered for exceptions. In determining whether 
to grant a requested exception after the recipient has satisfactorily 
met the requirements of paragraph (d)(1) of this section, HUD shall 
conclude that such an exception will serve to further the purposes of 
the Act and the effective and efficient administration of the 
recipient's program or project, taking into account the cumulative 
effect of the following factors, as applicable:
    (i) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the program or project that would 
otherwise not be available;
    (ii) Whether an opportunity was provided for open competitive 
bidding or negotiation;
    (iii) Whether the person affected is a member of a group or class of 
low- or moderate-income persons intended to be the beneficiaries of the 
assisted activity, and the exception will permit

[[Page 136]]

such person to receive generally the same interests or benefits as are 
being made available or provided to the group or class;
    (iv) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or the decisionmaking process with 
respect to the specific assisted activity in question;
    (v) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (b) of this section;
    (vi) Whether undue hardship will result either to the recipient or 
the person affected when weighed against the public interest served by 
avoiding the prohibited conflict; and
    (vii) Any other relevant considerations.

[60 FR 56916, Nov. 9, 1995, as amended at 80 FR 75938, Dec. 7, 2015]



Sec. 570.612  Executive Order 12372.

    (a) General. Executive Order 12372, Intergovernmental Review of 
Federal Programs, and the Department's implementing regulations at 24 
CFR part 52, allow each State to establish its own process for review 
and comment on proposed Federal financial assistance programs.
    (b) Applicability. Executive Order 12372 applies to the CDBG 
Entitlement program and the UDAG program. The Executive Order applies to 
all activities proposed to be assisted under UDAG, but it applies to the 
Entitlement program only where a grantee proposes to use funds for the 
planning or construction (reconstruction or installation) of water or 
sewer facilities. Such facilities include storm sewers as well as all 
sanitary sewers, but do not include water and sewer lines connecting a 
structure to the lines in the public right-of-way or easement. It is the 
responsibility of the grantee to initiate the Executive Order review 
process if it proposes to use its CDBG or UDAG funds for activities 
subject to review.



Sec. 570.613  Eligibility restrictions for certain resident aliens.

    (a) Restriction. Certain newly legalized aliens, as described in 24 
CFR part 49, are not eligible to apply for benefits under covered 
activities funded by the programs listed in paragraph (e) of this 
section. ``Benefits'' under this section means financial assistance, 
public services, jobs and access to new or rehabilitated housing and 
other facilities made available under covered activities funded by 
programs listed in paragraph (e) of this section. ``Benefits'' do not 
include relocation services and payments to which displacees are 
entitled by law.
    (b) Covered activities. ``Covered activities'' under this section 
means activities meeting the requirements of Sec. 570.208(a) that 
either:
    (1) Have income eligibility requirements limiting the benefits 
exclusively to low and moderate income persons; or
    (2) Are targeted geographically or otherwise to primarily benefit 
low and moderate income persons (excluding activities serving the public 
at large, such as sewers, roads, sidewalks, and parks), and that provide 
benefits to persons on the basis of an application.
    (c) Limitation on coverage. The restrictions under this section 
apply only to applicants for new benefits not being received by covered 
resident aliens as of the effective date of this section.
    (d) Compliance. Compliance can be accomplished by obtaining 
certification as provided in 24 CFR 49.20.
    (e) Programs affected. (1) The Community Development Block Grant 
program for small cities, administered under subpart F of part 570 of 
this title until closeout of the recipient's grant.
    (2) The Community Development Block Grant program for entitlement 
grants, administered under subpart D of part 570 of this title.
    (3) The Community Development Block Grant program for States, 
administered under subpart I of part 570 of this title until closeout of 
the unit of general local government's grant by the State.
    (4) The Urban Development Action Grants program, administered under 
subpart G of part 570 of this title until closeout of the recipient's 
grant.

[55 FR 18494, May 2, 1990]

[[Page 137]]



Sec. 570.614  Architectural Barriers Act and the Americans with 
Disabilities Act.

    (a) The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) 
requires certain Federal and Federally funded buildings and other 
facilities to be designed, constructed, or altered in accordance with 
standards that insure accessibility to, and use by, physically 
handicapped people. A building or facility designed, constructed, or 
altered with funds allocated or reallocated under this part after 
December 11, 1995, and that meets the definition of ``residential 
structure'' as defined in 24 CFR 40.2 or the definition of ``building'' 
as defined in 41 CFR 101-19.602(a) is subject to the requirements of the 
Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and shall 
comply with the Uniform Federal Accessibility Standards (appendix A to 
24 CFR part 40 for residential structures, and appendix A to 41 CFR part 
101-19, subpart 101-19.6, for general type buildings).
    (b) The Americans with Disabilities Act (42 U.S.C. 12131; 47 U.S.C. 
155, 201, 218 and 225) (ADA) provides comprehensive civil rights to 
individuals with disabilities in the areas of employment, public 
accommodations, State and local government services, and 
telecommunications. It further provides that discrimination includes a 
failure to design and construct facilities for first occupancy no later 
than January 26, 1993, that are readily accessible to and usable by 
individuals with disabilities. Further, the ADA requires the removal of 
architectural barriers and communication barriers that are structural in 
nature in existing facilities, where such removal is readily 
achievable--that is, easily accomplishable and able to be carried out 
without much difficulty or expense.

[60 FR 56917, Nov. 9, 1995]



Sec. 570.615  Housing counseling.

    Housing counseling, as defined in 24 CFR 5.100, that is funded with 
or provided in connection with CDBG funds must be carried out in 
accordance with 24 CFR 5.111.

[81 FR 90659, Dec. 14, 2016]

Subpart L [Reserved]



                        Subpart M_Loan Guarantees

    Source: 59 FR 66604, Dec. 27, 1994, unless otherwise noted.



Sec. 570.700  Purpose.

    This subpart contains requirements governing the guarantee under 
section 108 of the Act of debt obligations as defined in Sec. 570.701.



Sec. 570.701  Definitions.

    Borrower means the public entity or its designated public agency or 
the State that issues debt obligations under this subpart.
    Credit subsidy cost means the estimated long-term cost to the 
Federal Government of a Section 108 loan guarantee or a modification 
thereof, calculated on a net present value basis, excluding 
administrative costs and any incidental effects on governmental receipts 
or outlays.
    Debt obligation means a promissory note or other obligation issued 
by a public entity or its designated public agency or by a State and 
guaranteed by HUD under this subpart, or a trust certificate or other 
obligation offered by HUD or by a trust or other offeror approved for 
purposes of this subpart by HUD, which is guaranteed by HUD under this 
subpart and is based on and backed by a trust or pool composed of notes 
or other obligations issued by public entities or their designated 
public agencies or by States and guaranteed or eligible for guarantee by 
HUD under this subpart.
    Designated public agency means a public agency designated by a 
public entity to issue debt obligations as borrower under this subpart.
    Entitlement public entity means a metropolitan city or an urban 
county receiving a grant under subpart D of this part.
    Guaranteed loan funds means the proceeds payable to the borrower 
from the issuance of debt obligations under this subpart and includes 
funds received by a nonentitlement public entity from a State under 
Sec. 570.711.
    Nonentitlement public entity means any unit of general local 
government in a nonentitlement area.

[[Page 138]]

    Public entity shall have the meaning provided for the term 
``Eligible public entity'' in section 108(o) of the Act.
    State-assisted public entity means a unit of general local 
government in a nonentitlement area which is assisted by a State as 
required in Sec. 570.704(b)(9) and Sec. 570.705(b)(2) or pursuant to 
Sec. 570.711.

[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 
74 FR 36389, July 22, 2009; 80 FR 67633, Nov. 3, 2015]



Sec. 570.702  Eligible applicants.

    The following public entities may apply for loan guarantee 
assistance under this subpart.
    (a) Entitlement public entities.
    (b) Nonentitlement public entities that are assisted in the 
submission of applications by States that administer the CDBG program 
(under subpart I of this part). Such assistance shall consist, at a 
minimum, of the certifications required under Sec. 570.704(b)(9) (and 
actions pursuant thereto).
    (c) Nonentitlement public entities eligible to apply for grant 
assistance under subpart F of this part.



Sec. 570.703  Eligible activities.

    Guaranteed loan funds may be used for the following activities, 
provided such activities meet the requirements of Sec. 570.200. However, 
guaranteed loan funds may not be used to reimburse the CDBG program 
account or line of credit for costs incurred by the public entity or 
designated public agency and paid with CDBG grant funds or program 
income.
    (a) Acquisition of improved or unimproved real property in fee or by 
long-term lease, including acquisition for economic development 
purposes.
    (b) Rehabilitation of real property owned or acquired by the public 
entity or its designated public agency.
    (c) Payment of interest on obligations guaranteed under this 
subpart.
    (d) Relocation payments and other relocation assistance for 
individuals, families, businesses, nonprofit organizations, and farm 
operations who must relocate permanently or temporarily as a result of 
an activity financed with guaranteed loan funds, where the assistance 
is:
    (1) Required under the provisions of Sec. 570.606(b) or (c); or
    (2) Determined by the public entity to be appropriate under the 
provisions of Sec. 570.606(d).
    (e) Clearance, demolition, and removal, including movement of 
structures to other sites and remediation of properties with known or 
suspected environmental contamination, of buildings and improvements on 
real property acquired or rehabilitated pursuant to paragraphs (a) and 
(b) of this section. Remediation may include project-specific 
environmental assessment costs not otherwise eligible under 
Sec. 570.205.
    (f) Site preparation, including construction, reconstruction, 
installation of public and other site improvements, utilities or 
facilities (other than buildings), or remediation of properties 
(remediation can include project-specific environmental assessment costs 
not otherwise eligible under Sec. 570.205) with known or suspected 
environmental contamination, which is:
    (1) Related to the redevelopment or use of the real property 
acquired or rehabilitated pursuant to paragraphs (a) and (b) of this 
section, or
    (2) For an economic development purpose.
    (g) Payment of issuance, underwriting, servicing, trust 
administration and other costs associated with private sector financing 
of debt obligations under this subpart.
    (h) Housing rehabilitation eligible under Sec. 570.202.
    (i) The following economic development activities:
    (1) Activities eligible under Sec. 570.203; and
    (2) Community economic development projects eligible under 
Sec. 570.204.
    (j) Construction of housing by non-profit organizations for 
homeownership under section 17(d) of the United States Housing Act of 
1937 (Housing Development Grants Program, 24 CFR part 850).
    (k) A debt service reserve to be used in accordance with 
requirements specified in the contract entered into pursuant to 
Sec. 570.705(b)(1).
    (l) Acquisition, construction, reconstruction, rehabilitation or 
historic preservation, or installation of public

[[Page 139]]

facilities (except for buildings for the general conduct of government) 
to the extent eligible under Sec. 570.201(c), including public streets, 
sidewalks, other site improvements and public utilities, and remediation 
of known or suspected environmental contamination in conjunction with 
these activities. Remediation may include project-specific environmental 
assessment costs not otherwise eligible under Sec. 570.205.
    (m) In the case of applications by public entities which are, or 
which contain, ``colonias'' as defined in section 916 of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 5306 note), as 
amended by section 810 of the Housing and Community Development Act of 
1992, acquisition, construction, reconstruction, rehabilitation or 
installation of public works and site or other improvements which serve 
the colonia.
    (n) Payment of fees charged by HUD pursuant to Sec. 570.712.

[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 
71 FR 30036, May 24, 2006; 80 FR 67633, Nov. 3, 2015; 81 FR 1121, Jan. 
11, 2016]



Sec. 570.704  Application requirements.

    (a) Presubmission and citizen participation requirements. (1) Before 
submission of an application for loan guarantee assistance to HUD, the 
public entity must:
    (i) Develop a proposed application that includes the following 
items:
    (A) The community development objectives the public entity proposes 
to pursue with the guaranteed loan funds.
    (B) The activities the public entity proposes to carry out with the 
guaranteed loan funds. Each activity must be described in sufficient 
detail, including the specific provision of Sec. 570.703 under which it 
is eligible and the national objective to be met, amount of guaranteed 
loan funds expected to be used, and location, to allow citizens to 
determine the degree to which they will be affected. The proposed 
application must indicate which activities are expected to generate 
program income. The application must also describe where citizens may 
obtain additional information about proposed activities.
    (C) A description of the pledge of grants required under 
Sec. 570.705(b)(2). In the case of applications by State-assisted public 
entities, the description shall note that pledges of grants will be made 
by the State and by the public entity.
    (D) A description of any CDBG funds, including guaranteed loan funds 
and grant funds, that will be used to pay fees required under 
Sec. 570.705(g). The description must include an estimate of the amount 
of CBDG funds that will be used for this purpose. If the applicant will 
use grant funds to pay required fees, it must include this planned use 
of grant funds in its consolidated plan.
    (ii) Fulfill the applicable requirements in its citizen 
participation plan developed in accordance with Sec. 570.704(a)(2).
    (iii) Publish community-wide its proposed application so as to 
afford affected citizens an opportunity to examine the application's 
contents and to provide comments on the proposed application.
    (iv) Prepare its final application. Once the public entity has held 
the public hearing and published the proposed application as required by 
paragraphs (a)(1)(ii) and (iii) of this section, respectively, the 
public entity must consider any such comments and views received and, if 
the public entity deems appropriate, modify the proposed application. 
Upon completion, the public entity must make the final application 
available to the public. The final application must describe each 
activity in sufficient detail to permit a clear understanding of the 
nature of each activity, as well as identify the specific provision of 
Sec. 570.703 under which it is eligible, the national objective to be 
met, and the amount of guaranteed loan funds to be used. The final 
application must also indicate which activities are expected to generate 
program income.
    (v) If an application for loan guarantee assistance is to be 
submitted by an entitlement or nonentitlement public entity 
simultaneously with the public entity's submission for its grant, the 
public entity shall include and identify in its proposed and final 
consolidated plan the activities to be undertaken with the guaranteed 
loan funds, the national objective to be met by each of these 
activities, the amount of any program income expected to be

[[Page 140]]

received during the program year, and the amount of guaranteed loan 
funds to be used. The public entity shall also include in the 
consolidated plan a description of the pledge of grants, as required 
under Sec. 570.705(b)(2), and the use of grant funds to pay for any fees 
required under Sec. 570.705(g). In such cases the proposed and final 
application requirements of paragraphs (a)(1)(i), (iii), and (iv) of 
this section will be deemed to have been met.
    (2) Citizen participation plan. The public entity must develop and 
follow a detailed citizen participation plan and make the plan public. 
The plan must be completed and available before the application is 
submitted to HUD. The plan may be the citizen plan required for the 
consolidated plan, modified to include guaranteed loan funds. The public 
entity is not required to hold a separate public hearing for its 
consolidated plan and for the guaranteed loan funds to obtain citizens' 
views on community development and housing needs. The plan must set 
forth the public entity's policies and procedures for:
    (i) Giving citizens timely notice of local meetings and reasonable 
and timely access to local meetings, information, and records relating 
to the public entity's proposed and actual use of guaranteed loan funds, 
including, but not limited to:
    (A) The amount of guaranteed loan funds expected to be made 
available for the coming year, including program income anticipated to 
be generated by the activities carried out with guaranteed loan funds;
    (B) The range of activities that may be undertaken with guaranteed 
loan funds;
    (C) The estimated amount of guaranteed loan funds (including program 
income derived therefrom) proposed to be used for activities that will 
benefit low and moderate income persons;
    (D) The proposed activities likely to result in displacement and the 
public entity's plans, consistent with the policies developed under 
Sec. 570.606 for minimizing displacement of persons as a result of its 
proposed activities.
    (ii) Providing technical assistance to groups representative of 
persons of low and moderate income that request assistance in developing 
proposals. The level and type of assistance to be provided is at the 
discretion of the public entity. Such assistance need not include the 
provision of funds to such groups.
    (iii) Holding a minimum of two public hearings, each at a different 
stage of the public entity's program, for the purpose of obtaining the 
views of citizens and formulating or responding to proposals and 
questions. Together the hearings must address community development and 
housing needs, development of proposed activities and review of program 
performance. At least one of these hearings must be held before 
submission of the application to obtain the views of citizens on 
community development and housing needs. Reasonable notice of the 
hearing must be provided and the hearing must be held at times and 
locations convenient to potential or actual beneficiaries, with 
accommodation for the handicapped. The public entity must specify in its 
plan how it will meet the requirement for a hearing at times and 
locations convenient to potential or actual beneficiaries.
    (iv) Meeting the needs of non-English speaking residents in the case 
of public hearings where a significant number of non-English speaking 
residents can reasonably be expected to participate.
    (v) Providing affected citizens with reasonable advance notice of, 
and opportunity to comment on, proposed activities not previously 
included in an application and activities which are proposed to be 
deleted or substantially changed in terms of purpose, scope, location, 
or beneficiaries. The criteria the public entity will use to determine 
what constitutes a substantial change for this purpose must be described 
in the citizen participation plan.
    (vi) Responding to citizens' complaints and grievances, including 
the procedures that citizens must follow when submitting complaints and 
grievances. The public entity's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days of the receipt of the complaint, where practicable.
    (vii) Encouraging citizen participation, particularly by low and 
moderate income persons who reside in slum or

[[Page 141]]

blighted areas, and other areas in which guaranteed loan funds are 
proposed to be used.
    (b) Submission requirements. An application for loan guarantee 
assistance may be submitted at any time. The application (or 
consolidated plan) shall be submitted to the appropriate HUD Office and 
shall be accompanied by the following:
    (1) A description of how each of the activities to be carried out 
with the guaranteed loan funds meets one of the criteria in 
Sec. 570.208.
    (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.
    (3) A certification providing assurance that the public entity 
possesses the legal authority to make the pledge of grants required 
under Sec. 570.705(b)(2).
    (4) A certification providing assurance that the public entity 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.
    (5)-(6) [Reserved]
    (7) The anti-lobbying statement required under 24 CFR part 87 
(appendix A).
    (8) Certifications by the public entity that:
    (i) It possesses the legal authority to submit the application for 
assistance under this subpart and to use the guaranteed loan funds in 
accordance with the requirements of this subpart.
    (ii) Its governing body has duly adopted or passed as an official 
act a resolution, motion or similar official action:
    (A) Authorizing the person identified as the official representative 
of the public entity to submit the application and amendments thereto 
and all understandings and assurances contained therein, and directing 
and authorizing the person identified as the official representative of 
the public entity to act in connection with the application to provide 
such additional information as may be required; and
    (B) Authorizing such official representative to execute such 
documents as may be required in order to implement the application and 
issue debt obligations pursuant thereto (provided that the authorization 
required by this paragraph (B) may be given by the local governing body 
after submission of the application but prior to execution of the 
contract required by Sec. 570.705(b);
    (iii) Before submission of its application to HUD, the public entity 
has:
    (A) Furnished citizens with information required by 
Sec. 570.704(a)(2)(i);
    (B) Held at least one public hearing to obtain the views of citizens 
on community development and housing needs; and
    (C) Prepared its application in accordance with 
Sec. 570.704(a)(1)(iv) and made the application available to the public.
    (iv) It is following a detailed citizen participation plan which 
meets the requirements described in Sec. 570.704(a)(2).
    (v) The public entity will affirmatively further fair housing, and 
the guaranteed loan funds will be administered in compliance with:
    (A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.); and
    (B) The Fair Housing Act (42 U.S.C. 3601-3619).
    (vi)(A) (For entitlement public entities only.) In the aggregate, at 
least 70 percent of all CDBG funds, as defined at Sec. 570.3, to be 
expended during the one, two, or three consecutive years specified by 
the public entity for its CDBG program will be for activities which 
benefit low and moderate income persons, as described in criteria at 
Sec. 570.208(a).
    (B) (For nonentitlement public entities eligible under subpart F of 
this part only.) It will comply with primary and national objectives 
requirements, as applicable under subpart F of this part.
    (vii) It will comply with the requirements governing displacement, 
relocation, real property acquisition, and the replacement of low and 
moderate income housing described in Sec. 570.606.

[[Page 142]]

    (viii) It will comply with the requirements of Sec. 570.200(c)(2) 
with regard to the use of special assessments to recover the capital 
costs of activities assisted with guaranteed loan funds.
    (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 Sec. 570.200(c)(2), and it must therefore 
assess properties owned and occupied by moderate income persons, to 
recover the guaranteed loan funded portion of the capital cost without 
paying such assessments in their behalf from guaranteed loan funds.
    (x) It will comply with the other provisions of the Act and with 
other applicable laws.
    (9) In the case of an application submitted by a State-assisted 
public entity, certifications by the State that:
    (i) It agrees to make the pledge of grants required under 
Sec. 570.705(b)(2).
    (ii) It possesses the legal authority to make such pledge.
    (iii) At least 70 percent of the aggregate use of CDBG grant funds 
received by the State, guaranteed loan funds, and program income during 
the one, two, or three consecutive years specified by the State for its 
CDBG program will be for activities that benefit low and moderate income 
persons.
    (iv) It agrees to assume the responsibilities described in 
Sec. 570.710.
    (c) HUD review and approval of applications. (1) HUD will normally 
accept the certifications submitted with the application. HUD may, 
however, consider relevant information which challenges the 
certifications and require additional information or assurances from the 
public entity or State as warranted by such information.
    (2) [Reserved]
    (3) HUD may disapprove an application, or may approve loan guarantee 
assistance for an amount less than requested, for any of the following 
reasons:
    (i) HUD determines that the guarantee constitutes an unacceptable 
financial risk. Factors that will be considered in assessing financial 
risk shall include, but not be limited to, the following:
    (A) The length of the proposed repayment period;
    (B) The ratio of expected annual debt service requirements to 
expected annual grant amount;
    (C) The likelihood that the public entity or State will continue to 
receive grant assistance under this part during the proposed repayment 
period;
    (D) The public entity's or State's ability to furnish adequate 
security pursuant to Sec. 570.705(b), and
    (E) The amount of program income the proposed activities are 
reasonably estimated to contribute toward repayment of the guaranteed 
loan.
    (ii) The requested loan amount exceeds any of the limitations 
specified under Sec. 570.705(a).
    (iii) Funds are not available in the amount requested.
    (iv) The performance of the public entity, its designated public 
agency or State under this part is unacceptable.
    (v) Activities to be undertaken with the guaranteed loan funds are 
not eligible under Sec. 570.703.
    (vi) Activities to be undertaken with the guaranteed loan funds do 
not meet the criteria in Sec. 570.208 for compliance with one of the 
national objectives of the Act.
    (4) HUD will notify the public entity or State in writing that the 
loan guarantee request has either been approved, reduced, or 
disapproved. If the request is reduced or disapproved, the public entity 
or State shall be informed of the specific reasons for reduction or 
disapproval. If the request is reduced or disapproved, the public entity 
shall be informed of the specific reasons for reduction or disapproval. 
If the request is approved, 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 
Sec. 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.
    (5) Amendments. If the public entity or State wishes to carry out or 
assist in an activity not previously described in its application or to 
substantially

[[Page 143]]

change the purpose, scope, location, or beneficiaries of an activity, 
the amendment must be approved by HUD. Amendments by State-assisted 
public entities must also be approved by the State. The public entity 
shall follow the citizen participation requirements for amendments in 
Sec. 570.704(a)(2).
    (d) Environmental review. The public entity shall comply with HUD 
environmental review procedures (24 CFR part 58) for the release of 
funds for each project carried out with loan guarantee assistance. These 
procedures set forth the regulations, policies, responsibilities and 
procedures governing the carrying out of environmental review 
responsibilities of public entities. All public entities, including 
nonentitlement public entities, shall submit the request for release of 
funds and related certification for each project to be assisted with 
guaranteed loan funds to the appropriate HUD Field Office.
    (e) Displacement, relocation, acquisition, and replacement of 
housing. The public entity (or the designated public agency) shall 
comply with the displacement, relocation, acquisition, and replacement 
of low/moderate-income housing requirements in Sec. 570.606 in 
connection with any activity financed in whole or in part with 
guaranteed loan funds.

[59 FR 66604, Dec. 27, 1994, as amended at 60 FR 1917, Jan. 5, 1995; 61 
FR 11481, Mar. 20, 1996; 69 FR 32781, June 10, 2004; 72 FR 73496, Dec. 
27, 2008; 74 FR 36389, July 22, 2009; 80 FR 67633, Nov. 3, 2015]



Sec. 570.705  Loan requirements.

    (a) Limitations on commitments. (1) If loan guarantee commitments 
have been issued in any fiscal year in an aggregate amount equal to 50 
percent of the amount approved in an appropriation act for that fiscal 
year, HUD may limit the amount of commitments any one public entity may 
receive during such fiscal year as follows (except that HUD will not 
decrease commitments already issued):
    (i) The amount any one entitlement public entity may receive may be 
limited to $35,000,000.
    (ii) The amount any one nonentitlement public entity may receive may 
be limited to $7,000,000.
    (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 empowerment zones/enterprise communities by the Federal Government or 
by any State.
    (2) In addition to the limitations specified in paragraph (a)(1) of 
this section, the following limitations shall apply.
    (i) Entitlement public entities. No commitment to guarantee shall be 
made if the total unpaid balance of debt obligations guaranteed under 
this subpart (excluding any amount defeased under the contract entered 
into under Sec. 570.705(b)(1)) on behalf of the public entity would 
thereby exceed an amount equal to five times the amount of the most 
recent grant made pursuant to Sec. 570.304 to the public entity.
    (ii) States and State-assisted public entities. No commitment to 
guarantee shall be made if the total unpaid balance of debt obligations 
guaranteed under this subpart (excluding any amount defeased under the 
contract entered into under Sec. 570.705(b)(1)) on behalf of the State 
and all State-assisted public entities in the State would thereby exceed 
an amount equal to five times the amount of the most recent grant 
received by such State under subpart I.
    (iii) Nonentitlement public entities eligible under subpart F of 
this part. No commitment to guarantee shall be made with respect to a 
nonentitlement public entity in an insular area or the State of Hawaii 
if the total unpaid balance of debt obligations guaranteed under this 
subpart (excluding any amount defeased under the contract entered into 
under Sec. 570.705(b)(1)) on behalf of the public entity would thereby 
exceed an amount equal to five times the amount of the most recent grant 
made pursuant to Sec. 570.429 or Sec. 570.440 (as applicable) to the 
public entity.
    (A) The most recent grant approved for the public entity pursuant to 
subpart F of this part,
    (B) The average of the most recent three grants approved for the 
public entity pursuant to subpart F of this part, excluding any grant in 
the same fiscal year as the commitment, or

[[Page 144]]

    (C) The average amount of grants made under subpart F of this part 
to units of general local government in New York State in the previous 
fiscal year.
    (b) Security requirements. To assure the repayment of debt 
obligations and the charges incurred under paragraph (g) of this section 
and as a condition for receiving loan guarantee assistance, the public 
entity (and State and designated public agency, as applicable) shall:
    (1) Enter into a contract for loan guarantee assistance with HUD, in 
a form acceptable to HUD, including provisions for repayment of debt 
obligations guaranteed hereunder;
    (2) Pledge all grants made or for which the public entity or State 
may become eligible under this part; and
    (3) Furnish, at the discretion of HUD, such other security as may be 
deemed appropriate by HUD in making such guarantees. Other security 
shall be required for all loans with repayment periods of ten years or 
longer. Such other security shall be specified in the contract entered 
into pursuant to Sec. 570.705(b)(1). Examples of other security HUD may 
require are:
    (i) Program income as defined in Sec. 570.500(a);
    (ii) Liens on real and personal property;
    (iii) Debt service reserves; and
    (iv) Increments in local tax receipts generated by activities 
carried out with the guaranteed loan funds.
    (c) Use of grants for loan repayment, issuance, underwriting, 
servicing, and other costs. Notwithstanding any other provision of this 
part:
    (1) Community Development Block Grants allocated pursuant to section 
106 of the Act (including program income derived therefrom) may be used 
for:
    (i) Paying principal and interest due (including such issuance, 
servicing, underwriting, or other costs as may be incurred under 
paragraph (g) of this section) on the debt obligations guaranteed under 
this subpart;
    (ii) Defeasing such debt obligations; and
    (iii) Establishing debt service reserves as additional security 
pursuant to paragraph (b)(3) of this section.
    (2) HUD may apply grants pledged pursuant to paragraph (b)(2) of 
this section to any amounts due under the debt obligations, the payment 
of costs incurred under paragraph (g) of this section, or to the 
purchase or defeasance of such debt obligations, in accordance with the 
terms of the contract required by paragraph (b)(l) of this section.
    (d) Debt obligations. Debt obligations guaranteed under this subpart 
shall be in the form and denominations prescribed by HUD. Such debt 
obligations may be issued and sold only under such terms and conditions 
as may be prescribed by HUD. HUD may prescribe the terms and conditions 
of debt obligations, or of their issuance and sale, by regulation or by 
contractual arrangements authorized by section 108(r)(4) of the Act and 
paragraph (h) of this section. Unless specifically provided otherwise in 
the contract for loan guarantee assistance required under paragraph (b) 
of this section, debt obligations shall not constitute general 
obligations of any public entity or State secured by its full faith and 
credit.
    (e) Taxable obligations. Interest earned on debt obligations under 
this subpart shall be subject to Federal taxation as provided in section 
108(j) of the Act.
    (f) Loan repayment period. The term of debt obligations under this 
subpart shall not exceed twenty years.
    (g) Issuance, underwriting, servicing, and other costs. (1) Each 
public entity or its designated public agency and each State issuing 
debt obligations under this subpart must pay the issuance, underwriting, 
servicing, trust administration, and other costs associated with the 
private sector financing of the debt obligations.
    (2) Each public entity or its designated public agency and each 
state issuing debt obligations under this subpart must pay any and all 
fees charged by HUD pursuant to Sec. 570.712.
    (h) Contracting with respect to issuance and sale of debt 
obligations; effect of other laws. No State or local law, and no Federal 
law, shall preclude or limit HUD's exercise of:
    (1) The power to contract with respect to public offerings and other 
sales of debt obligations under this

[[Page 145]]

subpart upon such terms and conditions as HUD deems appropriate;
    (2) The right to enforce any such contract by any means deemed 
appropriate by HUD;
    (3) Any ownership rights of HUD, as applicable, in debt obligations 
under this subpart.

[59 FR 66604, Dec. 27, 1994, as amended at 69 FR 32782, June 10, 2004; 
74 FR 36389, July 22, 2009; 80 FR 67633, Nov. 3, 2015]



Sec. 570.706  Federal guarantee; subrogation.

    Section 108(f) of the Act provides for the incontestability of 
guarantees by HUD under subpart M of this part in the hands of a holder 
of such guaranteed obligations. If HUD pays a claim under a guarantee 
made under section 108 of the Act, HUD shall be fully subrogated for all 
the rights of the holder of the guaranteed debt obligation with respect 
to such obligation.

[61 FR 11481, Mar. 20, 1996]



Sec. 570.707  Applicability of rules and regulations.

    (a) Entitlement public entities. The provisions of subparts A, C, J, 
K and O of this part applicable to entitlement grants shall apply 
equally to guaranteed loan funds and other CDBG funds, except to the 
extent they are specifically modified or augmented by the provisions of 
this subpart.
    (b) State-assisted public entities. The provisions of subpart I of 
this part, and the requirements the State imposes on units of general 
local government receiving Community Development Block Grants or program 
income to the extent applicable, shall apply equally to guaranteed loan 
funds and Community Development Block Grants (including program income 
derived therefrom) administered by the State under the CDBG program, 
except to the extent they are specifically modified or augmented by the 
provisions of this subpart.
    (c) Nonentitlement public entities eligible under subpart F of this 
part. The provisions of subpart F of this part shall apply equally to 
guaranteed loan funds and other CDBG funds, except to the extent they 
are specifically modified or augmented by the provisions of this 
subpart.



Sec. 570.708  Sanctions.

    (a) Non-State assisted public entities. The performance review 
procedures described in subpart O of this part apply to all public 
entities receiving guaranteed loan funds other than State-assisted 
public entities. Performance deficiencies in the use of guaranteed loan 
funds made available to such public entities (or program income derived 
therefrom) or violations of the contract entered into pursuant to 
Sec. 570.705(b)(1) may result in the imposition of a sanction authorized 
pursuant to Sec. 570.900(b)(7) against pledged CDBG grants. In addition, 
upon a finding by HUD that the public entity has failed to comply 
substantially with any provision of the Act with respect to either the 
pledged grants or the guaranteed loan funds or program income, HUD may 
take action against the pledged grants as provided in Sec. 570.913 and/
or may take action as provided in the contract for loan guarantee 
assistance.
    (b) State-assisted public entities. Performance deficiencies in the 
use of guaranteed loan funds (or program income derived therefrom) or 
violations of the contract entered into pursuant to Sec. 570.705(b)(1) 
may result in an action authorized pursuant to Sec. 570.495 or 
Sec. 570.496. In addition, upon a finding by HUD that the State or 
public entity has failed to comply substantially with any provision of 
the Act with respect to the pledged CDBG nonentitlement funds, the 
guaranteed loan funds, or program income, HUD may take action against 
the pledged funds as provided in Sec. 570.496 and/or may take action as 
provided in the contract.



Sec. 570.709  Allocation of loan guarantee assistance.

    Of the amount approved in any appropriation act for guarantees under 
this subpart in any fiscal year, 70 percent shall be allocated for 
entitlement public entities and 30 percent shall be allocated for States 
and nonentitlement public entities. HUD need not comply with these 
percentage requirements in any fiscal year to the extent that there is 
an absence of applications approvable under this subpart from 
entitlement public entities or from

[[Page 146]]

States and nonentitlement public entities.

[74 FR 36389, July 22, 2009]



Sec. 570.710  State responsibilities.

    The State is responsible for choosing public entities that it will 
assist under this subpart. States are free to develop procedures and 
requirements for determining which activities will be assisted, subject 
to the requirements of this subpart. Upon approval by HUD of an 
application from a State or a State-assisted public entity, the State 
will be principally responsible, subject to HUD oversight under subpart 
I of this part, for ensuring compliance with all applicable requirements 
governing the use of the guaranteed loan funds. Notwithstanding the 
State's responsibilities described in this section, HUD may take any 
action necessary for ensuring compliance with requirements affecting the 
security interests of HUD with respect to the guaranteed loan.

[59 FR 66604, Dec. 27, 1994, as amended at 74 FR 36389, July 22, 2009]



Sec. 570.711  State borrowers; additional requirements and application
procedures.

    This section contains additional requirements and alternative 
application procedures for guarantees of debt obligations under section 
108 of the Act pursuant to the additional authority provided in 
paragraph (a) of section 222 of the Transportation, Housing and Urban 
Development, and Related Agencies Appropriations Act, 2009, Public Law 
111-8; 123 Stat. 524 at 976 (Division I of the Omnibus Appropriations 
Act, 2009) (``section 222'' and the ``2009 Appropriations Act''). If any 
other federal law or laws are enacted after March 11, 2009, the effect 
of which with respect to loan guarantee authority provided in an 
appropriations act is equivalent to the effect of section 222 with 
respect to the loan guarantee authority provided in the 2009 
Appropriations Act, the additional requirements and alternative 
application procedures in this section shall also apply to guarantees of 
debt obligations under section 108 of the act, pursuant to the 
additional authority provided in such other federal law or laws.
    (a) Applications by States. Notwithstanding Sec. 570.702 and 
Sec. 570.704, states that administer the CDBG program (under subpart I 
of this part) may apply for loan guarantee assistance under this 
subpart, and such application shall consist of the following:
    (1) A copy of the State's CDBG method of distribution in the action 
plan most recently submitted or amended pursuant to 24 CFR part 91. In 
addition to the requirements of 24 CFR part 91, such method of 
distribution must note the approximate amount of section 108 guaranteed 
obligations issued by the State and all nonentitlement public entities 
that are outstanding at the time of such submission or amendment, 
identify the maximum amount of guaranteed loan funds for which the State 
will apply during the period covered by the action plan, describe the 
pledge of grants required under Sec. 570.705(b)(2), and identify the 
nonentitlement public entities in the State that may be assisted with 
such guaranteed loan funds (to satisfy this requirement, the method of 
distribution may identify one or more specific nonentitlement public 
entities that may be assisted, or may indicate that all or a specified 
subset of the nonentitlement public entities in the State may be 
assisted and describe how applications will be selected for assistance).
    (2) Either:
    (i) A description of each activity to be carried out with the 
guaranteed loan funds, including the specific provision of Sec. 570.703 
under which the activity is eligible and how the activity meets one of 
the criteria in Sec. 570.208; or
    (ii) An indication of the type or types of activities to be 
assisted, the provisions of Sec. 570.703 under which such activities are 
eligible, and the criteria in Sec. 570.208 intended to be met, in which 
case HUD shall require that the description referred to in paragraph 
(a)(2)(i) of this section be submitted to and approved by HUD before the 
State disburses guaranteed loan funds to a public entity for the 
activity.
    (3) A schedule for repayment of the loan which identifies the 
sources of repayment.
    (b) Distribution to Local Governments. Proceeds payable to a State 
from the

[[Page 147]]

issuance of debt obligations under this subpart may be used only for:
    (1) Loans and grants to the nonentitlement public entities 
identified in the State's approved application for activities eligible 
under Sec. 570.703; and
    (2) The uses specified in paragraphs (c), (g), and (k) of 
Sec. 570.703.
    (c) Certification of need. Prior to approving a nonentitlement 
public entity's application for assistance, the State shall obtain a 
certification from such public entity conforming to Sec. 570.704(b)(4).
    (d) Local government citizen participation requirements. The 
presubmission and citizen participation requirements in Sec. 570.704(a) 
and the third sentence of Sec. 570.704(c)(5) shall not apply with 
respect to nonentitlement public entities' applications to a State for 
assistance under this section. Nonentitlement public entities shall 
comply with the provisions of Sec. 570.486(a) with respect to such 
applications and such assistance.
    (e) Environmental review; displacement, relocation, acquisition, and 
replacement of housing. Nonentitlement public entities assisted by a 
State under this section shall comply with Sec. 570.704(d) and (e).

[74 FR 36389, July 22, 2009]



Sec. 570.712  Collection of fees; procedure to determine amount of 
the fee.

    This section contains additional procedures for guarantees of debt 
obligations under section 108 when HUD is required or authorized to 
collect fees to pay the credit subsidy costs of the loan guarantee 
program.
    (a) Collection of fees. HUD may collect fees from borrowers for the 
purpose of paying the credit subsidy cost of the loan guarantee. Each 
public entity or its designated public agency and each State issuing 
debt obligations under this subpart is responsible for the payment of 
any and all fees charged pursuant to this section. The fees are payable 
from the grant allocated to the issuer pursuant to the Act (including 
program income derived therefrom) or from other sources, but are only 
payable from guaranteed loan funds if the fee is deducted from the 
disbursement of guaranteed loan funds.
    (b) Amount and determination of fee. (1) HUD shall calculate the 
amount of the fee as a percentage of the principal amount of the 
guaranteed loan as provided by this section, based on a determination 
that the fees when collected will reduce the credit subsidy cost to the 
amount established by applicable appropriation acts. The amount of the 
fee payable by the public entity or State shall be based on the date of 
the loan guarantee commitment and shall be determined by applying the 
percentages announced by Federal Register notice to guaranteed loan 
disbursements as they occur or periodically to outstanding principal 
balances, or both.
    (2) HUD shall publish in the Federal Register the fees required 
under paragraph (a) of this section, announcing the fee to be applied, 
the effective date of the fee, and any other necessary information 
regarding payment of the fee and, if necessary, provide a 30-day public 
comment period for the purpose of inviting comment on the proposed fee 
before adopting changes to the assumptions underlying the fee 
calculation or if the fee structure itself raises new considerations for 
Borrowers. HUD will publish a second Federal Register notice, if 
necessary, after consideration of public comments.

[80 FR 67633, Nov. 3, 2015]



                   Subpart N_Urban Renewal Provisions

    Source: 41 FR 20524, May 18, 1976, unless otherwise noted.



Sec. 570.800  Urban renewal regulations.

    The regulations governing urban renewal projects and neighborhood 
development programs in subpart N of this part, that were effective 
immediately before April 19, 1996, will continue to govern the rights 
and obligations of recipients and HUD with respect to such projects and 
programs.

[61 FR 11481, Mar. 20, 1996]



                      Subpart O_Performance Reviews

    Source: 53 FR 34466, Sept. 6, 1988, unless otherwise noted.

[[Page 148]]



Sec. 570.900  General.

    (a) Performance review authorities--(1) Entitlement, Insular Areas, 
and HUD-administered Small Cities performance reviews. Section 104(e)(1) 
of the Act requires that the Secretary shall, at least on an annual 
basis, make such reviews and audits as may be necessary or appropriate 
to determine whether the recipient has carried out its activities in a 
timely manner, whether the recipient has carried out those activities 
and its certifications in accordance with the requirements and the 
primary objectives of the Act and with other applicable laws, and 
whether the recipient has a continuing capacity to carry out those 
activities in a timely manner.
    (2) Urban Development Action Grant (UDAG) performance reviews. 
Section 119(g) of the Act requires the Secretary, at least on an annual 
basis, to make such reviews and audits of recipients of Urban 
Development Action Grants as necessary to determine whether the 
recipient's progress in carrying out the approved activities is 
substantially in accordance with the recipient's approved plans and 
timetables.
    (b) Performance review procedures. This paragraph describes the 
review procedures the Department will use in conducting the performance 
reviews required by sections 104(e) and 119(g) of the Act:
    (1) The Department will determine the performance of each 
entitlement, Insular Areas, and HUD-administered small cities recipient 
in accordance with section 104(e)(1) of the Act by reviewing for 
compliance with the requirements described in Sec. 570.901 and by 
applying the performance criteria described in Secs. 570.902 and 570.903 
relative to carrying out activities in a timely manner. The review 
criteria in Sec. 570.904 will be used to assist in determining if the 
recipient's program is being carried out in compliance with civil rights 
requirements.
    (2) The Department will review UDAG projects and activities to 
determine whether such projects and activities are being carried out 
substantially in accordance with the recipient's approved plans and 
schedules. The Department will also review to determine if the recipient 
has carried out its UDAG program in accordance with all other 
requirements of the Grant Agreement and with all applicable requirements 
of this part.
    (3) In conducting performance reviews, HUD will primarily rely on 
information obtained from the recipient's performance report, records 
maintained, findings from monitoring, grantee and subrecipient audits, 
audits and surveys conducted by the HUD Inspector General, and financial 
data regarding the amount of funds remaining in the line of credit plus 
program income. HUD may also consider relevant information pertaining to 
a recipient's performance gained from other sources, including 
litigation, citizen comments, and other information provided by or 
concerning the recipient. A recipient's failure to maintain records in 
the prescribed manner may result in a finding that the recipient has 
failed to meet the applicable requirement to which the record pertains.
    (4) If HUD determines that a recipient has not met a civil rights 
review criterion in Sec. 570.904, the recipient will be provided an 
opportunity to demonstrate that it has nonetheless met the applicable 
civil rights requirement.
    (5) If HUD finds that a recipient has failed to comply with a 
program requirement or has failed to meet a performance criterion in 
Sec. 570.902 or Sec. 570.903, HUD will give the recipient an opportunity 
to provide additional information concerning the finding.
    (6) If, after considering any additional information submitted by a 
recipient, HUD determines to uphold the finding, HUD may advise the 
recipient to undertake appropriate corrective or remedial actions as 
specified in Sec. 570.910. HUD will consider the recipient's capacity as 
described in Sec. 570.905 prior to selecting the corrective or remedial 
actions.
    (7) If the recipient fails to undertake appropriate corrective or 
remedial actions which resolve the deficiency to the satisfaction of the 
Secretary, the Secretary may impose a sanction pursuant to Sec. 570.911, 
570,912, or 570.913, as applicable.

[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995; 72 
FR 12536, Mar. 15, 2007]

[[Page 149]]



Sec. 570.901  Review for compliance with the primary and national 
objectives and other program requirements.

    HUD will review each entitlement, Insular Areas, and HUD-
administered small cities recipient's program to determine if the 
recipient has carried out its activities and certifications in 
compliance with:
    (a) The requirement described at Sec. 570.200(a)(3) that, consistent 
with the primary objective of the Act, not less than 70 percent of the 
aggregate amount of CDBG funds received by the recipient shall be used 
over the period specified in its certification for activities that 
benefit low and moderate income persons;
    (b) The requirement described at Sec. 570.200(a)(2) that each CDBG 
assisted activity meets the criteria for one or more of the national 
objectives described at Sec. 570.208;
    (c) All other activity eligibility requirements defined in subpart C 
of this part;
    (d) For entitlement grants and non-entitlement CDBG grants in 
Hawaii, the submission requirements of 24 CFR part 91 and the 
displacement policy requirements at Sec. 570.606;
    (e) For HUD-administered Small Cities grants in New York, the 
citizen participation requirements at Sec. 570.431, the amendment 
requirements at Sec. 570.427, and the displacement policy requirements 
of Sec. 570.606;
    (f) For Insular Areas Program grants only, the application and 
amendment requirements at Sec. 570.440, the citizen participation 
requirements at Sec. 570.441, the displacement policy requirements of 
Sec. 570.606, and the lead-based paint requirements of 24 CFR 35.940;
    (g) The grant administration requirements described in subpart J;
    (h) Other applicable laws and program requirements described in 
subpart K; and
    (i) Where applicable, the requirements pertaining to loan guarantees 
(subpart M) and urban renewal completions (subpart N).

[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995; 60 
FR 56917, Nov. 9, 1995; 72 FR 12536, Mar. 15, 2007; 72 FR 46371, Aug. 
17, 2007]



Sec. 570.902  Review to determine if CDBG-funded activities are being
carried out in a timely manner.

    HUD will review the performance of each entitlement, HUD-
administered small cities, and Insular Areas recipient to determine 
whether each recipient is carrying out its CDBG-assisted activities in a 
timely manner.
    (a) Entitlement recipients and Non-entitlement CDBG grantees in 
Hawaii. (1) Before the funding of the next annual grant and absent 
contrary evidence satisfactory to HUD, HUD will consider an entitlement 
recipient or a non-entitlement CDBG grantee in Hawaii to be failing to 
carry out its CDBG activities in a timely manner if:
    (i) Sixty days prior to the end of the grantee's current program 
year, the amount of entitlement grant funds available to the recipient 
under grant agreements but undisbursed by the U.S. Treasury is more than 
1.5 times the entitlement grant amount for its current program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that the 
lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (2) Notwithstanding that the amount of funds in the line of credit 
indicates that the recipient is carrying out its activities in a timely 
manner pursuant to paragraph (a)(1) of this section, HUD may determine 
that the recipient is not carrying out its activities in a timely manner 
if:
    (i) The amount of CDBG program income the recipient has on hand 60 
days prior to the end of its current program year, together with the 
amount of funds in its CDBG line of credit, exceeds 1.5 times the 
entitlement grant amount for its current program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that the 
lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (3) In determining the appropriate corrective action to take with 
respect to a HUD determination that a recipient is not carrying out its 
activities in a timely manner pursuant to paragraphs (a)(1) or (a)(2) of 
this section, HUD will consider the likelihood that

[[Page 150]]

the recipient will expend a sufficient amount of funds over the next 
program year to reduce the amount of unexpended funds to a level that 
will fall within the standard described in paragraph (a)(1) of this 
section when HUD next measures the grantee's timeliness performance. 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.
    (b) HUD-administered Small Cities program in New York. The 
Department will, absent substantial evidence to the contrary, deem a 
HUD-administered Small Cities recipient in New York to be carrying out 
its CDBG-funded activities in a timely manner if the schedule for 
carrying out its activities, as contained in the approved application 
(including any subsequent amendment(s)), is being substantially met.
    (c) Insular Areas recipients. (1) Before the funding of the next 
annual grant and absent contrary evidence satisfactory to HUD, HUD will 
consider an Insular Areas recipient to be failing to carry out its CDBG 
activities in a timely manner if:
    (i) Sixty days prior to the end of the grantee's current program 
year, the amount of Insular Area grant funds available to the recipient 
under grant agreements but undisbursed by the U.S. Treasury is more than 
2.0 times the Insular Area's grant amount for its current program year; 
and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that the 
lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (2) Notwithstanding that the amount of funds in the line of credit 
indicates that the Insular Area recipient is carrying out its activities 
in a timely manner pursuant to paragraph (c)(1) of this section, HUD may 
determine that the recipient is not carrying out its activities in a 
timely manner if:
    (i) The amount of CDBG program income the recipient has on hand 60 
days prior to the end of its current program year, together with the 
amount of funds in its CDBG line of credit, exceeds 2.0 times the 
Insular Area's grant amount for its current program year; and
    (ii) The grantee fails to demonstrate to HUD's satisfaction that the 
lack of timeliness has resulted from factors beyond the grantee's 
reasonable control.
    (3) In determining the appropriate corrective action to take with 
respect to a HUD determination that a recipient is not carrying out its 
activities in a timely manner pursuant to paragraphs (c)(1) or (c)(2) of 
this section, HUD will consider the likelihood that the recipient will 
expend a sufficient amount of funds over the next program year to reduce 
the amount of unexpended funds to a level that will fall within the 
standards described in paragraphs (c)(1) and (2) of this section when 
HUD next measures the grantee's timeliness performance. For these 
purposes, HUD will take into account the extent to which funds on hand 
have been obligated by the recipient and its sub-recipients for specific 
activities at the time the finding is made and other relevant 
information.
    (4) If a recipient is determined to be untimely pursuant to 
paragraphs (c)(1) or (c)(2) of this section in one year, and the 
recipient is again determined to be untimely in the following year, HUD 
may reduce the recipient's next grant by 100 percent of the amount in 
excess of twice the Insular Area's most recent CDBG grant, unless HUD 
determines that the untimeliness resulted from factors outside of the 
grantee's reasonable control.
    (5) The first review under paragraphs (c)(1) and (c)(2) of this 
section will take place 60 days prior to the conclusion of the Fiscal 
Year 2006 program year.

[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995; 72 
FR 12536, Mar. 15, 2007; 72 FR 46371, Aug. 17, 2007]



Sec. 570.903  Review to determine if the recipient is meeting its
consolidated plan responsibilities.

    The consolidated plan, action plan, and amendment submission 
requirements referred to in this section are in 24 CFR part 91. For the 
purpose of this section, the term consolidated plan includes an 
abbreviated consolidated plan that is submitted pursuant to 24 CFR 
91.235.

[[Page 151]]

    (a) Review timing and purpose. HUD will review the consolidated plan 
performance of each entitlement, Insular Areas, and Hawaii HUD-
administered Small Cities grant recipient prior to acceptance of a grant 
recipient's annual certification under 24 CFR 91.225(b)(3) to determine 
whether the recipient followed its HUD-approved consolidated plan for 
the most recently completed program year, and whether activities 
assisted with CDBG funds during that period were consistent with that 
consolidated plan, except that grantees are not bound by the 
consolidated plan with respect to the use or distribution of CDBG funds 
to meet non-housing community development needs.
    (b) Following a consolidated plan. The recipient will be considered 
to be following its consolidated plan if it has taken all of the planned 
actions described in its action plan. This includes, but is not limited 
to:
    (1) Pursuing all resources that the grantee indicated it would 
pursue;
    (2) Providing certifications of consistency, when requested to do so 
by applicants for HUD programs for which the grantee indicated that it 
would support application by other entities, in a fair and impartial 
manner; and
    (3) Not hindering implementation of the consolidated plan by action 
or willful inaction.
    (c) Disapproval. If HUD determines that a recipient has not met the 
criteria outlined in paragraph (b) of this section, HUD will notify the 
recipient and provide the recipient up to 45 days to demonstrate to the 
satisfaction of the Secretary that it has followed its consolidated 
plan. HUD will consider all relevant circumstances and the recipient's 
actions and lack of actions affecting the provision of assistance 
covered by the consolidated plan within its jurisdiction. Failure to so 
demonstrate in a timely manner will be cause for HUD to find that the 
recipient has failed to meet its certification. A complete and specific 
response by the recipient shall describe:
    (1) Any factors beyond the control of the recipient that prevented 
it from following its consolidated plan, and any actions the recipient 
has taken or plans to take to alleviate such factors; and
    (2) Actions taken by the recipient, if any, beyond those described 
in the consolidated plan performance report to facilitate following the 
consolidated plan, including the effects of such actions.
    (d) New York HUD-administered Small Cities. New York HUD-
administered grantees shall follow the provisions of paragraph (b) of 
this section for their abbreviated or full consolidated plan to the 
extent that the provisions of paragraph (b) of this section are 
applicable. If the grantee does not comply with the requirements of 
paragraph (b) of this section, and does not provide HUD with an 
acceptable explanation, HUD may decide, in accordance with the 
requirements of the notice of fund availability, that the grantee does 
not meet threshold requirements to apply for a new small cities grant.

[60 FR 56918, Nov. 9, 1995, as amended at 72 FR 12537, Mar. 15, 2007]



Sec. 570.904  Equal opportunity and fair housing review criteria.

    (a) General. (1) Where the criteria in this section are met, the 
Department will presume that the recipient has carried out its CDBG-
funded program in accordance with civil rights certifications and civil 
rights requirements of the Act relating to equal employment opportunity, 
equal opportunity in services, benefits and participation, and is 
affirmatively furthering fair housing unless:
    (i) There is evidence which shows, or from which it is reasonable to 
infer, that the recipient, motivated by considerations of race, color, 
religion where applicable, sex, national origin, age or handicap, has 
treated some persons less favorably than others, or
    (ii) There is evidence that a policy, practice, standard or method 
of administration, although neutral on its face, operates to deny or 
affect adversely in a significantly disparate way the provision of 
employment or services, benefits or participation to persons of a 
particular race, color, religion where applicable, sex, national origin, 
age or handicap, or fair housing to persons of a particular race, color, 
religion, sex, or national origin, or

[[Page 152]]

    (iii) Where the Secretary required a further assurance pursuant to 
Sec. 570.304 in order to accept the recipient's prior civil rights 
certification, the recipient has failed to meet any such assurance.
    (2) In such instances, or where the review criteria in this section 
are not met, the recipient will be afforded an opportunity to present 
evidence that it has not failed to carry out the civil rights 
certifications and fair housing requirements of the Act. The Secretary's 
determination of whether there has been compliance with the applicable 
requirements will be made based on a review of the recipient's 
performance, evidence submitted by the recipient, and all other 
available evidence. The Department may also initiate separate compliance 
reviews under title VI of the Civil Rights Act of 1964 or section 109 of 
the Act.
    (b) Review for equal opportunity. Title VI of the Civil Rights Act 
of 1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24 
CFR part 1, together with section 109 of the Act (see Sec. 570.602), 
prohibit discrimination in any program or activity funded in whole or in 
part with funds made available under this part.
    (1) Review for equal employment opportunity. The Department will 
presume that a recipient's hiring and employment practices have been 
carried out in compliance with its equal opportunity certifications and 
requirements of the Act. This presumption may be rebutted where, based 
on the totality of circumstances, there has been a deprivation of 
employment, promotion, or training opportunities by a recipient to any 
person within the meaning of section 109. The extent to which persons of 
a particular race, gender, or ethnic background are represented in the 
workforce may in certain circumstances be considered, together with 
complaints, performance reviews, and other information.
    (2) Review of equal opportunity in services, benefits and 
participation. The Department will presume a recipient is carrying out 
its programs and activities in accordance with the civil rights 
certifications and requirements of the Act. This presumption may be 
rebutted where, based on the totality of circumstances, there has been a 
deprivation of services, benefits, or participation in any program or 
activity funded in whole or in part with block grant funds by a 
recipient to any person within the meaning of section 109. The extent to 
which persons of a particular race, gender, or ethnic background 
participate in a program or activity may in certain circumstances be 
considered, together with complaints, performance reviews, and other 
information.
    (c) Review for fair housing--(1) General. See the requirements in 
the Fair Housing Act (42 U.S.C. 3601-20), as well as Sec. 570.601(a).
    (2) Affirmatively furthering fair housing. HUD will review a 
recipient's performance to determine if it has administered all programs 
and activities related to housing and urban development in accordance 
with Sec. 570.601(a)(2), which sets forth the grantee's responsibility 
to affirmatively further fair housing.
    (d) Actions to use minority and women's business firms. The 
Department will review a recipient's performance to determine if it has 
administered its activities funded with assistance under this part in a 
manner to encourage use of minority and women's business enterprises 
described in Executive Orders 11625, 12432 and 12138, and 2 CFR 200.321. 
In making this review, the Department will determine if the grantee has 
taken actions required under 2 CFR 200.321, and will review the 
effectiveness of those actions in accomplishing the objectives of 2 CFR 
200.321 and the Executive Orders. No recipient is required by this part 
to attain or maintain any particular statistical level of participation 
in its contracting activities by race, ethnicity, or gender of the 
contractor's owners or managers.

[53 FR 34466, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 
54 FR 37411, Sept. 9, 1989; 60 FR 1917, Jan. 5, 1995; 61 FR 11482, Mar. 
20, 1996; 80 FR 42368, July 16, 2015; 80 FR 75938, Dec. 7, 2015]



Sec. 570.905  Review of continuing capacity to carry out CDBG funded
activities in a timely manner.

    If HUD determines that the recipient has not carried out its CDBG 
activities and certifications in accordance with the requirements and 
criteria described

[[Page 153]]

in Sec. 570.901 or 570.902, HUD will undertake a further review to 
determine whether or not the recipient has the continuing capacity to 
carry out its activities in a timely manner. In making the 
determination, the Department will consider the nature and extent of the 
recipient's performance deficiencies, types of corrective actions the 
recipient has undertaken and the success or likely success of such 
actions.



Sec. 570.906  Review of urban counties.

    In reviewing the performance of an urban county, HUD will hold the 
county accountable for the actions or failures to act of any of the 
units of general local government participating in the urban county. 
Where the Department finds that a participating unit of government has 
failed to cooperate with the county to undertake or assist in 
undertaking an essential community development or assisted housing 
activity and that such failure results, or is likely to result, in a 
failure of the urban county to meet any requirement of the program or 
other applicable laws, the Department may prohibit the county's use of 
funds made available under this part for that unit of government. HUD 
will also consider any such failure to cooperate in its review of a 
future cooperation agreement between the county and such included unit 
of government described at Sec. 570.307(b)(2).



Secs. 570.907-570.909  [Reserved]



Sec. 570.910  Corrective and remedial actions.

    (a) General. Consistent with the procedures described in 
Sec. 570.900(b), the Secretary may take one or more of the actions 
described in paragraph (b) of this section. Such actions shall be 
designed to prevent a continuation of the performance deficiency; 
mitigate, to the extent possible, the adverse effects or consequences of 
the deficiency; and prevent a recurrence of the deficiency.
    (b) Actions authorized. The following lists the actions that HUD may 
take in response to a deficiency identified during the review of a 
recipient's performance:
    (1) Issue a letter of warning advising the recipient of the 
deficiency and putting the recipient on notice that additional action 
will be taken if the deficiency is not corrected or is repeated;
    (2) Recommend, or request the recipient to submit, proposals for 
corrective actions, including the correction or removal of the causes of 
the deficiency, through such actions as:
    (i) Preparing and following a schedule of actions for carrying out 
the affected CDBG activities, consisting of schedules, timetables and 
milestones necessary to implement the affected CDBG activities;
    (ii) Establishing and following a management plan which assigns 
responsibilities for carrying out the actions identified in paragraph 
(b)(2)(i) of this section;
    (iii) For entitlement and Insular Areas recipients, canceling or 
revising affected activities that are no longer feasible to implement 
due to the deficiency and re-programming funds from such affected 
activities to other eligible activities (pursuant to the citizen 
participation requirements in 24 CFR part 91); or
    (iv) Other actions which will serve to prevent a continuation of the 
deficiency, mitigate (to the extent possible) the adverse effects or 
consequences of the deficiency, and prevent a recurrence of the 
deficiency;
    (3) Advise the recipient that a certification will no longer be 
acceptable and that additional assurances will be required;
    (4) Advise the recipient to suspend disbursement of funds for the 
deficient activity;
    (5) Advise the recipient to reimburse its program account or letter 
of credit in any amounts improperly expended and reprogram the use of 
the funds in accordance with applicable requirements;
    (6) Change the method of payment to the recipient from a letter of 
credit basis to a reimbursement basis;
    (7) In the case of claims payable to HUD or the U.S. Treasury, 
institute collection procedures pursuant to subpart B of 24 CFR part 17; 
and
    (8) In the case of an entitlement or Insular Areas recipient, 
condition the use of funds from a succeeding fiscal year's allocation 
upon appropriate corrective action by the recipient. The

[[Page 154]]

failure of the recipient to undertake the actions specified in the 
condition may result in a reduction, pursuant to Sec. 570.911, of the 
entitlement or Insular Areas recipient's annual grant by up to the 
amount conditionally granted.

[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995; 72 
FR 12537, Mar. 15, 2007]



Sec. 570.911  Reduction, withdrawal, or adjustment of a grant or other
appropriate action.

    (a) Opportunity for an informal consultation. Prior to a reduction, 
withdrawal, or adjustment of a grant or other appropriate action, taken 
pursuant to paragraph (b), (c), or (d) of this section, the recipient 
shall be notified of such proposed action and given an opportunity 
within a prescribed time period for an informal consultation.
    (b) Entitlement grants, Non-entitlement CDBG grants in Hawaii, and 
Insular Areas grants. Consistent with the procedures described in 
Sec. 570.900(b), the Secretary may make a reduction in the entitlement, 
non-entitlement CDBG grants in Hawaii, or Insular Areas grant amount 
either for the succeeding program year or, if the grant had been 
conditioned, up to the amount that had been conditioned. The amount of 
the reduction shall be based on the severity of the deficiency and may 
be for the entire grant amount.
    (c) HUD-administered small cities grants. Consistent with the 
procedures described in Sec. 570.900(b), the Secretary may adjust, 
reduce or withdraw the grant or take other actions as appropriate, 
except that funds already expended on eligible approved activities shall 
not be recaptured or deducted from future grants.
    (d) Urban Development Action Grants. Consistent with the procedures 
described in Sec. 570.900(b), the Secretary may adjust, reduce or 
withdraw the grant or take other actions as appropriate, except that 
funds already expended on eligible approved activities shall not be 
recaptured or deducted from future grants made to the recipient.

[61 FR 11481, Mar. 20, 1996, as amended at 72 FR 12537, Mar. 15, 2007; 
72 FR 46371, Aug. 17, 2007]



Sec. 570.912  Nondiscrimination compliance.

    (a) Whenever the Secretary determines that a unit of general local 
government which is a recipient of assistance under this part has failed 
to comply with Sec. 570.602, the Secretary shall notify the governor of 
such State or chief executive officer of such unit of general local 
government of the noncompliance and shall request the governor or the 
chief executive officer to secure compliance. If within a reasonable 
period of time, not to exceed sixty days, the governor or chief 
executive officer fails or refuses to secure compliance, the Secretary 
is authorized to:
    (1) Refer the matter to the Attorney General with a recommendation 
that an appropriate civil action be instituted;
    (2) Exercise the powers and functions provided by title VI of the 
Civil Rights Act of 1964 (42 U.S.C. 2000d);
    (3) Exercise the powers and functions provided for in Sec. 570.913; 
or
    (4) Take such other action as may be provided by law.
    (b) When a matter is referred to the Attorney General pursuant to 
paragraph (a)(1) of this section, or whenever the Secretary has reason 
to believe that a State or a unit of general local government is engaged 
in a pattern or practice in violation of the provisions of Sec. 570.602, 
the Attorney General may bring a civil action in any appropriate United 
States district court for such relief as may be appropriate, including 
injunctive relief.



Sec. 570.913  Other remedies for noncompliance.

    (a) Action to enforce compliance. When the Secretary acts to enforce 
the civil rights provisions of Section 109, as described in Sec. 570.602 
and 24 CFR part 6, the procedures described in 24 CFR parts 6 and 180 
apply. If the Secretary finds, after reasonable notice and opportunity 
for hearing, that a recipient has failed to comply substantially with 
any other provisions of this part, the provisions of this section apply. 
The Secretary, until he/she is satisfied that there is no longer any 
such failure to comply, shall:
    (1) Terminate payments to the recipient;

[[Page 155]]

    (2) Reduce payments to the recipient by an amount equal to the 
amount of such payments which were not expended in accordance with this 
part; or
    (3) Limit the availability of payments to programs or activities not 
affected by such failure to comply.
    Provided, however, that the Secretary may on due notice suspend 
payments at any time after the issuance of a notice of opportunity for 
hearing pursuant to paragraph (c)(1) of this section, pending such 
hearing and a final decision, to the extent the Secretary determines 
such action necessary to preclude the further expenditure of funds for 
activities affected by such failure to comply.
    (b) In lieu of, or in addition to, any action authorized by 
paragraph (a) of this section, the Secretary may, if he/she has reason 
to believe that a recipient has failed to comply substantially with any 
provision of this part;
    (1) Refer the matter to the Attorney General of the United States 
with a recommendation that an appropriate civil action be instituted; 
and
    (2) Upon such a referral, the Attorney General may bring a civil 
action in any United States district court having venue thereof for such 
relief as may be appropriate, including an action to recover the amount 
of the assistance furnished under this part which was not expended in 
accordance with it, or for mandatory or injunctive relief;
    (c) Proceedings. When the Secretary proposes to take action pursuant 
to this section, the respondent is the unit of general local government 
or State receiving assistance under this part. These procedures are to 
be followed prior to imposition of a sanction described in paragraph (a) 
of this section:
    (1) Notice of opportunity for hearing: The Secretary shall notify 
the respondent in writing of the proposed action and of the opportunity 
for a hearing. The notice shall:
    (i) Specify, in a manner which is adequate to allow the respondent 
to prepare its response, allegations with respect to a failure to comply 
substantially with a provision of this part;
    (ii) State that the hearing procedures are governed by these rules;
    (iii) State that a hearing may be requested within 10 days from 
receipt of the notice and the name, address and telephone number of the 
person to whom any request for hearing is to be addressed:
    (iv) Specify the action which the Secretary proposes to take and 
that the authority for this action is section 111(a) of the Act;
    (v) State that if the respondent fails to request a hearing within 
the time specified a decision by default will be rendered against the 
respondent; and
    (vi) Be sent to the respondent by certified mail, return receipt 
requested.
    (2) Initiation of hearing. The respondent shall be allowed at least 
10 days from receipt of the notice within which to notify HUD of its 
request for a hearing. If no request is received within the time 
specified, the Secretary may proceed to make a finding on the issue of 
compliance with this part and to take the proposed action.
    (3) Administrative Law Judge. Proceedings conducted under these 
rules shall be presided over by an Administrative Law Judge (ALJ), 
appointed as provided by section 11 of the Administrative Procedures Act 
(5 U.S.C. 3105). The case shall be referred to the ALJ by the Secretary 
at the time a hearing is requested. The ALJ shall promptly notify the 
parties of the time and place at which the hearing will be held. The ALJ 
shall conduct a fair and impartial hearing and take all action necessary 
to avoid delay in the disposition of proceedings and to maintain order. 
The ALJ shall have all powers necessary to those ends, including but not 
limited to the power to:
    (i) Administer oaths and affirmations;
    (ii) Issue subpoenas as authorized by law;
    (iii) Rule upon offers of proof and receive relevant evidence;
    (iv) Order or limit discovery prior to the hearing as the interests 
of justice may require;
    (v) Regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (vi) Hold conferences for the settlement or simplification of the 
issues by consent of the parties;
    (vii) Consider and rule upon all procedural and other motions 
appropriate in adjudicative proceedings; and

[[Page 156]]

    (viii) Make and file initial determinations.
    (4) Ex parte communications. An ex parte communication is any 
communication with an ALJ, direct or indirect, oral or written, 
concerning the merits or procedures of any pending proceeding which is 
made by a party in the absence of any other party. Ex parte 
communications are prohibited except where the purpose and content of 
the communication have been disclosed in advance or simultaneously to 
all parties, or the communication is a request for information 
concerning the status of the case. Any ALJ who receives an ex parte 
communication which the ALJ knows or has reason to believe is 
unauthorized shall promptly place the communication, or its substance, 
in all files and shall furnish copies to all parties. Unauthorized ex 
parte communications shall not be taken into consideration in deciding 
any matter in issue.
    (5) The hearing. All parties shall have the right to be represented 
at the hearing by counsel. The ALJ shall conduct the proceedings in an 
expeditious manner while allowing the parties to present all oral and 
written evidence which tends to support their respective positions, but 
the ALJ shall exclude irrelevant, immaterial or unduly repetitious 
evidence. The Department has the burden of proof in showing by a 
preponderance of the evidence that the respondent failed to comply 
substantially with a provision of this part. Each party shall be allowed 
to cross-examine adverse witnesses and to rebut and comment upon 
evidence presented by the other party. Hearings shall be open to the 
public. So far as the orderly conduct of the hearing permits, interested 
persons other than the parties may appear and participate in the 
hearing.
    (6) Transcripts. Hearing shall be recorded and transcribed only by a 
reporter under the supervision of the ALJ. The orginal transcript shall 
be a part of the record and shall constitute the sole official 
transcript. Respondents and the public, at their own expense, may obtain 
copies of the transcript.
    (7) The ALJ's decision. At the conclusion of the hearing, the ALJ 
shall give the parties a reasonable opportunity to submit proposed 
findings and conclusions and supporting reasons therefor. Within 25 days 
after the conclusion of the hearing, the ALJ shall prepare a written 
decision which includes a statement of findings and conclusions, and the 
reasons or basis therefor, on all the material issues of fact, law or 
discretion presented on the record and the appropriate sanction or 
denial thereof. The decision shall be based on consideration of the 
whole record or those parts thereof cited by a party and supported by 
and in accordance with the reliable, probative, and substantial 
evidence. A copy of the decision shall be furnished to the parties 
immediately by certified mail, return receipt requested, and shall 
include a notice that any requests for review by the Secretary must be 
made in writing to the Secretary within 30 days of the receipt of the 
decision.
    (8) The record. The transcript of testimony and exhibits, together 
with the decision of the ALJ and all papers and requests filed in the 
proceeding, constitutes the exclusive record for decision and, on 
payment of its reasonable cost, shall be made available to the parties. 
After reaching his/her initial decision, the ALJ shall certify to the 
complete record and forward the record to the Secretary.
    (9) Review by the Secretary. The decision by the ALJ shall 
constitute the final decision of the Secretary unless, within 30 days 
after the receipt of the decision, either the respondent or the 
Assistant Secretary for Community Planning and Development files an 
exception and request for review by the Secretary. The excepting party 
must transmit simultaneously to the Secretary and the other party the 
request for review and the basis of the party's exceptions to the 
findings of the ALJ. The other party shall be allowed 30 days from 
receipt of the exception to provide the Secretary and the excepting 
party with a written reply. The Secretary shall then review the record 
of the case, including the exceptions and the reply. On the basis of 
such review, the Secretary shall issue a written determination, 
including a statement of the reasons or basis therefor, affirming, 
modifying or revoking the

[[Page 157]]

decision of the ALJ. The Secretary's decision shall be made and 
transmitted to the parties within 80 days after the decision of the ALJ 
was furnished to the parties.
    (10) Judicial review. The respondent may seek judicial review of the 
Secretary's decision pursuant to section 111(c) of the Act.

[53 FR 34466, Sept. 6, 1988, as amended at 64 FR 3802, Jan. 25, 1999]



 Sec. Appendix A to Part 570--Guidelines and Objectives for Evaluating 
                Project Costs and Financial Requirements

    I. Guidelines and Objectives for Evaluating Project Costs and 
Financial Requirements. HUD has developed the following guidelines that 
are designed to provide the recipient with a framework for financially 
underwriting and selecting CDBG-assisted economic development projects 
which are financially viable and will make the most effective use of the 
CDBG funds. The use of these underwriting guidelines as published by HUD 
is not mandatory. However, grantees electing not to use these 
underwriting guidelines would be expected to conduct basic financial 
underwriting prior to the provision of CDBG financial assistance to a 
for-profit business. States electing not to use these underwriting 
guidelines would be expected to ensure that the state or units of 
general local government conduct basic financial underwriting prior to 
the provision of CDBG financial assistance to a for-profit business.
    II. Where appropriate, HUD's underwriting guidelines recognize that 
different levels of review are appropriate to take into account 
differences in the size and scope of a proposed project, and in the case 
of a microenterprise or other small business to take into account the 
differences in the capacity and level of sophistication among businesses 
of differing sizes.
    III. Recipients are encouraged, when they develop their own programs 
and underwriting criteria, to also take these factors into account. For 
example, a recipient administering a program providing only technical 
assistance to small businesses might choose to apply underwriting 
guidelines to the technical assistance program as a whole, rather than 
to each instance of assistance to a business. Given the nature and 
dollar value of such a program, a recipient might choose to limit its 
evaluation to factors such as the extent of need for this type of 
assistance by the target group of businesses and the extent to which 
this type of assistance is already available.
    IV. The objectives of the underwriting guidelines are to ensure:
    (1) that project costs are reasonable;
    (2) that all sources of project financing are committed;
    (3) that to the extent practicable, CDBG funds are not substituted 
for non-Federal financial support;
    (4) that the project is financially feasible;
    (5) that to the extent practicable, the return on the owner's equity 
investment will not be unreasonably high; and
    (6) that to the extent practicable, CDBG funds are disbursed on a 
pro rata basis with other finances provided to the project.
    i. Project costs are reasonable. i. Reviewing costs for 
reasonableness is important. It will help the recipient avoid providing 
either too much or too little CDBG assistance for the proposed project. 
Therefore, it is suggested that the grantee obtain a breakdown of all 
project costs and that each cost element making up the project be 
reviewed for reasonableness. The amount of time and resources the 
recipient expends evaluating the reasonableness of a cost element should 
be commensurate with its cost. For example, it would be appropriate for 
an experienced reviewer looking at a cost element of less than $10,000 
to judge the reasonableness of that cost based upon his or her knowledge 
and common sense. For a cost element in excess of $10,000, it would be 
more appropriate for the reviewer to compare the cost element with a 
third-party, fair-market price quotation for that cost element. Third-
party price quotations may also be used by a reviewer to help determine 
the reasonableness of cost elements below $10,000 when the reviewer 
evaluates projects infrequently or if the reviewer is less experienced 
in cost estimations. If a recipient does not use third-party price 
quotations to verify cost elements, then the recipient would need to 
conduct its own cost analysis using appropriate cost estimating manuals 
or services.
    ii. The recipient should pay particular attention to any cost 
element of the project that will be carried out through a non-arms-
length transaction. A non-arms-length transaction occurs when the entity 
implementing the CDBG assisted activity procures goods or services from 
itself or from another party with whom there is a financial interest or 
family relationship. If abused, non-arms-length transactions 
misrepresent the true cost of the project.
    2. Commitment of all project sources of financing. The recipient 
should review all projected sources of financing necessary to carry out 
the economic development project. This is to ensure that time and effort 
is not wasted on assessing a proposal that is not able to proceed. To 
the extent practicable, prior to the commitment of CDBG funds to the 
project, the recipient should verify that: sufficient sources of funds 
have been identified to finance the project; all participating parties

[[Page 158]]

providing those funds have affirmed their intention to make the funds 
available; and the participating parties have the financial capacity to 
provide the funds.
    3. Avoid substitution of CDBG funds for non-Federal financial 
support. i. The recipient should review the economic development project 
to ensure that, to the extent practicable, CDBG funds will not be used 
to substantially reduce the amount of non-Federal financial support for 
the activity. This will help the recipient to make the most efficient 
use of its CDBG funds for economic development. To reach this 
determination, the recipient's reviewer would conduct a financial 
underwriting analysis of the project, including reviews of appropriate 
projections of revenues, expenses, debt service and returns on equity 
investments in the project. The extent of this review should be 
appropriate for the size and complexity of the project and should use 
industry standards for similar projects, taking into account the unique 
factors of the project such as risk and location.
    ii. Because of the high cost of underwriting and processing loans, 
many private financial lenders do not finance commercial projects that 
are less than $100,000. A recipient should familiarize itself with the 
lending practices of the financial institutions in its community. If the 
project's total cost is one that would normally fall within the range 
that financial institutions participate, then the recipient should 
normally determine the following:
    A. Private debt financing--whether or not the participating private, 
for-profit business (or other entity having an equity interest) has 
applied for private debt financing from a commercial lending institution 
and whether that institution has completed all of its financial 
underwriting and loan approval actions resulting in either a firm 
commitment of its funds or a decision not to participate in the project; 
and
    B. Equity participation--whether or not the degree of equity 
participation is reasonable given general industry standards for rates 
of return on equity for similar projects with similar risks and given 
the financial capacity of the entrepreneur(s) to make additional 
financial investments.
    iii. If the recipient is assisting a microenterprise owned by a low- 
or moderate-income person(s), in conducting its review under this 
paragraph, the recipient might only need to determine that non-Federal 
sources of financing are not available (at terms appropriate for such 
financing) in the community to serve the low- or moderate-income 
entrepreneur.
    4. Financial feasibility of the project. i. The public benefit a 
grantee expects to derive from the CDBG assisted project (the subject of 
separate regulatory standards) will not materialize if the project is 
not financially feasible. To determine if there is a reasonable chance 
for the project's success, the recipient should evaluate the financial 
viability of the project. A project would be considered financially 
viable if all of the assumptions about the project's market share, sales 
levels, growth potential, projections of revenue, project expenses and 
debt service (including repayment of the CDBG assistance if appropriate) 
were determined to be realistic and met the project's break-even point 
(which is generally the point at which all revenues are equal to all 
expenses). Generally speaking, an economic development project that does 
not reach this break-even point over time is not financially feasible. 
The following should be noted in this regard:
    A. some projects make provisions for a negative cash flow in the 
early years of the project while space is being leased up or sales 
volume built up, but the project's projections should take these factors 
into account and provide sources of financing for such negative cash 
flow; and
    B. it is expected that a financially viable project will also 
project sufficient revenues to provide a reasonable return on equity 
investment. The recipient should carefully examine any project that is 
not economically able to provide a reasonable return on equity 
investment. Under such circumstances, a business may be overstating its 
real equity investment (actual costs of the project may be overstated as 
well), or it may be overstating some of the project's operating expenses 
in the expectation that the difference will be taken out as profits, or 
the business may be overly pessimistic in its market share and revenue 
projections and has downplayed its profits.
    ii. In addition to the financial underwriting reviews carried out 
earlier, the recipient should evaluate the experience and capacity of 
the assisted business owners to manage an assisted business to achieve 
the projections. Based upon its analysis of these factors, the recipient 
should identify those elements, if any, that pose the greatest risks 
contributing to the project's lack of financial feasibility.
    5. Return on equity investment. To the extent practicable, the CDBG 
assisted activity should provide not more than a reasonable return on 
investment to the owner of the assisted activity. This will help ensure 
that the grantee is able to maximize the use of its CDBG funds for its 
economic development objectives. However, care should also be taken to 
avoid the situation where the owner is likely to receive too small a 
return on his/her investment, so that his/her motivation remains high to 
pursue the business with vigor. The amount, type and terms of the CDBG 
assistance should be adjusted to allow the owner a reasonable return on 
his/her investment given industry rates of return for that investment, 
local conditions and the risk of the project.

[[Page 159]]

    6. Disbursement of CDBG funds on a pro rata basis. To the extent 
practicable, CDBG funds used to finance economic development activities 
should be disbursed on a pro rata basis with other funding sources. 
Recipients should be guided by the principle of not placing CDBG funds 
at significantly greater risk than non-CDBG funds. This will help avoid 
the situation where it is learned that a problem has developed that will 
block the completion of the project, even though all or most of the CDBG 
funds going in to the project have already been expended. When this 
happens, a recipient may be put in a position of having to provide 
additional financing to complete the project or watch the potential loss 
of its funds if the project is not able to be completed. When the 
recipient determines that it is not practicable to disburse CDBG funds 
on a pro rata basis, the recipient should consider taking other steps to 
safeguard CDBG funds in the event of a default, such as insisting on 
securitizing assets of the project.

[60 FR 1953, Jan. 5, 1995]



PART 573_LOAN GUARANTEE RECOVERY FUND--Table of Contents



Sec.
573.1   Authority and purpose.
573.2   Definitions.
573.3   Eligible activities.
573.4   Loan term.
573.5   Underwriting standards and availability of loan guarantee 
          assistance.
573.6   Submission requirements.
573.7   Loan guarantee agreement.
573.8   Environmental procedures and standards.
573.9   Other requirements.
573.10   Fees for guaranteed loans.
573.11   Record access and recordkeeping.

    Authority: Pub. L. 104-155, 110 Stat. 1392, 18 U.S.C. 241 note; 42 
U.S.C. 3535(d).

    Source: 61 FR 47405, Sept. 6, 1996, unless otherwise noted.



Sec. 573.1  Authority and purpose.

    Section 4 of the Church Arson Prevention Act of 1996 (Pub. L. 104-
155, approved July 3, 1996) authorizes HUD to guarantee loans made by 
financial institutions to certain nonprofit organizations to finance 
activities designed to remedy the damage and destruction to real and 
personal property caused by acts of arson or terrorism. This part 
establishes the general procedures and requirements that apply to HUD's 
guarantee of these loans.



Sec. 573.2  Definitions.

    The following definitions are only applicable to loan guarantees 
under this part, and are not criminal definitions.
    Act means ``The Church Arson Prevention Act of 1996'' (Pub. L. 104-
155, approved July 3, 1996).
    Arson means a fire or explosion causing damage to (or destruction 
of) real or personal property that a Qualified Certification Official 
determines, or reasonably believes, to be deliberately set.
    Borrower means an organization described in section 501(c)(3) of the 
Internal Revenue Code of 1986, as amended, whose property has been 
damaged or destroyed as a result of an act of arson or terrorism and 
that incurs a debt obligation to a financial institution for the purpose 
of carrying out activities eligible under his part.
    Financial Institution means a lender which may be a bank, trust 
company, savings and loan association, credit union, mortgage company, 
or other issuer regulated by the Federal Deposit Insurance Corporation, 
the Office of Thrift Supervision, the Credit Union Administration, or 
the U.S. Comptroller of the Currency. A Financial Institution may also 
be a Pension Fund.
    Guarantee means an obligation of the United States Government 
guaranteeing payment of the outstanding principal loan amount, in whole 
or in part, plus interest thereon, on a debt obligation of the Borrower 
to a Financial Institution upon failure of the Borrower to repay the 
debt.
    Guaranteed Loan Funds means funds received by the borrower from the 
Financial Institution to finance eligible activities under this part, 
the repayment of which is guaranteed by HUD.
    Loan Guarantee Agreement means an agreement between a Financial 
Institution and the Secretary detailing the rights, responsibilities, 
procedures, terms, and conditions under which a loan provided by a 
Financial Institution to a Borrower may be guaranteed under section 4 of 
the Act.
    Qualified Certification Official (QCO)--(1) For the purpose of 
certifying an act of arson. A State or local official authorized to 
investigate possible acts of arson. For the purposes of this definition, 
such an official is authorized to

[[Page 160]]

execute an Official Incident Report or its equivalent and may be an 
official or employee of such agencies as the local fire department, the 
local police department, or the State Fire Marshall Office or its 
equivalent. The term ``Qualified Certification Official'' also includes 
HUD, which will consult with the Bureau of Alcohol, Tobacco, and 
Firearms of the Department of the Treasury in making its determinations.
    (2) For the purpose of certifying an act of terrorism. The Secretary 
or his designee, in consultation with the Federal Bureau of 
Investigation, shall determine whether an act of violence is a terrorist 
act or is reasonably believed to be a terrorist act.
    Section 4 Guaranteed Loan means a HUD guaranteed loan made by a 
Financial Institution to a Borrower for the purpose of carrying out 
eligible activities to address damage or destruction caused by acts of 
arson or terrorism.
    Terrorism means an act of violence causing damage to (or destruction 
of) real or personal property that the Secretary or his designee, in 
consultation with the Federal Bureau of Investigation, determines to be, 
or reasonably believes to be, a terrorist act, as defined by applicable 
Federal law or guidelines.



Sec. 573.3  Eligible activities.

    Guaranteed Loan Funds may be used by a Borrower for the following 
activities when it is certified in accordance with Sec. 573.6(e) that 
the activity is necessary to address damage caused by an act or acts of 
arson or terrorism as certified in accordance with Sec. 573.6(f):
    (a) Acquisition of improved or unimproved real property in fee or 
under long term lease.
    (b) Acquisition and installation of personal property.
    (c) Rehabilitation of real property owner, acquired, or leased by 
the Borrower.
    (d) Construction, reconstruction, or replacement of real property 
improvement.
    (e) Clearance, demolition, and removal, including movement of 
structures to other sites, of buildings, fixtures and improvements on 
real property.
    (f) Site preparation, including construction, reconstruction, or 
installation of site improvements, utilities, or facilities, which is 
related to the activities described in paragraph (a), (c), or (d) of 
this section.
    (g) Architectural, engineering, and similar services necessary to 
develop plans in connection with activities financed under paragraph 
(a), (b), (c), or (d) of this section.
    (h) Acquisition, installation and restoration of security systems.
    (i) Loans for refinancing existing indebtedness secured by a 
property which has been or will be acquired, constructed, rehabilitated 
or reconstructed, if such financing is determined to be appropriate to 
achieve the objectives of the Act and this part.
    (j) Other necessary project costs such as insurance, bonding, legal 
fees, appraisals, surveys, relocation, closing costs, etc., paid or 
incurred by the Borrower in connection with the completion of the above 
activities.

[61 FR 47405, Sept. 6, 1996, as amended at 62 FR 24574, May 6, 1997]



Sec. 573.4  Loan term.

    The term of the loan to be guaranteed by HUD under this part may not 
exceed 20 years.



Sec. 573.5  Underwriting standards and availability of loan guarantee 
assistance.

    (a) HUD may, in its discretion, accept the underwriting standards of 
the Financial Institution making a loan to a Borrower.
    (b) HUD will not make the loan guarantee unless it determines that 
the guaranteed loan is an acceptable financial risk under HUD's 
generally applicable loan underwriting standards based on the following:
    (1) The Borrower's ability to pay debt service; and
    (2) The value of the collateral assigned or pledged as security for 
the repayment of the loan.
    (c) The provision of a loan guarantee to a Financial Institution and 
the amount of the guarantee do not depend in any way on the purpose, 
function, or identity of the organization to which the Financial 
Institution has made, or

[[Page 161]]

intends to make, a Section 4 Guaranteed Loan.
    (d) HUD may disapprove a request for loan guarantee assistance based 
on the availability of funding.
    (e) HUD may decline any Financial Institution's participation if its 
underwriting criteria are insufficient to make the guarantee an 
acceptable financial risk, or if the proposed interest rates or fees are 
unacceptable. HUD expects the proposed interest rates to take into 
account the value of the Federal guarantee.
    (f) HUD may limit the availability of Guaranteed Loan Funds to 
geographic areas having the greatest need, as determined by a needs 
analysis of the most current available date conducted by HUD.
    (g) Other requirements associated with the underwriting standards 
and guidelines shall be contained in the Loan Guarantee Agreement.



Sec. 573.6  Submission requirements.

    A Financial Institution seeking a Section 4 Guaranteed Loan must 
submit to HUD the following documentation:
    (a) A statement that the institution is a Financial Institution as 
defined at Sec. 573.2.
    (b) A statement that the Borrower is eligible as defined at 
Sec. 573.2.
    (c) A description of each eligible activity for which the loan is 
requested.
    (d) A statement of other available funds to be used to finance the 
eligible activities (e.g., insurance proceeds).
    (e) A certification by the Borrower that the activities to be 
assisted resulted from an act of arson or terrorism which is the subject 
of the certification described in paragraph (f) of this section.
    (f) A certification by a QCO that the damage or destruction to be 
remedied by the use of the Guaranteed Loan Funds resulted from an act of 
arson or terrorism.
    (g) The environmental documentation required by Sec. 573.8.
    (h) A narrative of the institution's underwriting standards used in 
reviewing the Borrower's loan request.
    (i) The interest rate on the loan and fees the lender intends to use 
in connection with the loan; and
    (j) The percentage of the loan for which a guarantee is requested.



Sec. 573.7  Loan guarantee agreement.

    (a) The rights and responsibilities with respect to the guaranteed 
loan shall be substantially described in an agreement entered into 
between the Financial Institution, as the lender, and the Secretary, as 
the guarantor, which agreement shall provide that:
    (1) The lender has submitted or will submit a request for loan 
guarantee assistance that is accompanied by the Borrower's request for a 
loan to carry out eligible activities described in Sec. 573.3;
    (2) The lender will require the Borrower to execute a promissory 
note promising to repay the guaranteed loan in accordance with the terms 
thereof;
    (3) The lender will require the Borrower to provide collateral 
security, to an extent and in a form, acceptable to HUD;
    (4) HUD reserves the right to limit loan guarantees to loans 
financing the replacement of damaged property with comparable new 
property;
    (5) The lender will follow certain claim procedures to be specified 
by HUD in connection with any defaults, including appropriate 
notification of default as required by HUD;
    (6) The lender will follow procedures for payment under the 
guarantee whereby the lender will be paid (up to the amount of 
guarantee) the amount owed to the lender less any amount recovered from 
the underlying collateral security for the loan; and
    (7) The lender will act as the fiscal agent for the loan, servicing 
the guaranteed loan, maintaining loan documents, and receiving the 
Borrower's payments of principal and interest. The Borrower and the 
lender may be required to execute a fiscal agency agreement.
    (b) In addition, the agreement shall contain other requirements, 
terms, and conditions required or approved by HUD.



Sec. 573.8  Environmental procedures and standards.

    The environmental review requirements at 24 CFR part 50 are 
applicable to this part.

[[Page 162]]

    (a) Environmental procedures. Before any lender's submission 
requesting a loan guarantee for the acquisition, rehabilitation, or 
construction of real property can be selected for a loan guarantee, HUD 
shall determine whether any environmental thresholds are exceeded in 
accordance with 24 CFR part 50, which implements the National 
Environmental Policy Act (NEPA) and the related Federal environmental 
laws and authorities listed under 24 CFR 50.4. To assist in complying 
with environmental requirements, Borrowers are encouraged to select 
sites that are free of environmental hazards and are to provide HUD with 
environmental data needed to make a determination of compliance. For 
successful Borrowers, the costs for preparing the environmental data are 
eligible as project costs.
    (1) If HUD determines that one or more of the thresholds are 
exceeded, HUD shall conduct a compliance review of the issue and, if 
appropriate, establish mitigating measures that the applicant shall 
carry out for the property.
    (2) The lender's submissions under Sec. 573.6 shall provide HUD 
with:
    (i) Documentation for environmental threshold review; and
    (ii) Any previously issued environmental reviews prepared by local, 
State, or other Federal agencies for the proposed property.
    (3) In providing the above information, the Borrower is encouraged 
to contact the local community development agency to obtain any 
previously issued environmental reviews for the proposed property as 
well as for other relevant information that can be used in the applicant 
documentation for the environmental threshold review.
    (4) HUD reserves the right to disqualify any request where one or 
more environmental thresholds are exceeded if HUD determines that the 
compliance review cannot be satisfactorily completed.
    (5) If Guaranteed Loan Funds are requested for acquisition, 
rehabilitation, or construction, Borrowers and Financial Institutions 
are prohibited from committing or expending State, local, or other funds 
to undertake property acquisition, rehabilitation or construction under 
this part until HUD issues a letter of commitment notifying the lender 
of HUD approval of the loan guarantee.
    (b) Environmental thresholds. HUD shall determine whether a NEPA 
environmental assessment is required. Also, HUD shall determine whether 
the proposed property triggers thresholds for the applicable Federal 
environmental laws and authorities listed under 24 CFR 50.4 as follows:
    (1) For minor rehabilitation of a building and acquisition of any 
property, Federal environmental laws and authorities may apply when the 
property is:
    (i) Located within designated coastal barrier resources;
    (ii) Contaminated by toxic chemicals or radioactive materials;
    (iii) Located within a floodplain;
    (iv) A building for which flood insurance protection is required;
    (v) Located within a runway clear zone at a civil airport or within 
a clear zone or accident potential zone at a military airfield; or
    (vi) Listed on, or eligible for listing on, the National Register of 
Historic Places; located within, or adjacent to, an historic district, 
or is a property whose area of potential effects includes a historic 
district or property.
    (2) For major rehabilitation of a building or for new construction 
or rebuilding, and environmental assessment under NEPA is required and, 
in addition to paragraph (b)(1)(i) through (vi) of this section, other 
Federal environmental laws and authorities may apply when the property:
    (i) Affects coastal zone management;
    (ii) Is located near hazardous industrial operations handling fuels 
or chemicals of an explosive or flammable nature;
    (iii) Affects a sole source aquifer;
    (iv) Affects endangered species;
    (v) Is located within a designated wetland; or
    (vi) Is located in a high noise area.
    (c) Qualified data sources. The environmental threshold information 
provided by applicants mut be from qualified data sources. A qualified 
data source means any Federal, State, or local agency with expertise or 
experience in environmental protection (e.g.,

[[Page 163]]

the local community development agency; the local planning agency; the 
State environmental protection agency; or the State Historic 
Preservation Officer) or any other source qualified to provide reliable 
information on the particular property.
    (d) Definition. Minor rehabilitation means proposed fixing and 
repairs:
    (1) Whose estimated cost is less than 75 percent of the estimated 
cost of replacement after completion;
    (2) That does not involve changes in land use from residential to 
nonresidential, or from nonresidential to residential; and
    (3) In the case of residential properties, that does not increase 
density more than 20 percent.
    (e) Project consultants. In achieving compliance with these 
procedures, Borrower's architectural and engineering consultants shall 
consider these environmental factors and provide information in their 
plan narratives as to how their construction plans conform with the 
above environmental factors. To facilitate HUD's compliance with part 
50, the Borrower is required to submit the consultant's information and 
plan narrative discussing the pertinent environmental factors under this 
section.



Sec. 573.9  Other requirements.

    (a) Nondiscrimination and equal opportunity. The nondiscrimination 
and equal opportunity requirements described in 24 CFR part 5, subpart A 
apply to this part.
    (b) 2 CFR part 200. The provisions of 2 CFR part 200 apply to 
guaranteed loans under this part.
    (c) Lead-based paint. Housing assisted under this part is subject to 
the lead-based paint requirements described in part 35, subparts A, B, 
E, G, and R of this title.
    (d) Labor standards--(1) Davis-Bacon. All laborers and mechanics 
employed by contractors or subcontractors in the performance of 
construction work financed in whole or in part with Guaranteed Loan 
Funds under this part shall be paid wages at rates not less than those 
prevailing on similar construction in the locality as determined by the 
Secretary of Labor in accordance with the Davis-Bacon Act, as amended 
(40 U.S.C. 276a-276a-5). This paragraph shall apply to the 
rehabilitation of residential property only if such property contains 
not less than 8 units.
    (2) Volunteers. The provisions of paragraph (d)(1) of this section 
shall not apply to volunteers under the conditions set forth in 24 CFR 
part 70. In applying part 70, loan guarantees under this part shall be 
treated as a program for which there is a statutory exemption for 
volunteers.
    (3) Labor standards. Any contract, subcontract, or building loan 
agreement executed for a project subject to Davis-Bacon wage rates under 
paragraph (d)(1) of this section shall comply with all labor standards 
and provisions of 29 CFR parts 1, 3 and 5 that would be applicable to a 
loan guarantee program to which Davis-Bacon wage rates are made 
applicable by statute.

[61 FR 47405, Sept. 6, 1996, as amended at 64 FR 50226, Sept. 15, 1999; 
80 FR 75938, Dec. 7, 2015]



Sec. 573.10  Fees for guaranteed loans.

    (a) No fees will be assessed by HUD for its guaranty of a loan under 
this part.
    (b) The lender may assess the Borrower loan origination fees or 
other charges provided that such fees and charges are those charged by 
the lender to its other customers for similar transactions, and are no 
higher than those charged by the lender for similar transactions.



Sec. 573.11  Record access and recordkeeping.

    Records pertaining to the loans made by the Financial Institution 
shall be held for the life of the loan. A lender with a Section 4 
Guaranteed Loan shall allow HUD, the Comptroller General of the United 
States, and their authorized representatives access from time to time to 
any documents, papers or files which are pertinent to the guaranteed 
loan, and to inspect and make copies of such records which relate to any 
Section 4 Loan. Any inspection will be made during the lender's regular 
business hours or any other mutually convenient time.

[[Page 164]]



PART 574_HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS--Table of Contents



                            Subpart A_General

Sec.
574.3  Definitions.

                     Subpart B_Formula Entitlements

574.100  Eligible applicants.
574.110  Overview of formula allocations.
574.120  Responsibility of applicant to serve EMSA.
574.130  Formula allocations.
574.190  Reallocation of grant amounts.

                      Subpart C_Competitive Grants

574.200  Amounts available for competitive grants.
574.210  Eligible applicants.
574.240  Application requirements.
574.260  Amendments.

                      Subpart D_Uses of Grant Funds

574.300  Eligible activities.
574.310  General standards for eligible housing activities.
574.320  Additional standards for rental assistance.
574.330  Additional standards for short-term supported housing.
574.340  Additional standards for community residences.
574.350  Additional standards for broadband infrastructure.

   Subpart E_Special Responsibilities of Grantees and Project Sponsors

574.400  Prohibition of substitution of funds.
574.410  Capacity.
574.420  Cooperation.
574.430  Fee prohibitions.
574.440  Confidentiality.
574.450  Financial records.
574.460  Remaining participants following bifurcation of a lease or 
          eviction as a result of domestic violence, dating violence, 
          sexual assault, or stalking.

                     Subpart F_Grant Administration

574.500  Responsibility for grant administration.
574.510  Environmental procedures and standards.
574.520  Performance reports.
574.530  Recordkeeping.
574.540  Deobligation of funds.

                  Subpart G_Other Federal Requirements

574.600  Cross-reference.
574.603  Nondiscrimination and equal opportunity.
574.604  Protections for victims of domestic violence, dating violence, 
          sexual assault, and stalking.
574.605  Applicability of uniform administrative requirements, cost 
          principles, and audit requirements for Federal awards.
574.625  Conflict of interest.
574.630  Displacement, relocation and real property acquisition.
574.635  Lead-based paint.
574.640  Flood insurance protection.
574.645  Coastal barriers.
574.650  Audit.
574.655  Wage rates.
574.660  Housing counseling.

    Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and 5301-
5320.

    Source: 57 FR 61740, Dec. 28, 1992, unless otherwise noted.



                            Subpart A_General



Sec. 574.3  Definitions.

    The terms Grantee and Secretary are defined in 24 CFR part 5.
    Acquired immunodeficiency syndrome (AIDS) or related diseases means 
the disease of acquired immunodeficiency syndrome or any conditions 
arising from the etiologic agent for acquired immunodeficiency syndrome, 
including infection with the human immunodeficiency virus (HIV).
    Administrative costs mean costs for general management, oversight, 
coordination, evaluation, and reporting on eligible activities. Such 
costs do not include costs directly related to carrying out eligible 
activities, since those costs are eligible as part of the activity 
delivery costs of such activities.
    Applicant means a State or city applying for a formula allocation as 
described under Sec. 574.100 or a State, unit of general local 
government, or a nonprofit organization applying for a competitive grant 
as described under Sec. 574.210.
    City has the meaning given it in section 102(a) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302).
    Eligible Metropolitan Statistical Area (EMSA) means a metropolitan 
statistical area that has a population of more than 500,000 and has more 
than 1,500 cumulative cases of AIDS.
    Eligible person means a person with acquired immunodeficiency 
syndrome

[[Page 165]]

or related diseases who is a low-income individual, as defined in this 
section, and the person's family. A person with AIDS or related diseases 
or a family member regardless of income is eligible to receive housing 
information services, as described in Sec. 574.300(b)(1). Any person 
living in proximity to a community residence is eligible to participate 
in that residence's community outreach and educational activities 
regarding AIDS or related diseases, as provided in Sec. 574.300(b)(9).
    Eligible State means a State that has:
    (1) More than 1,500 cumulative cases of AIDS in those areas of the 
State outside of eligible metropolitan statistical areas that are 
eligible to be funded through a qualifying city; and
    (2) A consolidated plan prepared, submitted, and approved in 
accordance with 24 CFR part 91 that covers the assistance to be provided 
under this part. (A State may carry out activities anywhere in the 
State, including within an EMSA.)
    Family is defined in 24 CFR 5.403 and includes one or more eligible 
persons living with another person or persons, regardless of actual or 
perceived sexual orientation, gender identity, or marital status, who 
are determined to be important to the eligible person or person's care 
or well-being, and the surviving member or members of any family 
described in this definition who were living in a unit assisted under 
the HOPWA program with the person with AIDS at the time of his or her 
death.
    Low-income individual has the meaning given it in section 853(3) of 
the AIDS Housing Opportunity Act (42 U.S.C. 12902).
    Metropolitan statistical area has the meaning given it in section 
853(5) of the AIDS Housing Opportunity Act (42.U.S.C. 12902).
    Nonprofit organization means any nonprofit organization (including a 
State or locally chartered, nonprofit organization) that:
    (1) Is organized under State or local laws;
    (2) Has no part of its net earnings inuring to the benefit of any 
member, founder, contributor, or individual;
    (3) Has a functioning accounting system that is operated in 
accordance with generally accepted accounting principles, or has 
designated an entity that will maintain such an accounting system; and
    (4) Has among its purposes significant activities related to 
providing services or housing to persons with acquired immunodeficiency 
syndrome or related diseases.
    Non-substantial rehabilitation means rehabilitation that involves 
costs that are less than or equal to 75 percent of the value of the 
building after rehabilitation.
    Population means total resident population based on data compiled by 
the U.S. Census and referable to the same point in time.
    Project sponsor means any nonprofit organization or governmental 
housing agency that receives funds under a contract with the grantee to 
carry out eligible activities under this part. The selection of project 
sponsors is not subject to the procurement requirements of 2 CFR part 
200, subpart D.
    Qualifying city means a city that is the most populous unit of 
general local government in an eligible metropolitan statistical area 
(EMSA) and that has a consolidated plan prepared, submitted, and 
approved in accordance with 24 CFR part 91 that covers the assistance to 
be provided under this part.
    Rehabilitation means the improvement or repair of an existing 
structure, or an addition to an existing structure that does not 
increase the floor area by more than 100 percent.
    State has the meaning given it in section 853(9) of the AIDS Housing 
Opportunity Act (42 U.S.C. 12902).
    Substantial rehabilitation means rehabilitation that involves costs 
in excess of 75 percent of the value of the building after 
rehabilitation.
    Unit of general local government means any city, town, township, 
parish, county, village, or other general purpose political subdivision 
of a State; Guam, the Northern Mariana Islands, the Virgin Islands, 
American Samoa, the Federated States of Micronesia and Palau, the 
Marshall Islands, or a general purpose political subdivision thereof; 
and any agency or instrumentality thereof that is established pursuant 
to legislation and designated by the chief executive to act on behalf of 
the jurisdiction

[[Page 166]]

with regard to provisions of the National Affordable Housing Act.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994; 
60 FR 1917, Jan. 5, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 7963, Feb. 29, 
1996; 77 FR 5675, Feb. 3, 2012; 80 FR 75938, Dec. 7, 2015]



                     Subpart B_Formula Entitlements



Sec. 574.100  Eligible applicants.

    (a) Eligible States and qualifying cities, as defined in Sec. 574.3, 
qualify for formula allocations under HOPWA.
    (b) HUD will notify eligible States and qualifying cities of their 
formula eligibility and allocation amounts and EMSA service areas 
annually.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994; 
60 FR 1917, Jan. 5, 1995]



Sec. 574.110  Overview of formula allocations.

    The formula grants are awarded upon submission and approval of a 
consolidated plan, pursuant to 24 CFR part 91, that covers the 
assistance to be provided under this part. Certain states and cities 
that are the most populous unit of general local government in eligible 
metropolitan statistical areas will receive formula allocations based on 
their State or metropolitan population and proportionate number of cases 
of persons with AIDS. They will receive funds under this part (providing 
they comply with 24 CFR part 91) for eligible activities that address 
the housing needs of persons with AIDS or related diseases and their 
families (see Sec. 574.130(b)).

[61 FR 7963, Feb. 29, 1996]



Sec. 574.120  Responsibility of applicant to serve EMSA.

    The EMSA's applicant shall serve eligible persons who live anywhere 
within the EMSA, except that housing assistance shall be provided only 
in localities within the EMSA that have a consolidated plan prepared, 
submitted, and approved in accordance with 24 CFR part 91 that covers 
the assistance to be provided under this part. In allocating grant 
amounts among eligible activities, the EMSA's applicant shall address 
needs of eligible persons who reside within the metropolitan statistical 
area, including those not within the jurisdiction of the applicant.

[60 FR 1917, Jan. 5, 1995]



Sec. 574.130  Formula allocations.

    (a) Data sources. HUD will allocate funds based on the number of 
cases of acquired immunodeficiency syndrome reported to and confirmed by 
the Director of the Centers for Disease Control, and on population data 
provided by the U.S. Census. The number of cases of acquired 
immunodeficiency syndrome used for this purpose shall be the number 
reported as of March 31 of the fiscal year immediately preceding the 
fiscal year for which the amounts are appropriated and allocated.
    (b) Distribution of appropriated funds for entitlement awards. (1) 
Seventy-five percent of the funds allocated under the formula is 
distributed to qualifying cities and eligible States, as described in 
Sec. 574.100, based on each metropolitan statistical area's or State's 
proportionate share of the cumulative number of AIDS cases in all 
eligible metropolitan statistical areas and eligible States.
    (2) The remaining twenty-five percent is allocated among qualifying 
cities, but not States, where the per capita incidence of AIDS for the 
year, April 1 through March 31, preceding the fiscal year of the 
appropriation is higher than the average for all metropolitan 
statistical areas with more than 500,000 population. Each qualifying 
city's allocation reflects its EMSA's proportionate share of the high 
incidence factor among EMSA's with higher than average per capita 
incidence of AIDS. The high incidence factor is computed by multiplying 
the population of the metropolitan statistical area by the difference 
between its twelve-month-per-capita-incidence rate and the average rate 
for all metropolitan statistical areas with more than 500,000 
population. The EMSA's proportionate share is determined by dividing its 
high incidence factor by the sum of the high incidence factors for all 
EMSA's with higher than average per capita incidence of AIDS.
    (c) Minimum grant. No grant awarded under paragraph (b) of this 
section shall be less than $200,000. Therefore, if

[[Page 167]]

the calculations under paragraph (b) of this section would result in any 
eligible metropolitan statistical area or eligible State receiving less 
than $200,000, the amount allocated to that entity is increased to 
$200,000 and allocations to entities in excess of $200,000 are 
proportionately reduced by the amount of the increase.



Sec. 574.190  Reallocation of grant amounts.

    If an eligible State or qualifying city does not submit a 
consolidated plan in a timely fashion, in accordance with 24 CFR part 
91, that provides for use of its allocation of funding under this part, 
the funds allocated to that jurisdiction will be added to the funds 
available for formula allocations to other jurisdictions in the current 
fiscal year. Any formula funds that become available as a result of 
deobligations or the imposition of sanctions as provided for in 
Sec. 574.540 will be added to the funds available for formula 
allocations in the next fiscal year.

[57 FR 61740, Dec. 28, 1992, as amended at 60 FR 1918, Jan. 5, 1995]



                      Subpart C_Competitive Grants



Sec. 574.200  Amounts available for competitive grants.

    (a) The Department will set aside 10 percent of the amounts 
appropriated under this program to fund on a competitive basis:
    (1) Special projects of national significance; and
    (2) Other projects submitted by States and localities that do not 
qualify for formula grants.
    (b) Any competitively awarded funds that become available as a 
result of deobligations or the imposition of sanctions, as provided in 
Sec. 574.540, will be added to the funds available for competitive 
grants in the next fiscal year.
    (c) The competitive grants are awarded based on applications, as 
described in subpart C of this part, submitted in response to a Notice 
of Funding Availability published in the Federal Register. All States 
and units of general local government and nonprofit organizations are 
eligible to apply for competitive grants to fund projects of national 
significance. Only those States and units of general local government 
that do not qualify for formula allocations are eligible to apply for 
competitive grants to fund other projects.
    (d) If HUD makes a procedural error in a funding competition that, 
when corrected, would warrant funding of an otherwise eligible 
application, HUD will select that application for potential funding when 
sufficient funds become available.

[57 FR 61740, Dec. 28, 1992, as amended at 61 FR 7963, Feb. 29, 1996]



Sec. 574.210  Eligible applicants.

    (a) All States, units of general local government, and nonprofit 
organizations, may apply for grants for projects of national 
significance.
    (b) Only those States and units of general local government that do 
not qualify for formula grants, as described in Sec. 574.100; may apply 
for grants for other projects as described in Sec. 574.200(a)(2).
    (c) Except for grants for projects of national significance, 
nonprofit organizations are not eligible to apply directly to HUD for a 
grant but may receive funding as a project sponsor under contract with a 
grantee.



Sec. 574.240  Application requirements.

    Applications must comply with the provisions of the Department's 
Notice of Funding Availability (NOFA) for the fiscal year published in 
the Federal Register in accordance with 24 CFR part 12. The rating 
criteria, including the point value for each, are described in the NOFA, 
including criteria determined by the Secretary.

[61 FR 7963, Feb. 29, 1996]



Sec. 574.260  Amendments.

    (a) After an application has been selected for funding, any change 
that will significantly alter the scope, location, service area, or 
objectives of an activity or the number of eligible persons served must 
be justified to HUD and approved by HUD. Whenever any other amendment to 
the application is made, the grantee must provide a copy to HUD.
    (b) Each amendment request must contain a description of the revised

[[Page 168]]

proposed use of funds. Funds may not be expended for the revised 
proposed use of funds until:
    (1) HUD accepts the revised proposed use; and
    (2) For amendments to acquire, rehabilitate, convert, lease, repair 
or construct properties to provide housing, an environmental review of 
the revised proposed use of funds has been completed in accordance with 
Sec. 574.510.

(Approved by the Office of Management and Budget under control number 
2506-0133)



                      Subpart D_Uses of Grant Funds



Sec. 574.300  Eligible activities.

    (a) General. Subject to applicable requirements described in 
Secs. 574.310, 574.320, 574.330, and 574.340, HOPWA funds may be used to 
assist all forms of housing designed to prevent homelessness including 
emergency housing, shared housing arrangements, apartments, single room 
occupancy (SRO) dwellings, and community residences. Appropriate 
supportive services, as required by Sec. 574.310(a), must be provided as 
part of any HOPWA assisted housing, but HOPWA funds may also be used to 
provide services independently of any housing activity.
    (b) Activities. The following activities may be carried out with 
HOPWA funds:
    (1) Housing information services including, but not limited to, 
counseling, information, and referral services to assist an eligible 
person to locate, acquire, finance, and maintain housing. This may also 
include fair housing guidance for eligible persons who may encounter 
discrimination on the basis of race, color, religion, sex, age, national 
origin, familial status, or handicap. Housing counseling, as defined in 
Sec. 5.100, that is funded with or provided in connection with HOPWA 
funds must be carried out in accordance with Sec. 5.111. When grantees 
provide housing services to eligible persons (including persons 
undergoing relocation) that are incidental to a larger set of holistic 
case management services, these services do not meet the definition of 
Housing counseling, as defined in Sec. 5.100, and therefore are not 
required to be carried out in accordance with the certification 
requirements of Sec. 5.111;
    (2) Resource identification to establish, coordinate and develop 
housing assistance resources for eligible persons (including conducting 
preliminary research and making expenditures necessary to determine the 
feasibility of specific housing-related initiatives);
    (3) Acquisition, rehabilitation, conversion, lease, and repair of 
facilities to provide housing and services;
    (4) New construction (for single room occupancy (SRO) dwellings and 
community residences only).
    (5) Project- or tenant-based rental assistance, including assistance 
for shared housing arrangements;
    (6) Short-term rent, mortgage, and utility payments to prevent the 
homelessness of the tenant or mortgagor of a dwelling;
    (7) Supportive services including, but not limited to, health, 
mental health, assessment, permanent housing placement, drug and alcohol 
abuse treatment and counseling, day care, personal assistance, 
nutritional services, intensive care when required, and assistance in 
gaining access to local, State, and Federal government benefits and 
services, except that health services may only be provided to 
individuals with acquired immunodeficiency syndrome or related diseases 
and not to family members of these individuals;
    (8) Operating costs for housing including maintenance, security, 
operation, insurance, utilities, furnishings, equipment, supplies, and 
other incidental costs;
    (9) Technical assistance in establishing and operating a community 
residence, including planning and other pre-development or pre-
construction expenses and including, but not limited to, costs relating 
to community outreach and educational activities regarding AIDS or 
related diseases for persons residing in proximity to the community 
residence;
    (10) Administrative expenses:
    (i) Each grantee may use not more than 3 percent of the grant amount 
for its own administrative costs relating to administering grant amounts 
and allocating such amounts to project sponsors; and
    (ii) Each project sponsor receiving amounts from grants made under 
this

[[Page 169]]

program may use not more than 7 percent of the amounts received for 
administrative costs.
    (11) For competitive grants only, any other activity proposed by the 
applicant and approved by HUD.
    (c) Equal participation of faith-based organizations. The HUD 
program requirements in Sec. 5.109 of this title apply to the HOPWA 
program, including the requirements regarding disposition and change in 
use of real property by a faith-based organization.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994; 
68 FR 56405, Sept. 30, 2003; 80 FR 75938, Dec. 7, 2015; 81 19418, Apr. 
4, 2016; 81 FR 90659, Dec. 14, 2016]



Sec. 574.310  General standards for eligible housing activities.

    All grantees using grant funds to provide housing must adhere to the 
following standards:
    (a)(1) General. The grantee shall ensure that qualified service 
providers in the area make available appropriate supportive services to 
the individuals assisted with housing under this subpart. Supportive 
services are described in Sec. 574.300(b)(7). For any individual with 
acquired immunodeficiency syndrome or a related disease who requires 
more intensive care than can be provided in housing assisted under this 
subpart, the grantee shall provide for locating a care provider who can 
appropriately care for the individual and for referring the individual 
to the care provider.
    (2) Payments. The grantee shall ensure that grant funds will not be 
used to make payments for health services for any item or service to the 
extent that payment has been made, or can reasonably be expected to be 
made, with respect to that item or service:
    (i) Under any State compensation program, under an insurance policy, 
or under any Federal or State health benefits program; or
    (ii) By an entity that provides health services on a prepaid basis.
    (b) Housing quality standards. All housing assisted under 
Sec. 574.300(b) (3), (4), (5), and (8) must meet the applicable housing 
quality standards outlined below.
    (1) State and local requirements. Each recipient of assistance under 
this part must provide safe and sanitary housing that is in compliance 
with all applicable State and local housing codes, licensing 
requirements, and any other requirements in the jurisdiction in which 
the housing is located regarding the condition of the structure and the 
operation of the housing.
    (2) Habitability standards. Except for such variations as are 
proposed by the locality and approved by HUD, recipients must meet the 
following requirements:
    (i) Structure and materials. The structures must be structurally 
sound so as not to pose any threat to the health and safety of the 
occupants and so as to protect the residents from hazards.
    (ii) Access. The housing must be accessible and capable of being 
utilized without unauthorized use of other private properties. 
Structures must provide alternate means of egress in case of fire.
    (iii) Space and security. Each resident must be afforded adequate 
space and security for themselves and their belongings. An acceptable 
place to sleep must be provided for each resident.
    (iv) Interior air quality. Every room or space must be provided with 
natural or mechanical ventilation. Structures must be free of pollutants 
in the air at levels that threaten the health of residents.
    (v) Water supply. The water supply must be free from contamination 
at levels that threaten the health of individuals.
    (vi) Thermal environment. The housing must have adequate heating 
and/or cooling facilities in proper operating condition.
    (vii) Illumination and electricity. The housing must have adequate 
natural or artificial illumination to permit normal indoor activities 
and to support the health and safety of residents. Sufficient electrical 
sources must be provided to permit use of essential electrical appliance 
while assuring safety from fire.
    (viii) Food preparation and refuse disposal. All food preparation 
areas must contain suitable space and equipment to store, prepare, and 
serve food in a sanitary manner.

[[Page 170]]

    (ix) Sanitary condition. The housing and any equipment must be 
maintained in sanitary condition.
    (c) Minimum use period for structures. (1) Any building or structure 
assisted with amounts under this part must be maintained as a facility 
to provide housing or assistance for individuals with acquired 
immunodeficiency syndrome or related diseases:
    (i) For a period of not less than 10 years, in the case of 
assistance provided under an activity eligible under Sec. 574.300(b) (3) 
and (4) involving new construction, substantial rehabilitation or 
acquisition of a building or structure; or
    (ii) For a period of not less than 3 years in the cases involving 
non-substantial rehabilitation or repair of a building or structure.
    (2) Waiver of minimum use period. HUD may waive the minimum use 
period of a building or structure as stipulated in paragraph (c)(1) of 
this section if the grantee can demonstrate, to the satisfaction of HUD, 
that:
    (i) The assisted structure is no longer needed to provide supported 
housing or assistance, or the continued operation of the structure for 
such purposes is no longer feasible; and
    (ii) The structure will be used to benefit individuals or families 
whose incomes do not exceed 80 percent of the median income for the 
area, as determined by HUD with adjustments for smaller and larger 
families, if the Secretary finds that such variations are necessary 
because of construction costs or unusually high or low family incomes.
    (d) Resident rent payment. Except for persons in short-term 
supported housing, each person receiving rental assistance under this 
program or residing in any rental housing assisted under this program 
must pay as rent, including utilities, an amount which is the higher of:
    (1) 30 percent of the family's monthly adjusted income (adjustment 
factors include the age of the individual, medical expenses, size of 
family and child care expenses and are described in detail in 24 CFR 
5.609). The calculation of the family's monthly adjusted income must 
include the expense deductions provided in 24 CFR 5.611(a), and for 
eligible persons, the calculation of monthly adjusted income also must 
include the disallowance of earned income as provided in 24 CFR 5.617, 
if applicable;
    (2) 10 percent of the family's monthly gross income; or
    (3) If the family is receiving payments for welfare assistance from 
a public agency and a part of the payments, adjusted in accordance with 
the family's actual housing costs, is specifically designated by the 
agency to meet the family's housing costs, the portion of the payment 
that is designated for housing costs.
    (e) Termination of assistance--(1) Surviving family members. With 
respect to the surviving member or members of a family who were living 
in a unit assisted under the HOPWA program with the person with AIDS at 
the time of his or her death, housing assistance and supportive services 
under the HOPWA program shall continue for a grace period following the 
death of the person with AIDS. The grantee or project sponsor shall 
establish a reasonable grace period for continued participation by a 
surviving family member, but that period may not exceed one year from 
the death of the family member with AIDS. The grantee or project sponsor 
shall notify the family of the duration of their grace period and may 
assist the family with information on other available housing programs 
and with moving expenses.
    (2) Violation of requirements-- (i) Basis. Assistance to 
participants who reside in housing programs assisted under this part may 
be terminated if the participant violates program requirements or 
conditions of occupancy, subject to the VAWA protections in 24 CFR 
5.2005(b) and 24 CFR 5.2005(c). Grantees must ensure that supportive 
services are provided, so that a participant's assistance is terminated 
only in the most severe cases.
    (ii) Procedure. In terminating assistance to any program participant 
for violation of requirements, grantees must provide a formal process 
that recognizes the rights of individuals receiving assistance to due 
process of law. This process at minimum, must consist of:

[[Page 171]]

    (A) Serving the participant with a written notice containing a clear 
statement of the reasons for termination;
    (B) Permitting the participant to have a review of the decision, in 
which the participant is given the opportunity to confront opposing 
witnesses, present written objections, and be represented by their own 
counsel, before a person other than the person (or a subordinate of that 
person) who made or approved the termination decision; and
    (C) Providing prompt written notification of the final decision to 
the participant.

(Paragraph (c) approved by the Office of Management and Budget under 
control number 2506-0133)

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994; 
61 FR 7963, Feb. 29, 1996; 66 FR 6225, Jan. 19, 2001; 81 FR 80806, Nov. 
16, 2016]



Sec. 574.320  Additional standards for rental assistance.

    (a) If grant funds are used to provide rental assistance, the 
following additional standards apply:
    (1) Maximum subsidy. The amount of grant funds used to pay monthly 
assistance for an eligible person may not exceed the difference between:
    (i) The lower of the rent standard or reasonable rent for the unit; 
and
    (ii) The resident's rent payment calculated under Sec. 574.310(d).
    (2) Rent standard. The rent standard shall be established by the 
grantee and shall be no more than the published section 8 fair market 
rent (FMR) or the HUD-approved community-wide exception rent for the 
unit size. However, on a unit by unit basis, the grantee may increase 
that amount by up to 10 percent for up to 20 percent of the units 
assisted.
    (3) Rent reasonableness. The rent charged for a unit must be 
reasonable in relation to rents currently being charged for comparable 
units in the private unassisted market and must not be in excess of 
rents currently being charged by the owner for comparable unassisted 
units.
    (b) With respect to shared housing arrangements, the rent charged 
for an assisted family or individual shall be in relation to the size of 
the private space for that assisted family or individual in comparison 
to other private space in the shared unit, excluding common space. An 
assisted family or individual may be assigned a pro rata portion based 
on the ratio derived by dividing the number of bedrooms in their private 
space by the number of bedrooms in the unit. Participation in shared 
housing arrangements shall be voluntary.

[57 FR 61740, Dec. 28, 1992, as amended at 61 FR 7963, Feb. 29, 1996]



Sec. 574.330  Additional standards for short-term supported housing.

    Short-term supported housing includes facilities to provide 
temporary shelter to eligible individuals as well as rent, mortgage, and 
utilities payments to enable eligible individuals to remain in their own 
dwellings. If grant funds are used to provide such short-term supported 
housing assistance, the following additional standards apply:
    (a) Time limits. (1) A short-term supported housing facility may not 
provide residence to any individual for more than 60 days during any six 
month period. Rent, mortgage, and utilities payments to prevent the 
homelessness of the tenant or mortgagor of a dwelling may not be 
provided to such an individual for these costs accruing over a period of 
more than 21 weeks in any 52 week period. These limitations do not apply 
to rental assistance provided under Sec. 574.300(b)(5).
    (2) Waiver of time limitations. HUD may waive, as it determines 
appropriate, the limitations of paragraph (a)(1) and will favorably 
consider a waiver based on the good faith effort of a project sponsor to 
provide permanent housing under subsection (c).
    (b) Residency limitations--(1) Residency. A short-term supported 
facility may not provide shelter or housing at any single time for more 
than 50 families or individuals;
    (2) Waiver of residency limitations. HUD may waive, as it determines 
appropriate, the limitations of paragraph (b)(1) of this section.
    (c) Placement. A short-term supported housing facility assisted 
under this part must, to the maximum extent practicable, provide each 
individual living in such housing the opportunity

[[Page 172]]

for placement in permanent housing or in a living environment 
appropriate to his or her health and social needs.
    (d) Assistance to continue independent living. In addition to the 
supportive services provided when an individual is relocated to a short-
term supported housing facility, supportive services may be provided to 
individuals when they remain in their residence because the residence is 
appropriate to the needs of the individual. In the latter case, a rent, 
mortgage and utilities payments program assisted under this part shall 
provide, when reasonable, supportive services specifically designed to 
maintain the individual in such residence.
    (e) Case management services. A program assisted under this section 
shall provide each assisted individual with an opportunity, if eligible, 
to receive case management services from the appropriate social service 
agencies.

(Paragraph (b) approved by the Office of Management and Budget under 
control number 2506-0133)

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994]



Sec. 574.340  Additional standards for community residences.

    (a) A community residence is a multiunit residence designed for 
eligible persons to provide a lower cost residential alternative to 
institutional care; to prevent or delay the need for such care; to 
provide a permanent or transitional residential setting with appropriate 
services to enhance the quality of life for those who are unable to live 
independently; and to enable such persons to participate as fully as 
possible in community life.
    (b) If grant funds are used to provide a community residence, except 
for planning and other expenses preliminary to construction or other 
physical improvement for a community residence, the grantee must, prior 
to the expenditure of such funds, obtain and keep on file the following 
certifications:
    (1) A services agreement. (i) A certification that the grantee will 
itself provide services as required by Sec. 574.310(a) to eligible 
persons assisted by the community residence; or
    (ii) A certification that the grantee has entered into a written 
agreement with a project sponsor or contracted service provider to 
provide services as required by Sec. 574.310(a) to eligible persons 
assisted by the community residence;
    (2) The adequacy of funding. (i) A certification that the grantee 
has acquired sufficient funding for these services; or
    (ii) A certification that the grantee has on file an analysis of the 
service level needed for each community residence, a statement of which 
grantee agency, project sponsor, or service provider will provide the 
needed services, and a statement of how the services will be funded; and
    (3) Capability. (i) A certification that the grantee is qualified to 
provide the services; or
    (ii) A certification that the project sponsor or the service 
provider is qualified to provide the services.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994]



Sec. 574.350  Additional standards for broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 574.3, of a building with more than 
4 rental units, for which HOPWA funds are first obligated by the grantee 
or project sponsor on or after January 19, 2017 must include 
installation of broadband infrastructure, as this term is defined in 24 
CFR 5.100, except where the grantee or project sponsor determines and, 
in accordance with Sec. 574.530, documents the determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92637, Dec. 20, 2016]

[[Page 173]]



   Subpart E_Special Responsibilities of Grantees and Project Sponsors



Sec. 574.400  Prohibition of substitution of funds.

    Amounts received from grants under this part may not be used to 
replace other amounts made available or designated by State or local 
governments through appropriations for use for the purposes of this 
part.



Sec. 574.410  Capacity.

    The grantee shall ensure that any project sponsor with which the 
grantee contracts to carry out an activity under this part has the 
capacity and capability to effectively administer the activity.



Sec. 574.420  Cooperation.

    (a) The grantee shall agree, and shall ensure that each project 
sponsor agrees, to cooperate and coordinate in providing assistance 
under this part with the agencies of the relevant State and local 
governments responsible for services in the area served by the grantee 
for eligible persons and other public and private organizations and 
agencies providing services for such eligible persons.
    (b) A grantee that is a State shall obtain the approval of the unit 
of general local government in which a project is to be located before 
entering into a contract with a project sponsor to carry out an activity 
authorized under this part.
    (c) A grantee that is a city receiving a formula allocation for an 
EMSA shall coordinate with other units of general local government 
located within the metropolitan statistical area to address needs within 
that area.



Sec. 574.430  Fee prohibitions.

    The grantee shall agree, and shall ensure that each project sponsor 
agrees, that no fee, except rent, will be charged of any eligible person 
for any housing or services provided with amounts from a grant under 
this part.



Sec. 574.440  Confidentiality.

    The grantee shall agree, and shall ensure that each project sponsor 
agrees, to ensure the confidentiality of the name of any individual 
assisted under this part and any other information regarding individuals 
receiving assistance.



Sec. 574.450  Financial records.

    The grantee shall agree, and shall ensure that each project sponsor 
agrees, to maintain and make available to HUD for inspection financial 
records sufficient, in HUD's determination, to ensure proper accounting 
and disbursing of amounts received from a grant under this part.



Sec. 574.460  Remaining participants following bifurcation of a lease
or eviction as a result of domestic violence, dating violence, sexual 
assault, or stalking.

    When a covered housing provider exercises the option to bifurcate a 
lease, as provided in 24 CFR 5.2009(a), in order to evict, remove, 
terminate occupancy rights, or terminate assistance to a person with 
AIDS or related diseases that receives rental assistance or resides in 
rental housing assisted under the HOPWA program for engaging in criminal 
activity directly relating to domestic violence, dating violence, sexual 
assault or stalking, the covered housing provider shall provide the 
remaining persons residing in the unit a reasonable grace period to 
establish eligibility to receive HOPWA assistance or find alternative 
housing. The grantee or project sponsor shall set the reasonable grace 
period, which shall be no less than 90 calendar days, and not more than 
one year, from the date of the bifurcation of the lease. Housing 
assistance and supportive services under the HOPWA program shall 
continue for the remaining persons residing in the unit during the grace 
period. The grantee or project sponsor shall notify the remaining 
persons residing in the unit of the duration of the reasonable grace 
period and may assist them with information on other available housing 
programs and with moving expenses.

[81 FR 80806, Nov. 16, 2016]

[[Page 174]]



                     Subpart F_Grant Administration



Sec. 574.500  Responsibility for grant administration.

    (a) General. Grantees are responsible for ensuring that grants are 
administered in accordance with the requirements of this part and other 
applicable laws. Grantees are responsible for ensuring that their 
respective project sponsors carry out activities in compliance with all 
applicable requirements.
    (b) Grant agreement. The grant agreement will provide that the 
grantee agrees, and will ensure that each project sponsor agrees, to:
    (1) Operate the program in accordance with the provisions of these 
regulations and other applicable HUD regulations;
    (2) Conduct an ongoing assessment of the housing assistance and 
supportive services required by the participants in the program;
    (3) Assure the adequate provision of supportive services to the 
participants in the program; and
    (4) Comply with such other terms and conditions, including 
recordkeeping and reports (which must include racial and ethnic data on 
participants) for program monitoring and evaluation purposes, as HUD may 
establish for purposes of carrying out the program in an effective and 
efficient manner.
    (c) Enforcement. HUD will enforce the obligations in the grant 
agreement in accordance with the provisions of 2 CFR part 200, subpart 
D. A grantee will be provided an opportunity for informal consultation 
before HUD will exercise any remedies authorized in 2 CFR 200.338.

[57 FR 61740, Dec. 28, 1992, as amended at 80 FR 75938, Dec. 7, 2015]



Sec. 574.510  Environmental procedures and standards.

    (a) Activities under this part are subject to HUD environmental 
regulations in part 58 of this title, except that HUD will perform an 
environmental review in accordance with part 50 of this title for any 
competitive grant for Fiscal Year 2000.
    (b) The recipient, its project partners and their contractors may 
not acquire, rehabilitate, convert, lease, repair, dispose of, demolish, 
or construct property for a project under this part, or commit or expend 
HUD or local funds for such eligible activities under this part, until 
the responsible entity (as defined in Sec. 58.2 of this title) has 
completed the environmental review procedures required by part 58 and 
the environmental certification and RROF have been approved (or HUD has 
performed an environmental review and the recipient has received HUD 
approval of the property). HUD will not release grant funds if the 
recipient or any other party commits grant funds (i.e., incurs any costs 
or expenditures to be paid or reimbursed with such funds) before the 
recipient submits and HUD approves its RROF (where such submission is 
required).
    (c) For activities under a grant to a nonprofit entity that would 
generally be subject to review under part 58, HUD may make a finding in 
accordance with Sec. 58.11(d) and may itself perform the environmental 
review under the provisions of part 50 of this title if the recipient 
nonprofit entity objects in writing to the responsible entity's 
performing the review under part 58. Irrespective of whether the 
responsible entity in accord with part 58 (or HUD in accord with part 
50) performs the environmental review, the recipient shall supply all 
available, relevant information necessary for the responsible entity (or 
HUD, if applicable) to perform for each property any environmental 
review required by this part. The recipient also shall carry out 
mitigating measures required by the responsible entity (or HUD, if 
applicable) or select alternate eligible property.

[68 FR 56130, Sept. 29, 2003]



Sec. 574.520  Performance reports.

    (a) Formula grants. For a formula grant recipient, the performance 
reporting requirements are specified in 24 CFR part 91.
    (b) Competitive grants. A grantee shall submit to HUD annually a 
report describing the use of the amounts received, including the number 
of individuals assisted, the types of assistance provided, data on 
emergency transfers requested under 24 CFR 5.2005(e), pertaining to 
victims of domestic violence, dating violence, sexual assault,

[[Page 175]]

or stalking, including data on the outcomes of such requests, and any 
other information that HUD may require. Annual reports are required 
until all grant funds are expended.

[60 FR 1918, Jan. 5, 1995, as amended at 81 FR 80806, Nov. 16, 2016]



Sec. 574.530  Recordkeeping.

    Each grantee must ensure that records are maintained for a 4-year 
period to document compliance with the provisions of this part. Grantees 
must maintain the following:
    (a) Current and accurate data on the race and ethnicity of program 
participants.
    (b) Documentation related to the formula grantee's Assessment of 
Fair Housing, as described in 24 CFR 5.168.
    (c) Data on emergency transfers requested under 24 CFR 5.2005(e), 
pertaining to victims of domestic violence, dating violence, sexual 
assault, or stalking, including data on the outcomes of such requests.

[80 FR 42368, July 16, 2015, as amended at 81 FR 80806, Nov. 16, 2016]



Sec. 574.540  Deobligation of funds.

    HUD may deobligate all or a portion of the amounts approved for 
eligible activities if such amounts are not expended in a timely manner, 
or the proposed activity for which funding was approved is not provided 
in accordance with the approved application or action plan and the 
requirements of this regulation. HUD may deobligate any amount of grant 
funds that have not been expended within a three-year period from the 
date of the signing of the grant agreement. The grant agreement may set 
forth other circumstances under which funds may be deobligated or 
sanctions imposed.

[61 FR 7963, Feb. 29, 1996]



                  Subpart G_Other Federal Requirements



Sec. 574.600  Cross-reference.

    The Federal requirements set forth in 24 CFR part 5 apply to this 
program as specified in this subpart.

[61 FR 5209, Feb. 9, 1996]



Sec. 574.603  Nondiscrimination and equal opportunity.

    Within the population eligible for this program, the 
nondiscrimination and equal opportunity requirements set forth in 24 CFR 
part 5 and the following requirements apply:
    (a) Fair housing requirements. (1) Grantees and project sponsors 
shall comply with the applicable provisions of the Americans with 
Disabilities Act (42 U.S.C. 12101-12213) and implementing regulations at 
28 CFR part 35 (States and local government grantees) and part 36 
(public accommodations and requirements for certain types of short-term 
housing assistance).
    (2) Executive Order 11246, as amended by Executive Orders 11375, 
11478, 12086, and 12107 (3 CFR, 1964-1965 Comp., p. 339; 3 CFR, 1966-
1970 Comp., p. 684; 3 CFR, 1966-1970 Comp., p. 803; 3 CFR 1978 Comp., p. 
230; and 3 CFR, 1978 Comp., p. 264) (Equal Employment Opportunity) does 
not apply to this program.
    (b) Affirmative outreach. A grantee or project sponsor must adopt 
procedures to ensure that all persons who qualify for the assistance, 
regardless of their race, color, religion, sex, age, national origin, 
familial status, or handicap, know of the availability of the HOPWA 
program, including facilities and services accessible to persons with a 
handicap, and maintain evidence of implementation of the procedures.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 33894, June 30, 1994. 
Redesignated and amended at 61 FR 5209, Feb. 9, 1996; 61 FR 7964, Feb. 
29, 1996]



Sec. 574.604  Protections for victims of domestic violence, dating 
violence, sexual assault, and stalking.

    (a) General--(1) Applicability of VAWA requirements. Except as 
provided in paragraph (a)(2) of this section, the Violence Against Women 
Act (VAWA) requirements set forth in 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking), apply to housing assisted with HOPWA grant funds 
for acquisition, rehabilitation, conversion, lease, and repair of 
facilities to provide housing; new construction; and operating costs, as 
provided in Sec. 574.300. The requirements set forth in 24 CFR part 5, 
subpart L, also apply

[[Page 176]]

to project-based and tenant-based rental assistance, as provided in 
Secs. 574.300 and 574.320, and community residences, as provided in 
Sec. 574.340.
    (2) Limited applicability of VAWA requirements. The VAWA 
requirements set forth in 24 CFR part 5, subpart L do not apply to 
short-term supported housing, as provided in Sec. 574.330, except that 
no individual may be denied admission to or removed from the short-term 
supported housing on the basis or as a direct result of the fact that 
the individual is or has been a victim of domestic violence, dating 
violence, sexual assault, or stalking, if the individual otherwise 
qualifies for admission or occupancy.
    (3) The terms ``affiliated individual,'' ``dating violence,'' 
``domestic violence,'' ``sexual assault,'' and ``stalking'' are defined 
in 24 CFR 5.2003.
    (b) Covered housing provider. As used in this part, the term, 
``covered housing provider,'' which is defined in 24 CFR 5.2003, refers 
to the HOPWA grantee, project sponsor, or housing or facility owner, or 
manager, as described in this section.
    (1)(i) For housing assisted with HOPWA grant funds for acquisition, 
rehabilitation, conversion, lease, and repair of facilities to provide 
housing; new construction; operating costs; community residences; and 
project-based rental assistance, the HOPWA grantee is responsible for 
ensuring that each project sponsor undertakes the following actions (or, 
if administering the HOPWA assistance directly, the grantee shall 
undertake the following actions):
    (A) Sets a policy for determining the ``reasonable grace period'' 
for remaining persons residing in the unit to establish eligibility for 
HOPWA assistance or find alternative housing, which period shall be no 
less than 90 calendar days nor more than one year from the date of 
bifurcation of a lease, consistent with 24 CFR 574.460;
    (B) Provides notice of occupancy rights and the certification form 
at the times listed in paragraph (d) of this section;
    (C) Adopts and administers an emergency transfer plan, as developed 
by the grantee in accordance with 24 CFR 5.2005(e) of this section, and 
facilitates emergency transfers; and
    (D) Maintains the confidentiality of documentation submitted by 
tenants requesting emergency transfers and of each tenant's housing 
location consistent with Sec. 574.440 and 24 CFR 5.2007(c).
    (ii)(A) If a tenant seeks VAWA protections, set forth in 24 CFR part 
5, subpart L, the tenant must submit such request through the project 
sponsor (or the grantee if the grantee is directly administering HOPWA 
assistance). Grantees and project sponsors will work with the housing or 
facility owner or manager to facilitate protections on the tenant's 
behalf. Project sponsors must follow the documentation specifications in 
24 CFR 5.2007, including the confidentiality requirements in 24 CFR 
5.2007(c).
    (B) The grantee or project sponsor is responsible for ensuring that 
the housing or facility owner or manager develops and uses a HOPWA lease 
addendum with VAWA protections and is made aware of the option to 
bifurcate a lease in accordance with Sec. 574.460 and 24 CFR 5.2009.
    (2)(i) For tenant-based rental assistance, the HOPWA grantee is 
responsible for ensuring that each project sponsor providing tenant-
based rental assistance undertakes the following actions (or, if 
administering the HOPWA assistance directly, the grantee shall undertake 
the following actions):
    (A) Sets policy for determining the ``reasonable grace period'' for 
remaining persons residing in the unit to establish eligibility for 
HOPWA assistance or find alternative housing, which period shall be no 
less than 90 calendar days and no more than one year from the date of 
bifurcation of a lease, consistent with 24 CFR 574.460;
    (B) Provides notice of occupancy rights and the certification form 
at the times listed in paragraph (d) of this section;
    (C) Adopts and administers an emergency transfer plan, as developed 
by the grantee in accordance with 24 CFR 5.2005(e) of this section, and 
facilitates emergency transfers; and
    (D) Maintains the confidentiality of documentation submitted by 
tenants requesting emergency transfers and of

[[Page 177]]

each tenant's housing location consistent with Sec. 574.440 and 24 CFR 
5.2007(c).
    (ii)(A) If a tenant seeks VAWA protections set forth in 24 CFR part 
5, subpart L, the tenant must submit such request through the project 
sponsor (or the grantee if the grantee is directly administering HOPWA 
assistance). The project sponsor will work with the housing owner or 
manager to facilitate protections on the tenant's behalf. Project 
sponsors must follow the documentation specifications in 24 CFR 5.2007, 
including the confidentiality requirements in 24 CFR 5.2007(c). The 
project sponsor (or the grantee if the grantee is directly administering 
HOPWA assistance) is also responsible for determining on a case-by-case 
basis whether to provide new tenant-based rental assistance to a 
remaining tenant if lease bifurcation or an emergency transfer results 
in division of the household.
    (B) The grantee or project sponsor is responsible for ensuring that 
the housing owner or manager develops and uses a HOPWA lease addendum 
with VAWA protections and is made aware of the option to bifurcate a 
lease in accordance with Sec. 574.460 and 24 CFR 5.2009.
    (c) Effective date. The core statutory protections of VAWA that 
prohibit denial or termination of assistance or eviction because an 
applicant or tenant is a victim of domestic violence, dating violence, 
sexual assault, or stalking applied upon enactment of VAWA 2013 on March 
7, 2013. For formula grants, compliance with the VAWA regulatory 
requirements under this section and 24 CFR part 5, subpart L, are 
required for any project covered under Sec. 574.604(a) for which the 
date of the HOPWA funding commitment is made on or after December 16, 
2016. For competitive grants, compliance with the VAWA regulatory 
requirements under this section and 24 CFR part 5, subpart L, are 
required for awards made on or after December 16, 2016.
    (d) Notification requirements. (1) As provided in paragraph (b) of 
this section, the grantee is responsible for ensuring that the notice of 
occupancy rights and certification form described in 24 CFR 5.2005(a) is 
provided to each person receiving project-based or tenant-based rental 
assistance under HOPWA or residing in rental housing assisted under the 
eligible activities described in Sec. 574.604(a) at the following times:
    (i) At the time the person is denied rental assistance or admission 
to a HOPWA-assisted unit;
    (ii) At the time the person is admitted to a HOPWA-assisted unit or 
is provided rental assistance;
    (iii) With any notification of eviction from the HOPWA-assisted unit 
or notification of termination of rental assistance; and
    (iv) During the 12-month period following December 16, 2016, either 
during annual recertification or lease renewal, whichever is applicable, 
or, if there will be no recertification or lease renewal for a tenant 
during the first year after the rule takes effect, through other means.
    (2) The grantee is responsible for ensuring that, for each tenant 
receiving HOPWA tenant-based rental assistance, the owner or manager of 
the tenant's housing unit commits to provide the notice of occupancy 
rights and certification form described in 24 CFR 5.2005 with any 
notification of eviction that the owner or manager provides to the 
tenant during the period for which the tenant is receiving HOPWA tenant-
based rental assistance. This commitment, as well as the confidentiality 
requirements under 24 CFR 5.2007(c), must be set forth in the VAWA lease 
term/addendum required under paragraph (f) of this section.
    (e) Definition of reasonable time. For the purpose of 24 CFR 
5.2009(b), the reasonable time to establish eligibility or find 
alternative housing following bifurcation of a lease is the reasonable 
grace period described in Sec. 574.460.
    (f) VAWA lease term/addendum. As provided in paragraph (b) of this 
section, the grantee or project sponsor is responsible for ensuring that 
the housing or facility owner or manager, as applicable, develops and 
uses a VAWA lease term/addendum to incorporate all requirements that 
apply to the housing or facility owner or manager under 24 CFR part 5, 
subpart L, and this section,

[[Page 178]]

including the prohibited bases for eviction under 24 CFR 5.2005(b), the 
provisions regarding construction of lease terms and terms of assistance 
under 24 CFR 5.2005(c), and the confidentiality of documentation 
submitted by tenants requesting emergency transfers and of each tenant's 
housing location consistent with 24 CFR 5.2007(c). The VAWA lease term/
addendum must also provide that the tenant may terminate the lease 
without penalty if a determination is made that the tenant has met the 
conditions for an emergency transfer under 24 CFR 5.2005(e). The grantee 
or project sponsor is responsible for ensuring that the housing or 
facility owner, or manager, as applicable, adds the VAWA lease term/
addendum to the leases for all HOPWA-assisted units and the leases for 
all eligible persons receiving HOPWA tenant-based rental assistance.

[81 FR 80806, Nov. 16, 2016]



Sec. 574.605  Applicability of uniform administrative requirements, cost
principles, and audit requirements for Federal awards.

    The provisions of 2 CFR part 200, ``Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards'', apply to HOPWA grants.

[80 FR 75938, Dec. 7, 2015]



Sec. 574.625  Conflict of interest.

    (a) In addition to the conflict of interest requirements in 2 CFR 
200.317 (for recipients and subrecipients that are States) and 2 CFR 
200.318 (for recipients and subrecipients that are not States), no 
person who is an employee, agent, consultant, officer, or elected or 
appointed official of the grantee or project sponsor and who exercises 
or has exercised any functions or responsibilities with respect to 
assisted activities, or who is in a position to participate in a 
decision making process or gain inside information with regard to such 
activities, may obtain a financial interest or benefit from the 
activity, or have an interest in any contract, subcontract, or agreement 
with respect thereto, or the proceeds thereunder, either for himself or 
herself or for those with whom he or she has family or business ties, 
during his or her tenure or for one year thereafter.
    (b) Exceptions: Threshold requirements. Upon the written request of 
the recipient, HUD may grant an exception to the provisions of paragraph 
(a) of this section when it determines that the exception will serve to 
further the purposes of the HOPWA program and the effective and 
efficient administration of the recipient's program or project. An 
exception may be considered only after the recipient has provided the 
following:
    (1) A disclosure of the nature of the conflict, accompanied by an 
assurance that there has been public disclosure of the conflict and a 
description of how the public disclosure was made; and
    (2) An opinion of the recipient's attorney that the interest for 
which the exception is sought would not violate State or local law.
    (c) Factors to be considered for exceptions. In determining whether 
to grant a requested exception after the recipient has satisfactorily 
met the requirements of paragraph (b) of this section, HUD will consider 
the cumulative effect of the following factors, where applicable:
    (1) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the program or project that would 
otherwise not be available;
    (2) Whether the person affected is a member of a group or class of 
eligible persons and the exception will permit such person to receive 
generally the same interests or benefits as are being made available or 
provided to the group or class;
    (3) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or the decisionmaking process with 
respect to the specific assisted activity in question;
    (4) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (a) of this section;
    (5) Whether undue hardship will result either to the recipient or 
the person affected when weighed against the public interest served by 
avoiding the prohibited conflict; and

[[Page 179]]

    (6) Any other relevant considerations.

[57 FR 61740, Dec. 28, 1992, as amended at 80 FR 75938, Dec. 7, 2015]



Sec. 574.630  Displacement, relocation and real property acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, grantees and project sponsors must assure that 
they have taken all reasonable steps to minimize the displacement of 
persons (families, individuals, businesses, nonprofit organizations, and 
farms) as a result of a project assisted under this part.
    (b) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (f) of this section) must be provided relocation 
assistance at the levels described in, and in accordance with the 
requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and 
implementing regulations at 49 CFR part 24.
    (c) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (d) Appeals. A person who disagrees with the grantee's or project 
sponsor's determination concerning whether the person qualifies as a 
``displaced person,'' or the amount of relocation assistance for which 
the person is eligible, may file a written appeal of that determination 
with the grantee. A low-income person who is dissatisfied with the 
grantee's determination on his or her appeal may submit a written 
request for review of that determination to the HUD Field Office.
    (e) Responsibility of grantee. (1) Each grantee shall certify (i.e., 
provide assurance of compliance as required by 49 CFR part 24) that it 
will comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, and shall ensure such compliance 
notwithstanding any third party's contractual obligation to the grantee 
to comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. Such costs also may be paid for with funds available from other 
sources.
    (3) The grantee shall maintain records in sufficient detail to 
demonstrate compliance with these provisions.
    (f) Definition of displaced person. (1) For purposes of this 
section, the term ``displaced person'' means a person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, or 
demolition for a project assisted under this part. This includes any 
permanent, involuntary move for an assisted project including any 
permanent move for an assisted project, including any permanent move 
from the real property that is made:
    (i) After notice by the grantee, project sponsor, or property owner 
to move permanently from the property, if the move occurs on or after 
the date that the grantee submits to HUD an application for assistance 
that is later approved and funded;
    (ii) Before the submission of the application to HUD, if the 
grantee, project sponsor, or HUD determines that the displacement 
resulted directly from acquisition, rehabilitation, or demolition for 
the assisted project; or
    (iii) By a tenant-occupant of a dwelling unit, if any one of the 
following three situations occurs:
    (A) The tenant moves after the ``initiation of negotiations'' and 
the move occurs before the tenant has been provided written notice 
offering him or her the opportunity to lease and occupy a suitable, 
decent, safe and sanitary dwelling in the same building/complex, under 
reasonable terms and conditions, upon completion of the project. Such 
reasonable terms and conditions include a monthly rent and estimated 
average monthly utility costs that do not exceed the greater of:
    (1) The tenant's monthly rent before the initiation of negotiations 
and estimated average utility costs, or
    (2) 30 percent of gross household income; or
    (B) The tenant is required to relocate temporarily, does not return 
to the building/complex and either:

[[Page 180]]

    (1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, or
    (2) Other conditions of the temporary relocation are not reasonable; 
or
    (C) The tenant is required to move to another unit in the same 
building/complex but is not offered reimbursement for all reasonable 
out-of-pocket expenses incurred in connection with the move, or other 
conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (f)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
or applicable Federal, State or local law, or other good cause, and HUD 
determines that the eviction was not undertaken for the purposes of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
application and, before signing a lease and commencing occupancy, was 
provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that the person would not qualify 
as a ``displaced person'' (or for any assistance provided under this 
section), if the project is approved;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The grantee or project sponsor may request, at any time, HUD's 
determination of whether a displacement is or would be covered under 
this section.
    (g) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a residential tenant displaced as a direct result of 
privately undertaken rehabilitation, demolition, or acquisition of the 
real property, the term ``initiation of negotiations'' means the 
execution of the agreement between the grantee and the project sponsor.



Sec. 574.635  Lead-based paint.

    The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), 
the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 
4851-4856), and implementing regulations at part 35, subparts A, B, H, 
J, K, M, and R of this part apply to activities under this program.

[64 FR 50226, Sept. 15, 1999]



Sec. 574.640  Flood insurance protection.

    No property to be assisted under this part may be located in an area 
that has been identified by the Federal Emergency Management Agency 
(FEMA) as having special flood hazards, unless:
    (a)(1) The community in which the area is situated is participating 
in the National Flood Insurance Program and the regulations thereunder 
(44 CFR parts 59 through 79); or
    (2) Less than a year has passed since FEMA notification regarding 
such hazards; and
    (b) The grantee will ensure that flood insurance on the structure is 
obtained in compliance with section 102(a) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4001 et seq.).



Sec. 574.645  Coastal barriers.

    In accordance with the Coastal Barrier Resources Act, 16 U.S.C. 
3501, no financial assistance under this part may be made available 
within the Coastal Barrier Resources System.



Sec. 574.650  Audit.

    Grantees and project sponsors are subject to the audit requirements 
set forth in 2 CFR part 200, subpart F.

[80 FR 75938, Dec. 7, 2015]



Sec. 574.655  Wage rates.

    The provisions of the Davis-Bacon Act (40 U.S.C. 276a-276a-5) do not 
apply to this program, except where funds received under this part are 
combined with funds from other Federal programs that are subject to the 
Act.

[59 FR 17201, Apr. 11, 1994]

[[Page 181]]



Sec. 574.660  Housing counseling.

    Housing counseling, as defined in Sec. 5.100, that is funded with or 
provided in connection with HOPWA funds must be carried out in 
accordance with Sec. 5.111. When grantees provide housing services to 
eligible persons (including persons undergoing relocation) that are 
incidental to a larger set of holistic case management services, these 
services do not meet the definition of housing counseling, as defined in 
Sec. 5.100, and therefore are not required to be carried out in 
accordance with the certification requirements of Sec. 5.111.

[81 FR 90659, Dec. 14, 2016, as amended at 82 FR 8811, Jan. 31, 2017]



PART 576_EMERGENCY SOLUTIONS GRANTS PROGRAM--Table of Contents



                      Subpart A_General Provisions

Sec.
576.1  Applicability and purpose.
576.2  Definitions.
576.3  Allocation of funding.

          Subpart B_Program Components and Eligible Activities

576.100  General provisions and expenditure limits.
576.101  Street outreach component.
576.102  Emergency shelter component.
576.103  Homelessness prevention component.
576.104  Rapid re-housing assistance component.
576.105  Housing relocation and stabilization services.
576.106  Short-term and medium-term rental assistance.
576.107  HMIS component.
576.108  Administrative activities.
576.109  Indirect costs.

                    Subpart C_Award and Use of Funds

576.200  Submission requirements and grant approval.
576.201  Matching requirement.
576.202  Means of carrying out grant activities.
576.203  Obligation, expenditure, and payment requirements.

                         Subpart D_Reallocations

576.300  In general.
576.301  Metropolitan cities and urban counties.
576.302  States.
576.303  Territories.
576.304  Alternative method.

                     Subpart E_Program Requirements

576.400  Area-wide systems coordination requirements.
576.401  Evaluation of program participant eligibility and needs.
576.402  Terminating assistance.
576.403  Shelter and housing standards.
576.404  Conflicts of interest.
576.405  Homeless participation.
576.406  Equal participation of faith-based organizations.
576.407  Other Federal requirements.
576.408  Displacement, relocation, and acquisition.
576.409  Protection for victims of domestic violence, dating violence, 
          sexual assault, or stalking.

                     Subpart F_Grant Administration

576.500  Recordkeeping and reporting requirements.
576.501  Enforcement.

    Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11371 et seq., 42 
U.S.C. 3535(d).

    Source: 76 FR 75974, Dec. 5, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 576.1  Applicability and purpose.

    This part implements the Emergency Solutions Grants (ESG) program 
authorized by subtitle B of title IV of the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11371-11378). The program authorizes the 
Department of Housing and Urban Development (HUD) to make grants to 
States, units of general purpose local government, and territories for 
the rehabilitation or conversion of buildings for use as emergency 
shelter for the homeless, for the payment of certain expenses related to 
operating emergency shelters, for essential services related to 
emergency shelters and street outreach for the homeless, and for 
homelessness prevention and rapid re-housing assistance.



Sec. 576.2  Definitions.

    At risk of homelessness means: (1) An individual or family who:
    (i) Has an annual income below 30 percent of median family income 
for the area, as determined by HUD;
    (ii) Does not have sufficient resources or support networks, e.g., 
family,

[[Page 182]]

friends, faith-based or other social networks, immediately available to 
prevent them from moving to an emergency shelter or another place 
described in paragraph (1) of the ``homeless'' definition in this 
section; and
    (iii) Meets one of the following conditions:
    (A) Has moved because of economic reasons two or more times during 
the 60 days immediately preceding the application for homelessness 
prevention assistance;
    (B) Is living in the home of another because of economic hardship;
    (C) Has been notified in writing that their right to occupy their 
current housing or living situation will be terminated within 21 days 
after the date of application for assistance;
    (D) Lives in a hotel or motel and the cost of the hotel or motel 
stay is not paid by charitable organizations or by Federal, State, or 
local government programs for low-income individuals;
    (E) Lives in a single-room occupancy or efficiency apartment unit in 
which there reside more than two persons or lives in a larger housing 
unit in which there reside more than 1.5 persons reside per room, as 
defined by the U.S. Census Bureau;
    (F) Is exiting a publicly funded institution, or system of care 
(such as a health-care facility, a mental health facility, foster care 
or other youth facility, or correction program or institution); or
    (G) Otherwise lives in housing that has characteristics associated 
with instability and an increased risk of homelessness, as identified in 
the recipient's approved consolidated plan;
    (2) A child or youth who does not qualify as ``homeless'' under this 
section, but qualifies as ``homeless'' under section 387(3) of the 
Runaway and Homeless Youth Act (42 U.S.C. 5732a(3)), section 637(11) of 
the Head Start Act (42 U.S.C. 9832(11)), section 41403(6) of the 
Violence Against Women Act of 1994 (42 U.S.C. 14043e-2(6)), section 
330(h)(5)(A) of the Public Health Service Act (42 U.S.C. 254b(h)(5)(A)), 
section 3(m) of the Food and Nutrition Act of 2008 (7 U.S.C. 2012(m)), 
or section 17(b)(15) of the Child Nutrition Act of 1966 (42 U.S.C. 
1786(b)(15)); or
    (3) A child or youth who does not qualify as ``homeless'' under this 
section, but qualifies as ``homeless'' under section 725(2) of the 
McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2)), and the 
parent(s) or guardian(s) of that child or youth if living with her or 
him.
    Consolidated plan means a plan prepared in accordance with 24 CFR 
part 91. An approved consolidated plan means a consolidated plan that 
has been approved by HUD in accordance with 24 CFR part 91.
    Continuum of Care means the group composed of representatives of 
relevant organizations, which generally includes nonprofit homeless 
providers; victim service providers; faith-based organizations; 
governments; businesses; advocates; public housing agencies; school 
districts; social service providers; mental health agencies; hospitals; 
universities; affordable housing developers; law enforcement; 
organizations that serve homeless and formerly homeless veterans, and 
homeless and formerly homeless persons that are organized to plan for 
and provide, as necessary, a system of outreach, engagement, and 
assessment; emergency shelter; rapid re-housing; transitional housing; 
permanent housing; and prevention strategies to address the various 
needs of homeless persons and persons at risk of homelessness for a 
specific geographic area.
    Emergency shelter means any facility, the primary purpose of which 
is to provide a temporary shelter for the homeless in general or for 
specific populations of the homeless and which does not require 
occupants to sign leases or occupancy agreements. Any project funded as 
an emergency shelter under a Fiscal Year 2010 Emergency Solutions grant 
may continue to be funded under ESG.
    Homeless means:
    (1) An individual or family who lacks a fixed, regular, and adequate 
nighttime residence, meaning:
    (i) An individual or family with a primary nighttime residence that 
is a public or private place not designed for or ordinarily used as a 
regular sleeping

[[Page 183]]

accommodation for human beings, including a car, park, abandoned 
building, bus or train station, airport, or camping ground;
    (ii) An individual or family living in a supervised publicly or 
privately operated shelter designated to provide temporary living 
arrangements (including congregate shelters, transitional housing, and 
hotels and motels paid for by charitable organizations or by federal, 
state, or local government programs for low-income individuals); or
    (iii) An individual who is exiting an institution where he or she 
resided for 90 days or less and who resided in an emergency shelter or 
place not meant for human habitation immediately before entering that 
institution;
    (2) An individual or family who will imminently lose their primary 
nighttime residence, provided that:
    (i) The primary nighttime residence will be lost within 14 days of 
the date of application for homeless assistance;
    (ii) No subsequent residence has been identified; and
    (iii) The individual or family lacks the resources or support 
networks, e.g., family, friends, faith-based or other social networks, 
needed to obtain other permanent housing;
    (3) Unaccompanied youth under 25 years of age, or families with 
children and youth, who do not otherwise qualify as homeless under this 
definition, but who:
    (i) Are defined as homeless under section 387 of the Runaway and 
Homeless Youth Act (42 U.S.C. 5732a), section 637 of the Head Start Act 
(42 U.S.C. 9832), section 41403 of the Violence Against Women Act of 
1994 (42 U.S.C. 14043e-2), section 330(h) of the Public Health Service 
Act (42 U.S.C. 254b(h)), section 3 of the Food and Nutrition Act of 2008 
(7 U.S.C. 2012), section 17(b) of the Child Nutrition Act of 1966 (42 
U.S.C. 1786(b)) or section 725 of the McKinney-Vento Homeless Assistance 
Act (42 U.S.C. 11434a);
    (ii) Have not had a lease, ownership interest, or occupancy 
agreement in permanent housing at any time during the 60 days 
immediately preceding the date of application for homeless assistance;
    (iii) Have experienced persistent instability as measured by two 
moves or more during the 60-day period immediately preceding the date of 
applying for homeless assistance; and
    (iv) Can be expected to continue in such status for an extended 
period of time because of chronic disabilities, chronic physical health 
or mental health conditions, substance addiction, histories of domestic 
violence or childhood abuse (including neglect), the presence of a child 
or youth with a disability, or two or more barriers to employment, which 
include the lack of a high school degree or General Education 
Development (GED), illiteracy, low English proficiency, a history of 
incarceration or detention for criminal activity, and a history of 
unstable employment; or
    (4) Any individual or family who:
    (i) Is fleeing, or is attempting to flee, domestic violence, dating 
violence, sexual assault, stalking, or other dangerous or life-
threatening conditions that relate to violence against the individual or 
a family member, including a child, 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;
    (ii) Has no other residence; and
    (iii) Lacks the resources or support networks, e.g., family, 
friends, faith-based or other social networks, to obtain other permanent 
housing.
    Homeless Management Information System (HMIS) means the information 
system designated by the Continuum of Care to comply with the HUD's data 
collection, management, and reporting standards and used to collect 
client-level data and data on the provision of housing and services to 
homeless individuals and families and persons at-risk of homelessness.
    Metropolitan city means a city that was classified as a metropolitan 
city under 42 U.S.C. 5302(a) for the fiscal year immediately preceding 
the fiscal year for which ESG funds are made available. This term 
includes the District of Columbia.
    Private nonprofit organization means a private nonprofit 
organization that is a secular or religious organization described in 
section 501(c) of the Internal Revenue Code of 1986 and which is exempt 
from taxation under subtitle A of

[[Page 184]]

the Code, has an accounting system and a voluntary board, and practices 
nondiscrimination in the provision of assistance. A private nonprofit 
organization does not include a governmental organization, such as a 
public housing agency or housing finance agency.
    Program income shall have the meaning provided in 2 CFR 200.80. 
Program income includes any amount of a security or utility deposit 
returned to the recipient or subrecipient.
    Program participant means an individual or family who is assisted 
under ESG program.
    Program year means the consolidated program year established by the 
recipient under 24 CFR part 91.
    Recipient means any State, territory, metropolitan city, or urban 
county, or in the case of reallocation, any unit of general purpose 
local government that is approved by HUD to assume financial 
responsibility and enters into a grant agreement with HUD to administer 
assistance under this part.
    State means each of the several States and the Commonwealth of 
Puerto Rico.
    Subrecipient means a unit of general purpose local government or 
private nonprofit organization to which a recipient makes available ESG 
funds.
    Territory means each of the following: the Virgin Islands, Guam, 
American Samoa, and the Northern Mariana Islands.
    Unit of general purpose local government means any city, county, 
town, township, parish, village, or other general purpose political 
subdivision of a State.
    Urban county means a county that was classified as an urban county 
under 42 U.S.C. 5302(a) for the fiscal year immediately preceding the 
fiscal year for which ESG funds are made available.
    Victim service provider means a private nonprofit organization whose 
primary mission is to provide services to victims of domestic violence, 
dating violence, sexual assault, or stalking. This term includes rape 
crisis centers, battered women's shelters, domestic violence 
transitional housing programs, and other programs.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 576.3  Allocation of funding.

    (a) Territories. HUD will set aside for allocation to the 
territories up to 0.2 percent, but not less than 0.1 percent, of the 
total amount of each appropriation under this part in any fiscal year. 
HUD will allocate this set-aside amount to each territory based on its 
proportionate share of the total population of all territories and its 
rate of compliance with the most recent expenditure deadline under 
Sec. 576.203.
    (b) States, metropolitan cities, and urban counties. HUD will 
allocate the amounts that remain after the set-aside to territories 
under paragraph (a) of this section to States, metropolitan cities, and 
urban counties, as follows:
    (1) HUD will provide that the percentage of the total amount 
available for allocation to each State, metropolitan city, or urban 
county is equal to the percentage of the total amount available under 
section 106 of the Housing and Community Development Act of 1974 for the 
prior fiscal year that was allocated to that State, metropolitan city, 
or urban county.
    (2) Except as otherwise provided by law, if the amount a 
metropolitan city or urban county would be allocated under paragraph 
(b)(1) is less than 0.05 percent of the total fiscal year appropriation 
for ESG, that amount will be added to the allocation for the State in 
which the city or county is located.
    (c) Notification of allocation amount. HUD will notify each State, 
metropolitan city, urban county, and territory that is eligible to 
receive an allocation under this section of the amount of its 
allocation.



          Subpart B_Program Components and Eligible Activities



Sec. 576.100  General provisions and expenditure limits.

    (a) ESG funds may be used for five program components: street 
outreach, emergency shelter, homelessness prevention, rapid re-housing 
assistance, and HMIS; as well as administrative activities. The five 
program components and the eligible activities that may be funded under 
each are set forth

[[Page 185]]

in Sec. 576.101 through Sec. 576.107. Eligible administrative activities 
are set forth in Sec. 576.108.
    (b) The total amount of the recipient's fiscal year grant that may 
be used for street outreach and emergency shelter activities cannot 
exceed the greater of:
    (1) 60 percent of the recipient's fiscal year grant; or
    (2) The amount of Fiscal Year 2010 grant funds committed for 
homeless assistance activities.
    (c) The total amount of ESG funds that may be used for 
administrative activities cannot exceed 7.5 percent of the recipient's 
fiscal year grant.
    (d) Subject to the cost principles in 2 CFR part 200, subpart E, and 
other requirements in this part, employee compensation and other 
overhead costs directly related to carrying out street outreach, 
emergency shelter, homelessness prevention, rapid re-housing, and HMIS 
are eligible costs of those program components. These costs are not 
subject to the expenditure limit in paragraph (c) of this section.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 576.101  Street outreach component.

    (a) Eligible costs. Subject to the expenditure limit in 
Sec. 576.100(b), ESG funds may be used for costs of providing essential 
services necessary to reach out to unsheltered homeless people; connect 
them with emergency shelter, housing, or critical services; and provide 
urgent, nonfacility-based care to unsheltered homeless people who are 
unwilling or unable to access emergency shelter, housing, or an 
appropriate health facility. For the purposes of this section, the term 
``unsheltered homeless people'' means individuals and families who 
qualify as homeless under paragraph (1)(i) of the ``homeless'' 
definition under Sec. 576.2. The eligible costs and requirements for 
essential services consist of:
    (1) Engagement. The costs of activities to locate, identify, and 
build relationships with unsheltered homeless people and engage them for 
the purpose of providing immediate support, intervention, and 
connections with homeless assistance programs and/or mainstream social 
services and housing programs. These activities consist of making an 
initial assessment of needs and eligibility; providing crisis 
counseling; addressing urgent physical needs, such as providing meals, 
blankets, clothes, or toiletries; and actively connecting and providing 
information and referrals to programs targeted to homeless people and 
mainstream social services and housing programs, including emergency 
shelter, transitional housing, community-based services, permanent 
supportive housing, and rapid re-housing programs. Eligible costs 
include the cell phone costs of outreach workers during the performance 
of these activities.
    (2) Case management. The cost of assessing housing and service 
needs, arranging, coordinating, and monitoring the delivery of 
individualized services to meet the needs of the program participant. 
Eligible services and activities are as follows: using the centralized 
or coordinated assessment system as required under Sec. 576.400(d); 
conducting the initial evaluation required under Sec. 576.401(a), 
including verifying and documenting eligibility; counseling; developing, 
securing and coordinating services; obtaining Federal, State, and local 
benefits; monitoring and evaluating program participant progress; 
providing information and referrals to other providers; and developing 
an individualized housing and service plan, including planning a path to 
permanent housing stability.
    (3) Emergency health services. (i) Eligible costs are for the direct 
outpatient treatment of medical conditions and are provided by licensed 
medical professionals operating in community-based settings, including 
streets, parks, and other places where unsheltered homeless people are 
living.
    (ii) ESG funds may be used only for these services to the extent 
that other appropriate health services are inaccessible or unavailable 
within the area.
    (iii) Eligible treatment consists of assessing a program 
participant's health problems and developing a treatment plan; assisting 
program participants to understand their health needs; providing 
directly or assisting program participants to obtain appropriate

[[Page 186]]

emergency medical treatment; and providing medication and follow-up 
services.
    (4) Emergency mental health services. (i) Eligible costs are the 
direct outpatient treatment by licensed professionals of mental health 
conditions operating in community-based settings, including streets, 
parks, and other places where unsheltered people are living.
    (ii) ESG funds may be used only for these services to the extent 
that other appropriate mental health services are inaccessible or 
unavailable within the community.
    (iii) Mental health services are the application of therapeutic 
processes to personal, family, situational, or occupational problems in 
order to bring about positive resolution of the problem or improved 
individual or family functioning or circumstances.
    (iv) Eligible treatment consists of crisis interventions, the 
prescription of psychotropic medications, explanation about the use and 
management of medications, and combinations of therapeutic approaches to 
address multiple problems.
    (5) Transportation. The transportation costs of travel by outreach 
workers, social workers, medical professionals, or other service 
providers are eligible, provided that this travel takes place during the 
provision of services eligible under this section. The costs of 
transporting unsheltered people to emergency shelters or other service 
facilities are also eligible. These costs include the following:
    (i) The cost of a program participant's travel on public 
transportation;
    (ii) If service workers use their own vehicles, mileage allowance 
for service workers to visit program participants;
    (iii) The cost of purchasing or leasing a vehicle for the recipient 
or subrecipient in which staff transports program participants and/or 
staff serving program participants, and the cost of gas, insurance, 
taxes and maintenance for the vehicle; and
    (iv) The travel costs of recipient or subrecipient staff to 
accompany or assist program participants to use public transportation.
    (6) Services for special populations. ESG funds may be used to 
provide services for homeless youth, victim services, and services for 
people living with HIV/AIDS, so long as the costs of providing these 
services are eligible under paragraphs (a)(1) through (a)(5) of this 
section. The term victim services means services that assist program 
participants who are victims of domestic violence, dating violence, 
sexual assault, or stalking, including services offered by rape crisis 
centers and domestic violence shelters, and other organizations with a 
documented history of effective work concerning domestic violence, 
dating violence, sexual assault, or stalking.
    (b) Minimum period of use. The recipient or subrecipient must 
provide services to homeless individuals and families for at least the 
period during which ESG funds are provided.
    (c) Maintenance of effort. (1) If the recipient or subrecipient is a 
unit of general purpose local government, its ESG funds cannot be used 
to replace funds the local government provided for street outreach and 
emergency shelter services during the immediately preceding 12-month 
period, unless HUD determines that the unit of general purpose local 
government is in a severe financial deficit.
    (2) Upon the recipient's request, HUD will determine whether the 
unit of general purpose local government is in a severe financial 
deficit, based on the recipient's demonstration of each of the 
following:
    (i) The average poverty rate in the unit of general purpose local 
government's jurisdiction was equal to or greater than 125 percent of 
the average national poverty rate, during the calendar year for which 
the most recent data are available, as determined according to 
information from the U.S. Census Bureau.
    (ii) The average per-capita income in the unit of general purpose 
local government's jurisdiction was less than 75 percent of the average 
national per-capita income, during the calendar year for which the most 
recent data are available, as determined according to information from 
the Census Bureau.
    (iii) The unit of general purpose local government has a current 
annual budget deficit that requires a reduction in

[[Page 187]]

funding for services for homeless people.
    (iv) The unit of general purpose local government has taken all 
reasonable steps to prevent a reduction in funding of services for 
homeless people. Reasonable steps may include steps to increase revenue 
generation, steps to maximize cost savings, or steps to reduce 
expenditures in areas other than services for homeless people.



Sec. 576.102  Emergency shelter component.

    (a) General. Subject to the expenditure limit in Sec. 576.100(b), 
ESG funds may be used for costs of providing essential services to 
homeless families and individuals in emergency shelters, renovating 
buildings to be used as emergency shelter for homeless families and 
individuals, and operating emergency shelters.
    (1) Essential services. ESG funds may be used to provide essential 
services to individuals and families who are in an emergency shelter, as 
follows:
    (i) Case management. The cost of assessing, arranging, coordinating, 
and monitoring the delivery of individualized services to meet the needs 
of the program participant is eligible. Component services and 
activities consist of:
    (A) Using the centralized or coordinated assessment system as 
required under Sec. 576.400(d);
    (B) Conducting the initial evaluation required under 
Sec. 576.401(a), including verifying and documenting eligibility;
    (C) Counseling;
    (D) Developing, securing, and coordinating services and obtaining 
Federal, State, and local benefits;
    (E) Monitoring and evaluating program participant progress;
    (F) Providing information and referrals to other providers;
    (G) Providing ongoing risk assessment and safety planning with 
victims of domestic violence, dating violence, sexual assault, and 
stalking; and
    (H) Developing an individualized housing and service plan, including 
planning a path to permanent housing stability.
    (ii) Child care. The costs of child care for program participants, 
including providing meals and snacks, and comprehensive and coordinated 
sets of appropriate developmental activities, are eligible. The children 
must be under the age of 13, unless they are disabled. Disabled children 
must be under the age of 18. The child-care center must be licensed by 
the jurisdiction in which it operates in order for its costs to be 
eligible.
    (iii) Education services. When necessary for the program participant 
to obtain and maintain housing, the costs of improving knowledge and 
basic educational skills are eligible. Services include instruction or 
training in consumer education, health education, substance abuse 
prevention, literacy, English as a Second Language, and General 
Educational Development (GED). Component services or activities are 
screening, assessment and testing; individual or group instruction; 
tutoring; provision of books, supplies and instructional material; 
counseling; and referral to community resources.
    (iv) Employment assistance and job training. The costs of employment 
assistance and job training programs are eligible, including classroom, 
online, and/or computer instruction; on-the-job instruction; and 
services that assist individuals in securing employment, acquiring 
learning skills, and/or increasing earning potential. The cost of 
providing reasonable stipends to program participants in employment 
assistance and job training programs is an eligible cost. Learning 
skills include those skills that can be used to secure and retain a job, 
including the acquisition of vocational licenses and/or certificates. 
Services that assist individuals in securing employment consist of 
employment screening, assessment, or testing; structured job skills and 
job-seeking skills; special training and tutoring, including literacy 
training and prevocational training; books and instructional material; 
counseling or job coaching; and referral to community resources.
    (v) Outpatient health services. Eligible costs are for the direct 
outpatient treatment of medical conditions and are provided by licensed 
medical professionals. Emergency Solutions Grant (ESG) funds may be used 
only for these services to the extent that other appropriate health 
services are unavailable

[[Page 188]]

within the community. Eligible treatment consists of assessing a program 
participant's health problems and developing a treatment plan; assisting 
program participants to understand their health needs; providing 
directly or assisting program participants to obtain appropriate medical 
treatment, preventive medical care, and health maintenance services, 
including emergency medical services; providing medication and follow-up 
services; and providing preventive and noncosmetic dental care.
    (vi) Legal services. (A) Eligible costs are the hourly fees for 
legal advice and representation by attorneys licensed and in good 
standing with the bar association of the State in which the services are 
provided, and by person(s) under the supervision of the licensed 
attorney, regarding matters that interfere with the program 
participant's ability to obtain and retain housing.
    (B) Emergency Solutions Grant (ESG) funds may be used only for these 
services to the extent that other appropriate legal services are 
unavailable or inaccessible within the community.
    (C) Eligible subject matters are child support, guardianship, 
paternity, emancipation, and legal separation, orders of protection and 
other civil remedies for victims of domestic violence, dating violence, 
sexual assault, and stalking, appeal of veterans and public benefit 
claim denials, and the resolution of outstanding criminal warrants.
    (D) Component services or activities may include client intake, 
preparation of cases for trial, provision of legal advice, 
representation at hearings, and counseling.
    (E) Fees based on the actual service performed (i.e., fee for 
service) are also eligible, but only if the cost would be less than the 
cost of hourly fees. Filing fees and other necessary court costs are 
also eligible. If the subrecipient is a legal services provider and 
performs the services itself, the eligible costs are the subrecipient's 
employees' salaries and other costs necessary to perform the services.
    (F) Legal services for immigration and citizenship matters and 
issues relating to mortgages are ineligible costs. Retainer fee 
arrangements and contingency fee arrangements are ineligible costs.
    (vii) Life skills training. The costs of teaching critical life 
management skills that may never have been learned or have been lost 
during the course of physical or mental illness, domestic violence, 
substance use, and homelessness are eligible costs. These services must 
be necessary to assist the program participant to function independently 
in the community. Component life skills training are budgeting 
resources, managing money, managing a household, resolving conflict, 
shopping for food and needed items, improving nutrition, using public 
transportation, and parenting.
    (viii) Mental health services. (A) Eligible costs are the direct 
outpatient treatment by licensed professionals of mental health 
conditions.
    (B) ESG funds may only be used for these services to the extent that 
other appropriate mental health services are unavailable or inaccessible 
within the community.
    (C) Mental health services are the application of therapeutic 
processes to personal, family, situational, or occupational problems in 
order to bring about positive resolution of the problem or improved 
individual or family functioning or circumstances. Problem areas may 
include family and marital relationships, parent-child problems, or 
symptom management.
    (D) Eligible treatment consists of crisis interventions; individual, 
family, or group therapy sessions; the prescription of psychotropic 
medications or explanations about the use and management of medications; 
and combinations of therapeutic approaches to address multiple problems.
    (ix) Substance abuse treatment services. (A) Eligible substance 
abuse treatment services are designed to prevent, reduce, eliminate, or 
deter relapse of substance abuse or addictive behaviors and are provided 
by licensed or certified professionals.
    (B) ESG funds may only be used for these services to the extent that 
other appropriate substance abuse treatment services are unavailable or 
inaccessible within the community.

[[Page 189]]

    (C) Eligible treatment consists of client intake and assessment, and 
outpatient treatment for up to 30 days. Group and individual counseling 
and drug testing are eligible costs. Inpatient detoxification and other 
inpatient drug or alcohol treatment are not eligible costs.
    (x) Transportation. Eligible costs consist of the transportation 
costs of a program participant's travel to and from medical care, 
employment, child care, or other eligible essential services facilities. 
These costs include the following:
    (A) The cost of a program participant's travel on public 
transportation;
    (B) If service workers use their own vehicles, mileage allowance for 
service workers to visit program participants;
    (C) The cost of purchasing or leasing a vehicle for the recipient or 
subrecipient in which staff transports program participants and/or staff 
serving program participants, and the cost of gas, insurance, taxes, and 
maintenance for the vehicle; and
    (D) The travel costs of recipient or subrecipient staff to accompany 
or assist program participants to use public transportation.
    (xi) Services for special populations. ESG funds may be used to 
provide services for homeless youth, victim services, and services for 
people living with HIV/AIDS, so long as the costs of providing these 
services are eligible under paragraphs (a)(1)(i) through (a)(1)(x) of 
this section. The term victim services means services that assist 
program participants who are victims of domestic violence, dating 
violence, sexual assault, or stalking, including services offered by 
rape crisis centers and domestic violence shelters, and other 
organizations with a documented history of effective work concerning 
domestic violence, dating violence, sexual assault, or stalking.
    (2) Renovation. Eligible costs include labor, materials, tools, and 
other costs for renovation (including major rehabilitation of an 
emergency shelter or conversion of a building into an emergency 
shelter). The emergency shelter must be owned by a government entity or 
private nonprofit organization.
    (3) Shelter operations. Eligible costs are the costs of maintenance 
(including minor or routine repairs), rent, security, fuel, equipment, 
insurance, utilities, food, furnishings, and supplies necessary for the 
operation of the emergency shelter. Where no appropriate emergency 
shelter is available for a homeless family or individual, eligible costs 
may also include a hotel or motel voucher for that family or individual.
    (4) Assistance required under the Uniform Relocation Assistance and 
Real Property Acquisition Policies Act of 1970 (URA). Eligible costs are 
the costs of providing URA assistance under Sec. 576.408, including 
relocation payments and other assistance to persons displaced by a 
project assisted with ESG funds. Persons that receive URA assistance are 
not considered ``program participants'' for the purposes of this part, 
and relocation payments and other URA assistance are not considered 
``rental assistance'' or ``housing relocation and stabilization 
services'' for the purposes of this part.
    (b) Prohibition against involuntary family separation. The age, of a 
child under age 18 must not be used as a basis for denying any family's 
admission to an emergency shelter that uses Emergency Solutions Grant 
(ESG) funding or services and provides shelter to families with children 
under age 18.
    (c) Minimum period of use. (1) Renovated buildings. Each building 
renovated with ESG funds must be maintained as a shelter for homeless 
individuals and families for not less than a period of 3 or 10 years, 
depending on the type of renovation and the value of the building. The 
``value of the building'' is the reasonable monetary value assigned to 
the building, such as the value assigned by an independent real estate 
appraiser. The minimum use period must begin on the date the building is 
first occupied by a homeless individual or family after the completed 
renovation. A minimum period of use of 10 years, required for major 
rehabilitation and conversion, must be enforced by a recorded deed or 
use restriction.
    (i) Major rehabilitation. If the rehabilitation cost of an emergency 
shelter exceeds 75 percent of the value of the building before 
rehabilitation, the minimum period of use is 10 years.

[[Page 190]]

    (ii) Conversion. If the cost to convert a building into an emergency 
shelter exceeds 75 percent of the value of the building after 
conversion, the minimum period of use is 10 years.
    (iii) Renovation other than major rehabilitation or conversion. In 
all other cases where ESG funds are used for renovation, the minimum 
period of use is 3 years.
    (2) Essential services and shelter operations. Where the recipient 
or subrecipient uses ESG funds solely for essential services or shelter 
operations, the recipient or subrecipient must provide services or 
shelter to homeless individuals and families at least for the period 
during which the ESG funds are provided. The recipient or subrecipient 
does not need to limit these services or shelter to a particular site or 
structure, so long as the site or structure serves the same type of 
persons originally served with the assistance (e.g., families with 
children, unaccompanied youth, disabled individuals, or victims of 
domestic violence) or serves homeless persons in the same area where the 
recipient or subrecipient originally provided the services or shelter.
    (d) Maintenance of effort. The maintenance of effort requirements 
under Sec. 576.101(c), which apply to the use of ESG funds for essential 
services related to street outreach, also apply for the use of such 
funds for essential services related to emergency shelter.



Sec. 576.103  Homelessness prevention component.

    ESG funds may be used to provide housing relocation and 
stabilization services and short- and/or medium-term rental assistance 
necessary to prevent an individual or family from moving into an 
emergency shelter or another place described in paragraph (1) of the 
``homeless'' definition in Sec. 576.2. This assistance, referred to as 
homelessness prevention, may be provided to individuals and families who 
meet the criteria under the ``at risk of homelessness'' definition, or 
who meet the criteria in paragraph (2), (3), or (4) of the ``homeless'' 
definition in Sec. 576.2 and have an annual income below 30 percent of 
median family income for the area, as determined by HUD. The costs of 
homelessness prevention are only eligible to the extent that the 
assistance is necessary to help the program participant regain stability 
in the program participant's current permanent housing or move into 
other permanent housing and achieve stability in that housing. 
Homelessness prevention must be provided in accordance with the housing 
relocation and stabilization services requirements in Sec. 576.105, the 
short-term and medium-term rental assistance requirements in 
Sec. 576.106, and the written standards and procedures established under 
Sec. 576.400.



Sec. 576.104  Rapid re-housing assistance component.

    ESG funds may be used to provide housing relocation and 
stabilization services and short- and/or medium-term rental assistance 
as necessary to help a homeless individual or family move as quickly as 
possible into permanent housing and achieve stability in that housing. 
This assistance, referred to as rapid re-housing assistance, may be 
provided to program participants who meet the criteria under paragraph 
(1) of the ``homeless'' definition in Sec. 576.2 or who meet the 
criteria under paragraph (4) of the ``homeless'' definition and live in 
an emergency shelter or other place described in paragraph (1) of the 
``homeless'' definition. The rapid re-housing assistance must be 
provided in accordance with the housing relocation and stabilization 
services requirements in Sec. 576.105, the short- and medium-term rental 
assistance requirements in Sec. 576.106, and the written standards and 
procedures established under Sec. 576.400.



Sec. 576.105  Housing relocation and stabilization services.

    (a) Financial assistance costs. Subject to the general conditions 
under Sec. 576.103 and Sec. 576.104, ESG funds may be used to pay 
housing owners, utility companies, and other third parties for the 
following costs:
    (1) Rental application fees. ESG funds may pay for the rental 
housing application fee that is charged by the owner to all applicants.
    (2) Security deposits. ESG funds may pay for a security deposit that 
is equal to no more than 2 months' rent.

[[Page 191]]

    (3) Last month's rent. If necessary to obtain housing for a program 
participant, the last month's rent may be paid from ESG funds to the 
owner of that housing at the time the owner is paid the security deposit 
and the first month's rent. This assistance must not exceed one month's 
rent and must be included in calculating the program participant's total 
rental assistance, which cannot exceed 24 months during any 3-year 
period.
    (4) Utility deposits. ESG funds may pay for a standard utility 
deposit required by the utility company for all customers for the 
utilities listed in paragraph (5) of this section.
    (5) Utility payments. ESG funds may pay for up to 24 months of 
utility payments per program participant, per service, including up to 6 
months of utility payments in arrears, per service. A partial payment of 
a utility bill counts as one month. This assistance may only be provided 
if the program participant or a member of the same household has an 
account in his or her name with a utility company or proof of 
responsibility to make utility payments. Eligible utility services are 
gas, electric, water, and sewage. No program participant shall receive 
more than 24 months of utility assistance within any 3-year period.
    (6) Moving costs. ESG funds may pay for moving costs, such as truck 
rental or hiring a moving company. This assistance may include payment 
of temporary storage fees for up to 3 months, provided that the fees are 
accrued after the date the program participant begins receiving 
assistance under paragraph (b) of this section and before the program 
participant moves into permanent housing. Payment of temporary storage 
fees in arrears is not eligible.
    (7) If a program participant receiving short- or medium-term rental 
assistance under Sec. 576.106 meets the conditions for an emergency 
transfer under 24 CFR 5.2005(e), ESG funds may be used to pay amounts 
owed for breaking a lease to effect an emergency transfer. These costs 
are not subject to the 24-month limit on rental assistance under 
Sec. 576.106.
    (b) Services costs. Subject to the general restrictions under 
Sec. 576.103 and Sec. 576.104, ESG funds may be used to pay the costs of 
providing the following services:
    (1) Housing search and placement. Services or activities necessary 
to assist program participants in locating, obtaining, and retaining 
suitable permanent housing, include the following:
    (i) Assessment of housing barriers, needs, and preferences;
    (ii) Development of an action plan for locating housing;
    (iii) Housing search;
    (iv) Outreach to and negotiation with owners;
    (v) Assistance with submitting rental applications and understanding 
leases;
    (vi) Assessment of housing for compliance with Emergency Solutions 
Grant (ESG) requirements for habitability, lead-based paint, and rent 
reasonableness;
    (vii) Assistance with obtaining utilities and making moving 
arrangements; and
    (viii) Tenant counseling.
    (2) Housing stability case management. ESG funds may be used to pay 
cost of assessing, arranging, coordinating, and monitoring the delivery 
of individualized services to facilitate housing stability for a program 
participant who resides in permanent housing or to assist a program 
participant in overcoming immediate barriers to obtaining housing. This 
assistance cannot exceed 30 days during the period the program 
participant is seeking permanent housing and cannot exceed 24 months 
during the period the program participant is living in permanent 
housing. Component services and activities consist of:
    (A) Using the centralized or coordinated assessment system as 
required under Sec. 576.400(d), to evaluate individuals and families 
applying for or receiving homelessness prevention or rapid re-housing 
assistance;
    (B) Conducting the initial evaluation required under 
Sec. 576.401(a), including verifying and documenting eligibility, for 
individuals and families applying for homelessness prevention or rapid 
re-housing assistance;
    (C) Counseling;
    (D) Developing, securing, and coordinating services and obtaining 
Federal, State, and local benefits;

[[Page 192]]

    (E) Monitoring and evaluating program participant progress;
    (F) Providing information and referrals to other providers;
    (G) Developing an individualized housing and service plan, including 
planning a path to permanent housing stability; and
    (H) Conducting re-evaluations required under Sec. 576.401(b).
    (3) Mediation. ESG funds may pay for mediation between the program 
participant and the owner or person(s) with whom the program participant 
is living, provided that the mediation is necessary to prevent the 
program participant from losing permanent housing in which the program 
participant currently resides.
    (4) Legal services. ESG funds may pay for legal services, as set 
forth in Sec. 576.102(a)(1)(vi), except that the eligible subject 
matters also include landlord/tenant matters, and the services must be 
necessary to resolve a legal problem that prohibits the program 
participant from obtaining permanent housing or will likely result in 
the program participant losing the permanent housing in which the 
program participant currently resides.
    (5) Credit repair. ESG funds may pay for credit counseling and other 
services necessary to assist program participants with critical skills 
related to household budgeting, managing money, accessing a free 
personal credit report, and resolving personal credit problems. This 
assistance does not include the payment or modification of a debt.
    (c) Maximum amounts and periods of assistance. The recipient may set 
a maximum dollar amount that a program participant may receive for each 
type of financial assistance under paragraph (a) of this section. The 
recipient may also set a maximum period for which a program participant 
may receive any of the types of assistance or services under this 
section. However, except for housing stability case management, the 
total period for which any program participant may receive the services 
under paragraph (b) of this section must not exceed 24 months during any 
3-year period. The limits on the assistance under this section apply to 
the total assistance an individual receives, either as an individual or 
as part of a family.
    (d) Use with other subsidies. Financial assistance under paragraph 
(a) of this section cannot be provided to a program participant who is 
receiving the same type of assistance through other public sources or to 
a program participant who has been provided with replacement housing 
payments under the URA, during the period of time covered by the URA 
payments.
    (e) Housing counseling. Housing counseling, as defined in 
Sec. 5.100, that is funded with or provided in connection with ESG funds 
must be carried out in accordance with Sec. 5.111. When recipients or 
subrecipients provide housing services to eligible persons that are 
incidental to a larger set of holistic case management services, these 
services do not meet the definition of housing counseling, as defined in 
Sec. 5.100, and therefore are not required to be carried out in 
accordance with the certification requirements of Sec. 5.111

[76 FR 75974, Dec. 5, 2011,, as amended at 81 FR 80808, Nov. 16, 2016; 
81 FR 90659, Dec. 14, 2016]



Sec. 576.106  Short-term and medium-term rental assistance.

    (a) General provisions. Subject to the general conditions under 
Sec. 576.103 and Sec. 576.104, the recipient or subrecipient may provide 
a program participant with up to 24 months of rental assistance during 
any 3-year period. This assistance may be short-term rental assistance, 
medium-term rental assistance, payment of rental arrears, or any 
combination of this assistance.
    (1) Short-term rental assistance is assistance for up to 3 months of 
rent.
    (2) Medium-term rental assistance is assistance for more than 3 
months but not more than 24 months of rent.
    (3) Payment of rental arrears consists of a one-time payment for up 
to 6 months of rent in arrears, including any late fees on those 
arrears.
    (4) Rental assistance may be tenant-based or project-based, as set 
forth in paragraphs (h) and (i) of this section.
    (b) Discretion to set caps and conditions. Subject to the 
requirements of this section, the recipient may set a maximum amount or 
percentage of

[[Page 193]]

rental assistance that a program participant may receive, a maximum 
number of months that a program participant may receive rental 
assistance, or a maximum number of times that a program participant may 
receive rental assistance. The recipient may also require program 
participants to share in the costs of rent.
    (c) Use with other subsidies. Except for a one-time payment of 
rental arrears on the tenant's portion of the rental payment, rental 
assistance cannot be provided to a program participant who is receiving 
tenant-based rental assistance, or living in a housing unit receiving 
project-based rental assistance or operating assistance, through other 
public sources. Rental assistance may not be provided to a program 
participant who has been provided with replacement housing payments 
under the URA during the period of time covered by the URA payments.
    (d) Rent restrictions. (1) Rental assistance cannot be provided 
unless the rent does not exceed the Fair Market Rent established by HUD, 
as provided under 24 CFR part 888, and complies with HUD's standard of 
rent reasonableness, as established under 24 CFR 982.507.
    (2) For purposes of calculating rent under this section, the rent 
shall equal the sum of the total monthly rent for the unit, any fees 
required for occupancy under the lease (other than late fees and pet 
fees) and, if the tenant pays separately for utilities, the monthly 
allowance for utilities (excluding telephone) established by the public 
housing authority for the area in which the housing is located.
    (e) Rental assistance agreement. The recipient or subrecipient may 
make rental assistance payments only to an owner with whom the recipient 
or subrecipient has entered into a rental assistance agreement. The 
rental assistance agreement must set forth the terms under which rental 
assistance will be provided, including the requirements that apply under 
this section. The rental assistance agreement must provide that, during 
the term of the agreement, the owner must give the recipient or 
subrecipient a copy of any notice to the program participant to vacate 
the housing unit or any complaint used under State or local law to 
commence an eviction action against the program participant. Each rental 
assistance agreement that is executed or renewed on or after December 
16, 2016 must include all protections that apply to tenants and 
applicants under 24 CFR part 5, subpart L, as supplemented by 
Sec. 576.409, except for the emergency transfer plan requirements under 
24 CFR 5.2005(e) and 576.409(d). If the housing is not assisted under 
another ``covered housing program'', as defined in 24 CFR 5.2003, the 
agreement may provide that the owner's obligations under 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking), expire at the end of the rental assistance 
period.
    (f) Late payments. The recipient or subrecipient must make timely 
payments to each owner in accordance with the rental assistance 
agreement. The rental assistance agreement must contain the same payment 
due date, grace period, and late payment penalty requirements as the 
program participant's lease. The recipient or subrecipient is solely 
responsible for paying late payment penalties that it incurs with non-
ESG funds.
    (g) Lease. Each program participant receiving rental assistance must 
have a legally binding, written lease for the rental unit, unless the 
assistance is solely for rental arrears. The lease must be between the 
owner and the program participant. Where the assistance is solely for 
rental arrears, an oral agreement may be accepted in place of a written 
lease, if the agreement gives the program participant an enforceable 
leasehold interest under state law and the agreement and rent owed are 
sufficiently documented by the owner's financial records, rent ledgers, 
or canceled checks. For program participants living in housing with 
project-based rental assistance under paragraph (i) of this section, the 
lease must have an initial term of 1 year. Each lease executed on or 
after December 16, 2016 must include a lease provision or incorporate a 
lease addendum that includes all requirements that apply to tenants, the 
owner or lease under 24 CFR part 5, subpart L (Protection for Victims of 
Domestic

[[Page 194]]

Violence, Dating Violence, Sexual Assault, or Stalking), as supplemented 
by 24 CFR 576.409, including the prohibited bases for eviction and 
restrictions on construing lease terms under 24 CFR 5.2005(b) and (c). 
If the housing is not assisted under another ``covered housing 
program,'' as defined in 24 CFR 5.2003, the lease provision or lease 
addendum may be written to expire at the end of the rental assistance 
period.
    (h) Tenant-based rental assistance. (1) A program participant who 
receives tenant-based rental assistance may select a housing unit in 
which to live and may move to another unit or building and continue to 
receive rental assistance, as long as the program participant continues 
to meet the program requirements.
    (2) The recipient may require that all program participants live 
within a particular area for the period in which the rental assistance 
is provided.
    (3) The rental assistance agreement with the owner must terminate 
and no further rental assistance payments under that agreement may be 
made if:
    (i) The program participant moves out of the housing unit for which 
the program participant has a lease;
    (ii) The lease terminates and is not renewed; or
    (iii) The program participant becomes ineligible to receive ESG 
rental assistance.
    (i) Project-based rental assistance. If the recipient or 
subrecipient identifies a permanent housing unit that meets ESG 
requirements and becomes available before a program participant is 
identified to lease the unit, the recipient or subrecipient may enter 
into a rental assistance agreement with the owner to reserve the unit 
and subsidize its rent in accordance with the following requirements:
    (1) The rental assistance agreement may cover one or more permanent 
housing units in the same building. Each unit covered by the rental 
assistance agreement (``assisted unit'') may only be occupied by program 
participants, except as provided under paragraph (i)(4) of this section.
    (2) The recipient or subrecipient may pay up to 100 percent of the 
first month's rent, provided that a program participant signs a lease 
and moves into the unit before the end of the month for which the first 
month's rent is paid. The rent paid before a program participant moves 
into the unit must not exceed the rent to be charged under the program 
participant's lease and must be included when determining that program 
participant's total rental assistance.
    (3) The recipient or subrecipient may make monthly rental assistance 
payments only for each whole or partial month an assisted unit is leased 
to a program participant. When a program participant moves out of an 
assisted unit, the recipient or subrecipient may pay the next month's 
rent, i.e., the first month's rent for a new program participant, as 
provided in paragraph (i)(2) of this section.
    (4) The program participant's lease must not condition the term of 
occupancy to the provision of rental assistance payments. If the program 
participant is determined ineligible or reaches the maximum number of 
months over which rental assistance can be provided, the recipient or 
subrecipient must suspend or terminate the rental assistance payments 
for the unit. If the payments are suspended, the individual or family 
may remain in the assisted unit as permitted under the lease, and the 
recipient or subrecipient may resume payments if the individual or 
family again becomes eligible and needs further rental assistance. If 
the payments are terminated, the rental assistance may be transferred to 
another available unit in the same building, provided that the other 
unit meets all ESG requirements.
    (5) The rental assistance agreement must have an initial term of one 
year. When a new program participant moves into an assisted unit, the 
term of the rental assistance agreement may be extended to cover the 
initial term of the program participant's lease. If the program 
participant's lease is renewed, the rental assistance agreement may be 
renewed or extended, as needed, up to the maximum number of months for 
which the program participant remains eligible. However, under no 
circumstances may the recipient or subrecipient commit ESG funds to be 
expended beyond the expenditure deadline in Sec. 576.203 or commit funds 
for a

[[Page 195]]

future ESG grant before the grant is awarded.
    (j) Changes in household composition. The limits on the assistance 
under this section apply to the total assistance an individual receives, 
either as an individual or as part of a family.

[76 FR 75974, Dec. 5, 2011,, as amended at 81 FR 80808, Nov. 16, 2016]



Sec. 576.107  HMIS component.

    (a) Eligible costs. (1) The recipient or subrecipient may use ESG 
funds to pay the costs of contributing data to the HMIS designated by 
the Continuum of Care for the area, including the costs of:
    (i) Purchasing or leasing computer hardware;
    (ii) Purchasing software or software licenses;
    (iii) Purchasing or leasing equipment, including telephones, fax 
machines, and furniture;
    (iv) Obtaining technical support;
    (v) Leasing office space;
    (vi) Paying charges for electricity, gas, water, phone service, and 
high-speed data transmission necessary to operate or contribute data to 
the HMIS;
    (vii) Paying salaries for operating HMIS, including:
    (A) Completing data entry;
    (B) Monitoring and reviewing data quality;
    (C) Completing data analysis;
    (D) Reporting to the HMIS Lead;
    (F) Training staff on using the HMIS or comparable database; and
    (G) Implementing and complying with HMIS requirements;
    (viii) Paying costs of staff to travel to and attend HUD-sponsored 
and HUD-approved training on HMIS and programs authorized by Title IV of 
the McKinney-Vento Homeless Assistance Act;
    (ix) Paying staff travel costs to conduct intake; and
    (x) Paying participation fees charged by the HMIS Lead, if the 
recipient or subrecipient is not the HMIS Lead. The HMIS Lead is the 
entity designated by the Continuum of Care to operate the area's HMIS.
    (2) If the recipient is the HMIS lead agency, as designated by the 
Continuum of Care in the most recent fiscal year Continuum of Care 
Homeless Assistance Grants Competition, it may also use ESG funds to pay 
the costs of:
    (i) Hosting and maintaining HMIS software or data;
    (ii) Backing up, recovering, or repairing HMIS software or data;
    (iii) Upgrading, customizing, and enhancing the HMIS;
    (iv) Integrating and warehousing data, including development of a 
data warehouse for use in aggregating data from subrecipients using 
multiple software systems;
    (v) Administering the system;
    (vi) Reporting to providers, the Continuum of Care, and HUD; and
    (vii) Conducting training on using the system or a comparable 
database, including traveling to the training.
    (3) If the subrecipient is a victim services provider or a legal 
services provider, it may use ESG funds to establish and operate a 
comparable database that collects client-level data over time (i.e., 
longitudinal data) and generates unduplicated aggregate reports based on 
the data. Information entered into a comparable database must not be 
entered directly into or provided to an HMIS.
    (b) General restrictions. Activities funded under this section must 
comply with HUD's standards on participation, data collection, and 
reporting under a local HMIS.



Sec. 576.108  Administrative activities.

    (a) Eligible costs. The recipient may use up to 7.5 percent of its 
ESG grant for the payment of administrative costs related to the 
planning and execution of ESG activities. This does not include staff 
and overhead costs directly related to carrying out activities eligible 
under Sec. 576.101 through Sec. 576.107, because those costs are 
eligible as part of those activities. Eligible administrative costs 
include:
    (1) General management, oversight and coordination. Costs of overall 
program management, coordination, monitoring, and evaluation. These 
costs include, but are not limited to, necessary expenditures for the 
following:
    (i) Salaries, wages, and related costs of the recipient's staff, the 
staff of subrecipients, or other staff engaged in program 
administration. In charging

[[Page 196]]

costs to this category, the recipient may either include the entire 
salary, wages, and related costs allocable to the program of each person 
whose primary responsibilities with regard to the program involve 
program administration assignments, or the pro rata share of the salary, 
wages, and related costs of each person whose job includes any program 
administration assignments. The recipient may use only one of these 
methods for each fiscal year grant. Program administration assignments 
include the following:
    (A) Preparing program budgets and schedules, and amendments to those 
budgets and schedules;
    (B) Developing systems for assuring compliance with program 
requirements;
    (C) Developing interagency agreements and agreements with 
subrecipients and contractors to carry out program activities;
    (D) Monitoring program activities for progress and compliance with 
program requirements;
    (E) Preparing reports and other documents directly related to the 
program for submission to HUD;
    (F) Coordinating the resolution of audit and monitoring findings;
    (G) Evaluating program results against stated objectives; and
    (H) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraph (a)(1)(i)(A) through (G) of this section.
    (ii) Travel costs incurred for monitoring of subrecipients;
    (iii) Administrative services performed under third-party contracts 
or agreements, including general legal services, accounting services, 
and audit services; and
    (iv) Other costs for goods and services required for administration 
of the program, including rental or purchase of equipment, insurance, 
utilities, office supplies, and rental and maintenance (but not 
purchase) of office space.
    (2) Training on ESG requirements. Costs of providing training on ESG 
requirements and attending HUD-sponsored ESG trainings.
    (3) Consolidated plan. Costs of preparing and amending the ESG and 
homelessness-related sections of the consolidated plan in accordance 
with ESG requirements and 24 CFR part 91.
    (4) Environmental review. Costs of carrying out the environmental 
review responsibilities under Sec. 576.407.
    (b) Sharing requirement. (1) States. If the recipient is a State, 
the recipient must share its funds for administrative costs with its 
subrecipients that are units of general purpose local government. The 
amount shared must be reasonable under the circumstances. The recipient 
may share its funds for administrative costs with its subrecipients that 
are private nonprofit organizations.
    (2) Territories, metropolitan cities, and urban counties. If the 
recipient is a territory, metropolitan city, or urban county, the 
recipient may share its funds for administrative costs with its 
subrecipients.



Sec. 576.109  Indirect costs.

    (a) In general. ESG grant funds may be used to pay indirect costs in 
accordance with 2 CFR part 200, subpart E.
    (b) Allocation. Indirect costs may be allocated to each eligible 
activity under Sec. 576.101 through Sec. 576.108, so long as that 
allocation is consistent with 2 CFR part 200, subpart E.
    (c) Expenditure limits. The indirect costs charged to an activity 
subject to an expenditure limit under Sec. 576.100 must be added to the 
direct costs charged for that activity when determining the total costs 
subject to the expenditure limit.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



                    Subpart C_Award and Use of Funds



Sec. 576.200  Submission requirements and grant approval.

    (a) Application submission and approval. In addition to meeting the 
application submission requirements in 24 CFR part 5, subpart K, each 
State, urban county, or metropolitan city must submit and obtain HUD 
approval of a consolidated plan in accordance with the requirements in 
24 CFR part

[[Page 197]]

91, and each territory must submit and obtain HUD approval of a 
consolidated plan in accordance with the requirements that apply to 
local governments under 24 CFR part 91. As provided under 2 CFR 200.207, 
HUD may impose special conditions or restrictions on a grant, if the 
recipient is determined to be high risk.
    (b) Amendments. The recipient must amend its approved consolidated 
plan in order to make a change in its allocation priorities; make a 
change in its method of distributing funds; carry out an activity not 
previously described in the plan; or change the purpose, scope, 
location, or beneficiaries of an activity. The amendment must be 
completed and submitted to HUD in accordance with the requirements under 
24 CFR 91.505.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 576.201  Matching requirement.

    (a) The recipient must make matching contributions to supplement the 
recipient's ESG program in an amount that equals the recipient's fiscal 
year grant for ESG. This amount may include contributions to any project 
under the recipient's ESG program, including any subrecipient's ESG 
project, if the requirements in this section are met. The first $100,000 
of a State's fiscal year grant is not required to be matched, but the 
benefit of this exception must pass to the state's subrecipients that 
are least capable of providing matching contributions. The match 
requirements under this section do not apply if the recipient is a 
territory.
    (b) To be recognized as match for ESG, each contribution must meet 
the requirements under 2 CFR 200.306, except that:
    (1) Notwithstanding 2 CFR 200.306(b)(4), matching contributions are 
not subject to the expenditure limits in Sec. 576.100; and
    (2) Notwithstanding 2 CFR 200.306(b)(5), the recipient may use funds 
from another Federal program as match for ESG, unless doing so would 
violate a specific statutory prohibition or the recipient or 
subrecipient counts ESG funds as match for that program.
    (c) The recipient may count as match the value specified in 2 CFR 
200.306(d) for any building the recipient or subrecipient donates for 
long-term use in the recipient's ESG program, provided that depreciation 
on the building is not counted as match or charged to any Federal award. 
If a third party donates a building to the recipient or subrecipient, 
the recipient may count as match either depreciation of the building and 
fair rental charges for the land for each year the building is used for 
the recipient's ESG program or, if the building is donated for long-term 
use in the recipient's ESG program, the fair market value of the capital 
assets, as specified in 2 CFR 200.306(h)(2), (i), and (j). To qualify as 
a donation for long-term use, the donation must be evidenced by a 
recorded deed or use restriction that is effective for at least 10 years 
after the donation date. If the donated building is renovated with ESG 
funds, the minimum period of use under Sec. 576.102(c) may increase the 
period for which the building must be used in the recipient's ESG 
program.
    (d) Eligible types of matching contributions. The matching 
requirement may be met by one or both of the following:
    (1) Cash contributions. Cash expended for allowable costs, as 
defined in OMB Circulars A-87 (2 CFR part 225) and A-122 (2 CFR part 
230), of the recipient or subrecipient.
    (2) Noncash contributions. The value of any real property, 
equipment, goods, or services contributed to the recipient's or 
subrecipient's ESG program, provided that if the recipient or 
subrecipient had to pay for them with grant funds, the costs would have 
been allowable. Noncash contributions may also include the purchase 
value of any donated building.
    (e) Calculating the amount of noncash contributions. (1) To 
determine the value of any donated material or building, or of any 
lease, the recipient must use a method reasonably calculated to 
establish the fair market value.
    (2) Services provided by individuals must be valued at rates 
consistent with those ordinarily paid for similar work in the 
recipient's or subrecipient's organization. If the recipient or 
subrecipient does not have employees performing similar work, the rates 
must be consistent with those ordinarily

[[Page 198]]

paid by other employers for similar work in the same labor market.
    (3) Some noncash contributions are real property, equipment, goods, 
or services that, if the recipient or subrecipient had to pay for them 
with grant funds, the payments would have been indirect costs. Matching 
credit for these contributions must be given only if the recipient or 
subrecipient has established, along with its regular indirect cost rate, 
a special rate for allocating to individual projects or programs the 
value of those contributions.
    (f) Costs paid by program income. Costs paid by program income shall 
count toward meeting the recipient's matching requirements, provided the 
costs are eligible ESG costs that supplement the recipient's ESG 
program.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 576.202  Means of carrying out grant activities.

    (a) States. If the recipient is a State, the recipient may use an 
amount consistent with the restrictions in Sec. 576.100 and Sec. 576.108 
to carry out administrative activities through its employees or 
procurement contracts. If the recipient is a State, and has been 
identified as the HMIS lead by the Continuum of Care, the State may use 
funds to carry out HMIS activities set forth in Sec. 576.107(a)(2). The 
recipient must subgrant the remaining funds in its fiscal year grant to:
    (1) Units of general purpose local government in the State, which 
may include metropolitan cities and urban counties that receive ESG 
funds directly from HUD; or
    (2) Private nonprofit organizations, provided that for emergency 
shelter activities the recipient obtains a certification of approval 
from the unit of general purpose local government for the geographic 
area in which those activities are to be carried out.
    (b) Recipients other than States; subrecipients. The recipient, if 
it is not a State, and all subrecipients may carry out all eligible 
activities through their employees, procurement contracts, or subgrants 
to private nonprofit organizations. If the recipient is an urban county, 
it may carry out activities through any of its member governments, so 
long as the county applies to its members the same requirements that are 
applicable to local government subrecipients under this part.



Sec. 576.203  Obligation, expenditure, and payment requirements.

    (a) Obligation of funds. (1) Funds allocated to States. (i) Within 
60 days from the date that HUD signs the grant agreement with the State 
(or grant amendment for reallocated funds), the recipient must obligate 
the entire grant, except the amount for its administrative costs. This 
requirement is met by a subgrant agreement with, or a letter of award 
requiring payment from the grant to, a subrecipient.
    (ii) Within 120 days after the date that the State obligates its 
funds to a unit of general purpose local government, the subrecipient 
must obligate all of those funds by a subgrant agreement with, or a 
letter of award requiring payment to, a private nonprofit organization; 
a procurement contract; or the written designation of a department 
within the government of the subrecipient to directly carry out an 
eligible activity.
    (2) Funds allocated to metropolitan cities, urban counties, and 
territories. Within 180 days after the date that HUD signs the grant 
agreement (or a grant amendment for reallocation of funds) with the 
metropolitan city, urban county, or territory, the recipient must 
obligate all the grant amount, except the amount for its administrative 
costs. This requirement is met by an agreement with, or a letter of 
award requiring payment to, a subrecipient; a procurement contract; or a 
written designation of a department within the government of the 
recipient to directly carry out an eligible activity. If the recipient 
is an urban county, this requirement may also be met with an agreement 
with, or letter of award requiring payment to, a member government, 
which has designated a department to directly carry out an eligible 
activity.
    (b) Expenditures. The recipient must draw down and expend funds from 
each year's grant not less than once during each quarter of the 
recipient's program year. All of the recipient's grant must be expended 
for eligible activity costs

[[Page 199]]

within 24 months after the date HUD signs the grant agreement with the 
recipient. For the purposes of this paragraph, expenditure means either 
an actual cash disbursement for a direct charge for a good or service or 
an indirect cost or the accrual of a direct charge for a good or service 
or an indirect cost.
    (c) Payments to subrecipients. The recipient must pay each 
subrecipient for allowable costs within 30 days after receiving the 
subrecipient's complete payment request. This requirement also applies 
to each subrecipient that is a unit of general purpose local government.



                         Subpart D_Reallocations



Sec. 576.300  In general.

    (1) Funds not awarded by HUD due to failure by the recipient to 
submit and obtain HUD approval of a consolidated plan will be 
reallocated in accordance with Secs. 576.301 through 576.303.
    (2) Recaptured funds will be awarded by formula. In October and 
April each year, HUD will determine if the amount of recaptured funds is 
at least 30 percent of the most recent fiscal year appropriation. If so, 
HUD will amend all existing grants and reallocate the funds. If the 
amount is less than 30 percent of the most recent fiscal year 
appropriation, the funds will be reallocated in conjunction with the 
next fiscal year's allocation of funding.



Sec. 576.301  Metropolitan cities and urban counties.

    Grant funds returned by a metropolitan city or urban county will be 
reallocated as follows:
    (a) Eligible recipient. HUD will make the funds available to the 
State in which the city or county is located.
    (b) Notification of availability. HUD will promptly notify the State 
of the availability of the amounts to be reallocated.
    (c) Application requirement. Within 45 days after the date of 
notification, the State must submit to HUD a substantial amendment to 
its consolidated plan in accordance with 24 CFR part 91.
    (d) Restrictions that apply to reallocated amounts. The same 
requirements that apply to grant funds allocated under Sec. 576.3 apply 
to grant funds reallocated under this section, except that the State 
must distribute the reallocated funds:
    (1) To private nonprofit organizations and units of general purpose 
local government in the geographic area in which the metropolitan city 
or urban county is located;
    (2) If funds remain, to private nonprofit organizations and units of 
general purpose local government located throughout the State.



Sec. 576.302  States.

    Grant funds returned by a State will be reallocated as follows:
    (a) Eligible recipients. HUD will make the funds available:
    (1) To metropolitan cities and urban counties in the State that were 
not allocated funds under Sec. 576.3 because the amount they would have 
been allocated did not meet the minimum requirement under 
Sec. 576.3(b)(2);
    (2) If funds remain, to county governments in the State other than 
urban counties;
    (3) Then, if funds remain, to metropolitan cities and urban counties 
in the State that were allocated funds under Sec. 576.3.
    (b) Notification of availability. HUD will notify eligible 
recipients of the availability of the funds by a notification letter or 
Federal Register notice, which will specify how the awards of funds will 
be made.
    (c) Application requirements. Within 45 days after the date of 
notification, the eligible recipient must submit to HUD:
    (1) A substantial amendment to its approved consolidated plan in 
accordance with 24 CFR part 91; or
    (2) If the eligible recipient does not have an approved consolidated 
plan, an abbreviated consolidated plan that meets the requirements in 
the Federal Register notice or notification letter from HUD.
    (d) Restrictions that apply to reallocated amounts. The same 
requirements that apply to grant funds allocated under Sec. 576.3 apply 
to grant funds reallocated under this section.



Sec. 576.303  Territories.

    (a) General. Grant funds returned by a territory will be reallocated 
to other

[[Page 200]]

territories, then if funds remain, to States.
    (b) Allocation method. The funds will be allocated as follows:
    (1) For territories, the funds will be allocated among the 
territories in direct proportion with each territory's share of the 
total population of all of the eligible territories. If HUD determines 
that a territory failed to spend its funds in accordance with ESG 
requirements, then HUD may exclude the territory from the allocation of 
reallocation amounts under this section.
    (2) For States, the funds will be allocated to each State in direct 
proportion with each State's share of the total amount of funds 
allocated to States under Sec. 576.3.
    (c) Notification of availability. HUD will notify eligible 
recipients of the availability of the fund by a letter or Federal 
Register notice, which will specify how the awards of funds will be 
made.
    (d) Application requirements. Within 45 days after the date of 
notification, the eligible recipient must submit to HUD a substantial 
amendment to its consolidated plan in accordance with 24 CFR part 91.
    (e) Restrictions that apply to reallocated amounts. The same 
requirements that apply to grant funds allocated under Sec. 576.3 apply 
to grant funds reallocated under this section.



                     Subpart E_Program Requirements



Sec. 576.400  Area-wide systems coordination requirements.

    (a) Consultation with Continuums of Care. The recipient must consult 
with each Continuum of Care that serves the recipient's jurisdiction in 
determining how to allocate ESG funds each program year; developing the 
performance standards for, and evaluating the outcomes of, projects and 
activities assisted by ESG funds; and developing funding, policies, and 
procedures for the administration and operation of the HMIS.
    (b) Coordination with other targeted homeless services. The 
recipient and its subrecipients must coordinate and integrate, to the 
maximum extent practicable, ESG-funded activities with other programs 
targeted to homeless people in the area covered by the Continuum of Care 
or area over which the services are coordinated to provide a strategic, 
community-wide system to prevent and end homelessness for that area. 
These programs include:
    (1) Shelter Plus Care Program (24 CFR part 582);
    (2) Supportive Housing Program (24 CFR part 583);
    (3) Section 8 Moderate Rehabilitation Program for Single Room 
Occupancy Program for Homeless Individuals (24 CFR part 882);
    (4) HUD--Veterans Affairs Supportive Housing (HUD-VASH) (division K, 
title II, Consolidated Appropriations Act, 2008, Pub. L. 110-161 (2007), 
73 FR 25026 (May 6, 2008));
    (5) Education for Homeless Children and Youth Grants for State and 
Local Activities (title VII-B of the McKinney-Vento Homeless Assistance 
Act (42 U.S.C. 11431 et seq.));
    (6) Grants for the Benefit of Homeless Individuals (section 506 of 
the Public Health Services Act (42 U.S.C. 290aa-5));
    (7) Healthcare for the Homeless (42 CFR part 51c);
    (8) Programs for Runaway and Homeless Youth (Runaway and Homeless 
Youth Act (42 U.S.C. 5701 et seq.));
    (9) Projects for Assistance in Transition from Homelessness (part C 
of title V of the Public Health Service Act (42 U.S.C. 290cc-21 et 
seq.));
    (10) Services in Supportive Housing Grants (section 520A of the 
Public Health Service Act);
    (11) Emergency Food and Shelter Program (title III of the McKinney-
Vento Homeless Assistance Act (42 U.S.C. 11331 et seq.));
    (12) Transitional Housing Assistance Grants for Victims of Sexual 
Assault, Domestic Violence, Dating Violence, and Stalking Program 
(section 40299 of the Violent Crime Control and Law Enforcement Act (42 
U.S.C. 13975));
    (13) Homeless Veterans Reintegration Program (section 5(a)(1)) of 
the Homeless Veterans Comprehensive Assistance Act (38 U.S.C. 2021);
    (14) Domiciliary Care for Homeless Veterans Program (38 U.S.C. 
2043);
    (15) VA Homeless Providers Grant and Per Diem Program (38 CFR part 
61);

[[Page 201]]

    (16) Health Care for Homeless Veterans Program (38 U.S.C. 2031);
    (17) Homeless Veterans Dental Program (38 U.S.C. 2062);
    (18) Supportive Services for Veteran Families Program (38 CFR part 
62); and
    (19) Veteran Justice Outreach Initiative (38 U.S.C. 2031).
    (c) System and program coordination with mainstream resources. The 
recipient and its subrecipients must coordinate and integrate, to the 
maximum extent practicable, ESG-funded activities with mainstream 
housing, health, social services, employment, education, and youth 
programs for which families and individuals at risk of homelessness and 
homeless individuals and families may be eligible. Examples of these 
programs include:
    (1) Public housing programs assisted under section 9 of the U.S. 
Housing Act of 1937 (42 U.S.C. 1437g) (24 CFR parts 905, 968, and 990);
    (2) Housing programs receiving tenant-based or project-based 
assistance under section 8 of the U.S. Housing Act of 1937 (42 U.S.C. 
1437f) (respectively 24 CFR parts 982 and 983);
    (3) Supportive Housing for Persons with Disabilities (Section 811) 
(24 CFR part 891);
    (4) HOME Investment Partnerships Program (24 CFR part 92);
    (5) Temporary Assistance for Needy Families (TANF) (45 CFR parts 
260-265);
    (6) Health Center Program (42 CFR part 51c);
    (7) State Children's Health Insurance Program (42 CFR part 457):
    (8) Head Start (45 CFR chapter XIII, subchapter B);
    (9) Mental Health and Substance Abuse Block Grants (45 CFR part 96); 
and
    (10) Services funded under the Workforce Investment Act (29 U.S.C. 
2801 et seq.).
    (d) Centralized or coordinated assessment. Once the Continuum of 
Care has developed a centralized assessment system or a coordinated 
assessment system in accordance with requirements to be established by 
HUD, each ESG-funded program or project within the Continuum of Care's 
area must use that assessment system. The recipient and subrecipient 
must work with the Continuum of Care to ensure the screening, assessment 
and referral of program participants are consistent with the written 
standards required by paragraph (e) of this section. A victim service 
provider may choose not to use the Continuum of Care's centralized or 
coordinated assessment system.
    (e) Written standards for providing ESG assistance. (1) If the 
recipient is a metropolitan city, urban county, or territory, the 
recipient must have written standards for providing Emergency Solutions 
Grant (ESG) assistance and must consistently apply those standards for 
all program participants. The recipient must describe these standards in 
its consolidated plan.
    (2) If the recipient is a state:
    (i) The recipient must establish and consistently apply, or require 
that its subrecipients establish and consistently apply, written 
standards for providing ESG assistance. If the written standards are 
established by the subrecipients, the recipient may require these 
written standards to be:
    (A) Established for each area covered by a Continuum of Care or area 
over which the services are coordinated and followed by each 
subrecipient providing assistance in that area; or
    (B) Established by each subrecipient and applied consistently within 
the subrecipient's program.
    (ii) Written standards developed by the state must be included in 
the state's Consolidated Plan. If the written standards are developed by 
its subrecipients, the recipient must describe its requirements for the 
establishment and implementation of these standards in the state's 
Consolidated Plan.
    (3) At a minimum these written standards must include:
    (i) Standard policies and procedures for evaluating individuals' and 
families' eligibility for assistance under Emergency Solutions Grant 
(ESG);
    (ii) Standards for targeting and providing essential services 
related to street outreach;
    (iii) Policies and procedures for admission, diversion, referral, 
and discharge by emergency shelters assisted under ESG, including 
standards regarding length of stay, if any, and safeguards to meet the 
safety and shelter

[[Page 202]]

needs of special populations, e.g., victims of domestic violence, dating 
violence, sexual assault, and stalking; and individuals and families who 
have the highest barriers to housing and are likely to be homeless the 
longest;
    (iv) Policies and procedures for assessing, prioritizing, and 
reassessing individuals' and families' needs for essential services 
related to emergency shelter;
    (v) Policies and procedures for coordination among emergency shelter 
providers, essential services providers, homelessness prevention, and 
rapid re-housing assistance providers; other homeless assistance 
providers; and mainstream service and housing providers (see 
Sec. 576.400(b) and (c) for a list of programs with which ESG-funded 
activities must be coordinated and integrated to the maximum extent 
practicable);
    (vi) Policies and procedures for determining and prioritizing which 
eligible families and individuals will receive homelessness prevention 
assistance and which eligible families and individuals will receive 
rapid re-housing assistance (these policies must include the emergency 
transfer priority required under Sec. 576.409);
    (vii) Standards for determining what percentage or amount of rent 
and utilities costs each program participant must pay while receiving 
homelessness prevention or rapid re-housing assistance;
    (viii) Standards for determining how long a particular program 
participant will be provided with rental assistance and whether and how 
the amount of that assistance will be adjusted over time; and
    (ix) Standards for determining the type, amount, and duration of 
housing stabilization and/or relocation services to provide to a program 
participant, including the limits, if any, on the homelessness 
prevention or rapid re-housing assistance that each program participant 
may receive, such as the maximum amount of assistance, maximum number of 
months the program participant receive assistance; or the maximum number 
of times the program participant may receive assistance.
    (f) Participation in HMIS. The recipient must ensure that data on 
all persons served and all activities assisted under ESG are entered 
into the applicable community-wide HMIS in the area in which those 
persons and activities are located, or a comparable database, in 
accordance with HUD's standards on participation, data collection, and 
reporting under a local HMIS. If the subrecipient is a victim service 
provider or a legal services provider, it may use a comparable database 
that collects client-level data over time (i.e., longitudinal data) and 
generates unduplicated aggregate reports based on the data. Information 
entered into a comparable database must not be entered directly into or 
provided to an HMIS.

[76 FR 75974, Dec. 5, 2011, as amended at 81 FR 80808, Nov. 16, 2016]



Sec. 576.401  Evaluation of program participant eligibility and needs.

    (a) Evaluations. The recipient or its subrecipient must conduct an 
initial evaluation to determine the eligibility of each individual or 
family's eligibility for ESG assistance and the amount and types of 
assistance the individual or family needs to regain stability in 
permanent housing. These evaluations must be conducted in accordance 
with the centralized or coordinated assessment requirements set forth 
under Sec. 576.400(d) and the written standards established under 
Sec. 576.400(e).
    (b) Re-evaluations for homelessness prevention and rapid re-housing 
assistance. (1) The recipient or subrecipient must re-evaluate the 
program participant's eligibility and the types and amounts of 
assistance the program participant needs not less than once every 3 
months for program participants receiving homelessness prevention 
assistance, and not less than once annually for program participants 
receiving rapid re-housing assistance. At a minimum, each re-evaluation 
of eligibility must establish that:
    (i) The program participant does not have an annual income that 
exceeds 30 percent of median family income for the area, as determined 
by HUD; and
    (ii) The program participant lacks sufficient resources and support 
networks necessary to retain housing without ESG assistance.

[[Page 203]]

    (2) The recipient or subrecipient may require each program 
participant receiving homelessness prevention or rapid re-housing 
assistance to notify the recipient or subrecipient regarding changes in 
the program participant's income or other circumstances (e.g., changes 
in household composition) that affect the program participant's need for 
assistance under ESG. When notified of a relevant change, the recipient 
or subrecipient must re-evaluate the program participant's eligibility 
and the amount and types of assistance the program participant needs.
    (c) Annual income. When determining the annual income of an 
individual or family, the recipient or subrecipient must use the 
standard for calculating annual income under 24 CFR 5.609.
    (d) Connecting program participants to mainstream and other 
resources. The recipient and its subrecipients must assist each program 
participant, as needed, to obtain:
    (1) Appropriate supportive services, including assistance in 
obtaining permanent housing, medical health treatment, mental health 
treatment, counseling, supervision, and other services essential for 
achieving independent living; and
    (2) Other Federal, State, local, and private assistance available to 
assist the program participant in obtaining housing stability, 
including:
    (i) Medicaid (42 CFR chapter IV, subchapter C):
    (ii) Supplemental Nutrition Assistance Program (7 CFR parts 271-
283);
    (iii) Women, Infants and Children (WIC) (7 CFR part 246);
    (iv) Federal-State Unemployment Insurance Program (20 CFR parts 601-
603, 606, 609, 614-617, 625, 640, 650);
    (v) Social Security Disability Insurance (SSDI) (20 CFR part 404);
    (vi) Supplemental Security Income (SSI) (20 CFR part 416);
    (vii) Child and Adult Care Food Program (42 U.S.C. 1766(t) (7 CFR 
part 226));
    (viii) Other assistance available under the programs listed in 
Sec. 576.400(c).
    (e) Housing stability case management. (1) While providing 
homelessness prevention or rapid re-housing assistance to a program 
participant, the recipient or subrecipient must:
    (i) Require the program participant to meet with a case manager not 
less than once per month to assist the program participant in ensuring 
long-term housing stability; and
    (ii) Develop a plan to assist the program participant to retain 
permanent housing after the ESG assistance ends, taking into account all 
relevant considerations, such as the program participant's current or 
expected income and expenses; other public or private assistance for 
which the program participant will be eligible and likely to receive; 
and the relative affordability of available housing in the area.
    (2) The recipient or subrecipient is exempt from the requirement 
under paragraph (e)(1)(i) of this section if the Violence Against Women 
Act of 1994 (42 U.S.C. 13701 et seq.) or the Family Violence Prevention 
and Services Act (42 U.S.C. 10401 et seq.) prohibits that recipient or 
subrecipient from making its shelter or housing conditional on the 
participant's acceptance of services.



Sec. 576.402  Terminating assistance.

    (a) In general. If a program participant violates program 
requirements, the recipient or subrecipient may terminate the assistance 
in accordance with a formal process established by the recipient or 
subrecipient that recognizes the rights of individuals affected. The 
recipient or subrecipient must exercise judgment and examine all 
extenuating circumstances in determining when violations warrant 
termination so that a program participant's assistance is terminated 
only in the most severe cases.
    (b) Program participants receiving rental assistance or housing 
relocation and stabilization services. To terminate rental assistance or 
housing relocation and stabilization services to a program participant, 
the required formal process, at a minimum, must consist of:
    (1) Written notice to the program participant containing a clear 
statement of the reasons for termination;
    (2) A review of the decision, in which the program participant is 
given the opportunity to present written or oral objections before a 
person other than the person (or a subordinate of that

[[Page 204]]

person) who made or approved the termination decision; and
    (3) Prompt written notice of the final decision to the program 
participant.
    (c) Ability to provide further assistance. Termination under this 
section does not bar the recipient or subrecipient from providing 
further assistance at a later date to the same family or individual.



Sec. 576.403  Shelter and housing standards.

    (a) Lead-based paint remediation and disclosure. The Lead-Based 
Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential 
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and 
implementing regulations in 24 CFR part 35, subparts A, B, H, J, K, M, 
and R apply to all shelters assisted under ESG program and all housing 
occupied by program participants.
    (b) Minimum standards for emergency shelters. Any building for which 
Emergency Solutions Grant (ESG) funds are used for conversion, major 
rehabilitation, or other renovation, must meet state or local government 
safety and sanitation standards, as applicable, and the following 
minimum safety, sanitation, and privacy standards. Any emergency shelter 
that receives assistance for shelter operations must also meet the 
following minimum safety, sanitation, and privacy standards. The 
recipient may also establish standards that exceed or add to these 
minimum standards.
    (1) Structure and materials. The shelter building must be 
structurally sound to protect residents from the elements and not pose 
any threat to health and safety of the residents. Any renovation 
(including major rehabilitation and conversion) carried out with ESG 
assistance must use Energy Star and WaterSense products and appliances.
    (2) Access. The shelter must be accessible in accordance with 
Section 504 of the Rehabilitation Act (29 U.S.C. 794) and implementing 
regulations at 24 CFR part 8; the Fair Housing Act (42 U.S.C. 3601 et 
seq.) and implementing regulations at 24 CFR part 100; and Title II of 
the Americans with Disabilities Act (42 U.S.C. 12131 et seq.) and 28 CFR 
part 35; where applicable.
    (3) Space and security. Except where the shelter is intended for day 
use only, the shelter must provide each program participant in the 
shelter with an acceptable place to sleep and adequate space and 
security for themselves and their belongings.
    (4) Interior air quality. Each room or space within the shelter must 
have a natural or mechanical means of ventilation. The interior air must 
be free of pollutants at a level that might threaten or harm the health 
of residents.
    (5) Water supply. The shelter's water supply must be free of 
contamination.
    (6) Sanitary facilities. Each program participant in the shelter 
must have access to sanitary facilities that are in proper operating 
condition, are private, and are adequate for personal cleanliness and 
the disposal of human waste.
    (7) Thermal environment. The shelter must have any necessary 
heating/cooling facilities in proper operating condition.
    (8) Illumination and electricity. The shelter must have adequate 
natural or artificial illumination to permit normal indoor activities 
and support health and safety. There must be sufficient electrical 
sources to permit the safe use of electrical appliances in the shelter.
    (9) Food preparation. Food preparation areas, if any, must contain 
suitable space and equipment to store, prepare, and serve food in a safe 
and sanitary manner.
    (10) Sanitary conditions. The shelter must be maintained in a 
sanitary condition.
    (11) Fire safety. There must be at least one working smoke detector 
in each occupied unit of the shelter. Where possible, smoke detectors 
must be located near sleeping areas. The fire alarm system must be 
designed for hearing-impaired residents. All public areas of the shelter 
must have at least one working smoke detector. There must also be a 
second means of exiting the building in the event of fire or other 
emergency.
    (c) Minimum standards for permanent housing. The recipient or 
subrecipient cannot use ESG funds to help a program participant remain 
or move into

[[Page 205]]

housing that does not meet the minimum habitability standards provided 
in this paragraph (c). The recipient may also establish standards that 
exceed or add to these minimum standards.
    (1) Structure and materials. The structures must be structurally 
sound to protect residents from the elements and not pose any threat to 
the health and safety of the residents.
    (2) Space and security. Each resident must be provided adequate 
space and security for themselves and their belongings. Each resident 
must be provided an acceptable place to sleep.
    (3) Interior air quality. Each room or space must have a natural or 
mechanical means of ventilation. The interior air must be free of 
pollutants at a level that might threaten or harm the health of 
residents.
    (4) Water supply. The water supply must be free from contamination.
    (5) Sanitary facilities. Residents must have access to sufficient 
sanitary facilities that are in proper operating condition, are private, 
and are adequate for personal cleanliness and the disposal of human 
waste.
    (6) Thermal environment. The housing must have any necessary 
heating/cooling facilities in proper operating condition.
    (7) Illumination and electricity. The structure must have adequate 
natural or artificial illumination to permit normal indoor activities 
and support health and safety. There must be sufficient electrical 
sources to permit the safe use of electrical appliances in the 
structure.
    (8) Food preparation. All food preparation areas must contain 
suitable space and equipment to store, prepare, and serve food in a safe 
and sanitary manner.
    (9) Sanitary conditions. The housing must be maintained in a 
sanitary condition.
    (10) Fire safety. (i) There must be a second means of exiting the 
building in the event of fire or other emergency.
    (ii) Each unit must include at least one battery-operated or hard-
wired smoke detector, in proper working condition, on each occupied 
level of the unit. Smoke detectors must be located, to the extent 
practicable, in a hallway adjacent to a bedroom. If the unit is occupied 
by hearing impaired persons, smoke detectors must have an alarm system 
designed for hearing-impaired persons in each bedroom occupied by a 
hearing-impaired person.
    (iii) The public areas of all housing must be equipped with a 
sufficient number, but not less than one for each area, of battery-
operated or hard-wired smoke detectors. Public areas include, but are 
not limited to, laundry rooms, community rooms, day care centers, 
hallways, stairwells, and other common areas.



Sec. 576.404  Conflicts of interest.

    (a) Organizational conflicts of interest. The provision of any type 
or amount of ESG assistance may not be conditioned on an individual's or 
family's acceptance or occupancy of emergency shelter or housing owned 
by the recipient, the subrecipient, or a parent or subsidiary of the 
subrecipient. No subrecipient may, with respect to individuals or 
families occupying housing owned by the subrecipient, or any parent or 
subsidiary of the subrecipient, carry out the initial evaluation 
required under Sec. 576.401 or administer homelessness prevention 
assistance under Sec. 576.103. Recipients and subrecipients must also 
maintain written standards of conduct covering organizational conflicts 
of interest required under 2 CFR 200.318.
    (b) Individual conflicts of interest. For the procurement of goods 
and services, the recipient and its subrecipients must comply with 2 CFR 
200.317 and 200.318. For all other transactions and activities, the 
following restrictions apply:
    (1) Conflicts prohibited. No person described in paragraph (b)(2) of 
this section who exercises or has exercised any functions or 
responsibilities with respect to activities assisted under the ESG 
program, or who is in a position to participate in a decision-making 
process or gain inside information with regard to activities assisted 
under the program, may obtain a financial interest or benefit from an 
assisted activity; have a financial interest in any contract, 
subcontract, or agreement with respect to an assisted activity; or have

[[Page 206]]

a financial interest in the proceeds derived from an assisted activity, 
either for him or herself or for those with whom he or she has family or 
business ties, during his or her tenure or during the one-year period 
following his or her tenure.
    (2) Persons covered. The conflict-of- interest provisions of 
paragraph (b)(1) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
recipient or its subrecipients.
    (3) Exceptions. Upon the written request of the recipient, HUD may 
grant an exception to the provisions of this subsection on a case-by-
case basis, taking into account the cumulative effects of the criteria 
in paragraph (b)(3)(ii) of this section, provided that the recipient has 
satisfactorily met the threshold requirements of paragraph (b)(3)(i) of 
this section.
    (i) Threshold requirements. HUD will consider an exception only 
after the recipient has provided the following documentation:
    (A) If the recipient or subrecipient is a government, disclosure of 
the nature of the conflict, accompanied by an assurance that there has 
been public disclosure of the conflict and a description of how the 
public disclosure was made; and
    (B) An opinion of the recipient's attorney that the interest for 
which the exception is sought would not violate state or local law.
    (ii) Factors to be considered for exceptions. In determining whether 
to grant a requested exception after the recipient has satisfactorily 
met the threshold requirements under paragraph (b)(3)(i) of this 
section, HUD must conclude that the exception will serve to further the 
purposes of the ESG program and the effective and efficient 
administration of the recipient's or subrecipient's program or project, 
taking into account the cumulative effect of the following factors, as 
applicable:
    (A) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the program or project that would 
otherwise not be available;
    (B) Whether an opportunity was provided for open competitive bidding 
or negotiation;
    (C) Whether the affected person has withdrawn from his or her 
functions, responsibilities or the decision-making process with respect 
to the specific activity in question;
    (D) Whether the interest or benefit was present before the affected 
person was in the position described in paragraph (b)(1) of this 
section;
    (E) Whether undue hardship results to the recipient, the 
subrecipient, or the person affected, when weighed against the public 
interest served by avoiding the prohibited conflict; and
    (F) Any other relevant considerations.
    (c) Contractors. All contractors of the recipient or subrecipient 
must comply with the same requirements that apply to subrecipients under 
this section.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 576.405  Homeless participation.

    (a) Unless the recipient is a State, the recipient must provide for 
the participation of not less than one homeless individual or formerly 
homeless individual on the board of directors or other equivalent 
policy-making entity of the recipient, to the extent that the entity 
considers and makes policies and decisions regarding any facilities, 
services, or other assistance that receive funding under Emergency 
Solutions Grant (ESG).
    (b) If the recipient is unable to meet requirement under paragraph 
(a), it must instead develop and implement a plan to consult with 
homeless or formerly homeless individuals in considering and making 
policies and decisions regarding any facilities, services, or other 
assistance that receive funding under Emergency Solutions Grant (ESG). 
The plan must be included in the annual action plan required under 24 
CFR 91.220.
    (c) To the maximum extent practicable, the recipient or subrecipient 
must involve homeless individuals and families in constructing, 
renovating, maintaining, and operating facilities assisted under ESG, in 
providing services assisted under ESG, and in providing services for 
occupants of facilities assisted under ESG. This involvement may include 
employment or volunteer services.

[[Page 207]]



Sec. 576.406  Equal participation of faith-based organizations.

    The HUD program requirements in Sec. 5.109 of this title apply to 
the ESG program, including the requirements regarding disposition and 
change in use of real property by a faith-based organization.

[81 FR 19418, Apr. 4, 2016]



Sec. 576.407  Other Federal requirements.

    (a) General. The requirements in 24 CFR part 5, subpart A are 
applicable, including the nondiscrimination and equal opportunity 
requirements at 24 CFR 5.105(a) and the housing counseling requirements 
at 24 CFR 5.111. Section 3 of the Housing and Urban Development Act of 
1968, 12 U.S.C. 1701u, and implementing regulations at 24 CFR part 135 
apply, except that homeless individuals have priority over other Section 
3 residents in accordance with Sec. 576.405(c).
    (b) Affirmative outreach. The recipient or subrecipient must make 
known that use of the facilities, assistance, and services are available 
to all on a nondiscriminatory basis. If it is unlikely that the 
procedures that the recipient or subrecipient intends to use to make 
known the availability of the facilities, assistance, and services will 
to reach persons of any particular race, color, religion, sex, age, 
national origin, familial status, or disability who may qualify for 
those facilities and services, the recipient or subrecipient must 
establish additional procedures that ensure that those persons are made 
aware of the facilities, assistance, and services. The recipient and its 
subrecipients must take appropriate steps to ensure effective 
communication with persons with disabilities including, but not limited 
to, adopting procedures that will make available to interested persons 
information concerning the location of assistance, services, and 
facilities that are accessible to persons with disabilities. Consistent 
with Title VI and Executive Order 13166, recipients and subrecipients 
are also required to take reasonable steps to ensure meaningful access 
to programs and activities for limited English proficiency (LEP) 
persons.
    (c) Uniform requirements. The requirements of 2 CFR part 200 apply 
to the recipient and subrecipients, and:
    (1) Program income may be used as matching contributions, subject to 
the requirements in Sec. 576.201;
    (2) The disposition of real property for which ESG funds are used 
for major rehabilitation, conversion, or other renovation under 
Sec. 576.102 is governed by the minimum period of use requirements under 
Sec. 576.102(c).
    (d) Environmental review responsibilities. (1) Activities under this 
part are subject to environmental review by HUD under 24 CFR part 50. 
The recipient shall supply all available, relevant information necessary 
for HUD to perform for each property any environmental review required 
by 24 CFR part 50. The recipient also shall carry out mitigating 
measures required by HUD or select alternate eligible property. HUD may 
eliminate from consideration any application that would require an 
Environmental Impact Statement (EIS).
    (2) The recipient or subrecipient, or any contractor of the 
recipient or subrecipient, may not acquire, rehabilitate, convert, 
lease, repair, dispose of, demolish, or construct property for a project 
under this part, or commit or expend HUD or local funds for eligible 
activities under this part, until HUD has performed an environmental 
review under 24 CFR part 50 and the recipient has received HUD approval 
of the property.
    (e) Davis-Bacon Act. The provisions of the Davis-Bacon Act (40 
U.S.C. 276a to 276a-5) do not apply to the ESG program.
    (f) Procurement of Recovered Materials. The recipient and its 
contractors must comply with Section 6002 of the Solid Waste Disposal 
Act, as amended by the Resource Conservation and Recovery Act. The 
requirements of Section 6002 include procuring only items designated in 
guidelines of the Environmental Protection Agency (EPA) at 40 CFR part 
247 that contain the highest percentage of recovered materials 
practicable, consistent with maintaining a satisfactory level of 
competition, where the purchase price of the item exceeds $10,000 or the 
value of the

[[Page 208]]

quantity acquired by the preceding fiscal year exceeded $10,000; 
procuring solid waste management services in a manner that maximizes 
energy and resource recovery; and establishing an affirmative 
procurement program for procurement of recovered materials identified in 
the EPA guidelines.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 75939, Dec. 7, 2015; 81 
FR 90660, Dec. 14, 2016]



Sec. 576.408  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of Emergency Solutions Grant (ESG), the recipient and its 
subrecipients must assure that they have taken all reasonable steps to 
minimize the displacement of persons (families, individuals, businesses, 
nonprofit organizations, and farms) as a result of a project assisted 
under Emergency Solutions Grant (ESG).
    (b) Temporary relocation not permitted. No tenant-occupant of 
housing (a dwelling unit) that is converted into an emergency shelter 
may be required to relocate temporarily for a project assisted with ESG 
funds, or be required to move to another unit in the same building/
complex. When a tenant moves for a project assisted with ESG funds under 
conditions that trigger the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (URA), 42 U.S.C. 4601-4655, as 
described in paragraph (c) of this section, the tenant should be treated 
as permanently displaced and offered relocation assistance and payments 
consistent with that paragraph.
    (c) Relocation assistance for displaced persons. (1) In general. A 
displaced person (defined in paragraph (c)(2) of this section) must be 
provided relocation assistance at the levels described in, and in 
accordance with, the URA and 49 CFR part 24. A displaced person must be 
advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601 
et seq.). Whenever possible, minority persons shall be given reasonable 
opportunities to relocate to comparable and suitable decent, safe, and 
sanitary replacement dwellings, not located in an area of minority 
concentration, that are within their financial means. This policy, 
however, does not require providing a person a larger payment than is 
necessary to enable a person to relocate to a comparable replacement 
dwelling. (See 49 CFR 24.205(c)(2)(ii)(D).) As required by Section 504 
of the Rehabilitation Act (29 U.S.C. 794) and 49 CFR part 24, 
replacement dwellings must also contain the accessibility features 
needed by displaced persons with disabilities.
    (2) Displaced Person. (i) For purposes of paragraph (c) of this 
section, the term ``displaced person'' means any person (family, 
individual, business, nonprofit organization, or farm, including any 
corporation, partnership, or association) that moves from real property, 
or moves personal property from real property, permanently, as a direct 
result of acquisition, rehabilitation, or demolition for a project 
assisted under the ESG program. This includes any permanent, involuntary 
move for an assisted project, including any permanent move from the real 
property that is made:
    (A) After the owner (or person in control of the site) issues a 
notice to move permanently from the property or refuses to renew an 
expiring lease, if the move occurs on or after:
    (I) The date of the submission by the recipient (or subrecipient, as 
applicable) of an application for assistance to HUD (or the recipient, 
as applicable) that is later approved and funded if the recipient (or 
subrecipient, as applicable) has site control as evidenced by a deed, 
sales contract, or option contract to acquire the property; or
    (II) The date on which the recipient (or subrecipient, as 
applicable) selects the applicable site, if the recipient (or 
subrecipient, as applicable) does not have site control at the time of 
the application, provided that the recipient (or subrecipient, as 
applicable) eventually obtains control over the site;
    (B) Before the date described in paragraph (c)(2)(i)(A) of this 
section, if the recipient or HUD determines that the displacement 
resulted directly from acquisition, rehabilitation, or demolition for 
the project; or
    (C) By a tenant-occupant of a dwelling unit and the tenant moves 
after execution of the agreement covering

[[Page 209]]

the acquisition, rehabilitation, or demolition of the property for the 
project.
    (ii) Notwithstanding paragraph (c)(2)(i) of this section, a person 
does not qualify as a displaced person if:
    (A) The person has been evicted for cause based upon a serious or 
repeated violation of the terms and conditions of the lease or occupancy 
agreement; violation of applicable Federal, State or local law, or other 
good cause; and the recipient determines that the eviction was not 
undertaken for the purpose of evading the obligation to provide 
relocation assistance.
    (B) The person moved into the property after the submission of the 
application but, before signing a lease and commencing occupancy, was 
provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced), and the fact that the person 
would not qualify as a ``displaced person'' (or for any assistance under 
this section) as a result of the project;
    (C) The person is ineligible under 49 CFR 24.2(a)(9)(ii); or
    (D) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (iii) The recipient or subrecipient may, at any time, request that 
HUD to determine whether a displacement is or would be covered by this 
rule.
    (3) Initiation of negotiations. For purposes of determining the type 
of replacement housing payment assistance to be provided to a displaced 
person pursuant to this section:
    (i) If the displacement is the direct result of privately undertaken 
rehabilitation, demolition, or acquisition of the real property, 
``initiation of negotiations'' means the execution of the agreement 
between the recipient and the subrecipient or the agreement between the 
recipient (or subrecipient, as applicable) and the person owning or 
controlling the property;
    (ii) If site control is only evidenced by an option contract to 
acquire the property, the ``initiation of negotiations'' does not become 
effective until the execution of a written agreement that creates a 
legally enforceable commitment to proceed with the purchase, such as a 
sales contract.
    (d) Real property acquisition requirements. The acquisition of real 
property, whether funded privately or publicly, for a project assisted 
with Emergency Solutions Grant (ESG) funds is subject to the URA and 
Federal governmentwide regulations at 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the recipient's (or 
subrecipient's, if applicable) determination concerning whether the 
person qualifies as a displaced person, or the amount of relocation 
assistance for which the person may be eligible, may file a written 
appeal of that determination with the recipient under 49 CFR 24.10. A 
low-income person who disagrees with the recipient's determination may 
submit a written request for review of that determination by the 
appropriate HUD field office.



Sec. 576.409  Protection for victims of domestic violence, dating violence,
sexual assault, or stalking.

    (a) Applicability of VAWA protections. The core statutory 
protections of VAWA that prohibit denial or termination of assistance or 
eviction solely because an applicant or tenant is a victim of domestic 
violence, dating violence, sexual assault, or stalking applied upon 
enactment of VAWA 2013 on March 7, 2013. The VAWA regulatory 
requirements under 24 CFR part 5, subpart L, as supplemented by this 
section, apply to all eligibility and termination decisions that are 
made with respect to ESG rental assistance on or after December 16, 
2016. The recipient must ensure that the requirements under 24 CFR part 
5, subpart L, are included or incorporated into rental assistance 
agreements and leases as provided in Sec. 576.106(e) and (g).
    (b) Covered housing provider. For the ESG program, ``covered housing 
provider,'' as such term is used in HUD's regulations in 24 CFR part 5, 
subpart L, refers to:
    (1) The recipient or subrecipient that administers the rental 
assistance for the purposes of 24 CFR 5.2005(e);
    (2) The housing owner for the purposes of 24 CFR 5.2005(d)(1), 
(d)(3), and (d)(4) and 5.2009(a);
    (3) The housing owner and the recipient or subrecipient that 
administers

[[Page 210]]

the rental assistance for the purposes of 24 CFR 5.2005(d)(2); and
    (4) The housing owner and the recipient or subrecipient that 
administers the rental assistance for the purposes of 24 CFR 5.2007. 
However, the recipient or subrecipient may limit documentation requests 
under 24 CFR 5.2007 to only the recipient or subrecipient, provided 
that:
    (i) This limitation is made clear in both the notice described under 
24 CFR 5.2005(a)(1) and the rental assistance agreement;
    (ii) The entity designated to receive documentation requests 
determines whether the program participant is entitled to protection 
under VAWA and immediately advise the program participant of the 
determination; and
    (iii) If the program participant is entitled to protection, the 
entity designated to receive documentation requests must notify the 
owner in writing that the program participant is entitled to protection 
under VAWA and work with the owner on the program participant's behalf. 
Any further sharing or disclosure of the program participant's 
information will be subject to the requirements in 24 CFR 5.2007.
    (c) Notification. As provided under 24 CFR 5.2005(a) each recipient 
or subrecipient that determines eligibility for or administers ESG 
rental assistance is responsible for ensuring that the notice and 
certification form described under 24 CFR 5.2005(a)(1) is provided to 
each applicant for ESG rental assistance and each program participant 
receiving ESG rental assistance at each of the following times:
    (1) When an individual or family is denied ESG rental assistance;
    (2) When an individual or family's application for a unit receiving 
project-based rental assistance is denied;
    (3) When a program participant begins receiving ESG rental 
assistance;
    (4) When a program participant is notified of termination of ESG 
rental assistance; and
    (5) When a program participant receives notification of eviction.
    (d) Emergency transfer plan. (1) The recipient must develop the 
emergency transfer plan under 24 CFR 5.2005(e) or, if the recipient is a 
state, require its subrecipients that administer ESG rental assistance 
to develop the emergency transfer plan(s) required under 24 CFR 
5.2005(e). If the state's subrecipients are required to develop the 
plan(s), the recipient must specify whether an emergency transfer plan 
is to be developed for:
    (i) The state as a whole;
    (ii) Each area within the state that is covered by a Continuum of 
Care; or
    (iii) Each subrecipient that administers ESG rental assistance.
    (2) Once the applicable plan is developed in accordance with this 
section, the recipient and each subrecipient that administers ESG rental 
assistance must implement the plan in accordance with 24 CFR 5.2005(e).
    (3) Each emergency transfer plan must meet the requirements in 24 
CFR 5.2005(e) and include the following program requirements:
    (i) For families living in units receiving project-based rental 
assistance (assisted units), the required policies must provide that if 
a program participant qualifies for an emergency transfer, but a safe 
unit is not immediately available for an internal emergency transfer, 
that program participant shall have priority over all other applicants 
for tenant-based rental assistance, utility assistance, and units for 
which project-based rental assistance is provided.
    (ii) For families receiving tenant-based rental assistance, the 
required policies must specify what will happen with respect to the non-
transferring family member(s), if the family separates in order to 
effect an emergency transfer.
    (e) Bifurcation. For the purposes of this part, the following 
requirements shall apply in place of the requirements at 24 CFR 
5.2009(b):
    (1) When a family receiving tenant-based rental assistance separates 
under 24 CFR 5.2009(a), the family's tenant-based rental assistance and 
utility assistance, if any, shall continue for the family member(s) who 
are not evicted or removed.
    (2) If a family living in a unit receiving project-based rental 
assistance separates under 24 CFR 5.2009(a), the family member(s) who 
are not evicted or removed can remain in the assisted unit without 
interruption to the rental

[[Page 211]]

assistance or utility assistance provided for the unit.
    (f) Emergency shelters. The following requirements apply to 
emergency shelters funded under Sec. 576.102:
    (1) No individual or family may be denied admission to or removed 
from the emergency shelter on the basis or as a direct result of the 
fact that the individual or family is or has been a victim of domestic 
violence, dating violence, sexual assault, or stalking, if the 
individual or family otherwise qualifies for admission or occupancy.
    (2) The terms ``affiliated individual,'' ``dating violence,'' 
``domestic violence,'' ``sexual assault,'' and ``stalking'' are defined 
in 24 CFR 5.2003.

[81 FR 80808, Nov. 16, 2016]



                     Subpart F_Grant Administration



Sec. 576.500  Recordkeeping and reporting requirements.

    (a) In general. The recipient must have policies and procedures to 
ensure the requirements of this part are met, including those required 
by 2 CFR part 200. The policies and procedures must be established in 
writing and implemented by the recipient and its subrecipients to ensure 
that ESG funds are used in accordance with the requirements. In 
addition, sufficient records must be established and maintained to 
enable the recipient and HUD to determine whether ESG requirements are 
being met.
    (b) Homeless status. The recipient must maintain and follow written 
intake procedures to ensure compliance with the homeless definition in 
Sec. 576.2. The procedures must require documentation at intake of the 
evidence relied upon to establish and verify homeless status. The 
procedures must establish the order of priority for obtaining evidence 
as third-party documentation first, intake worker observations second, 
and certification from the person seeking assistance third. However, 
lack of third-party documentation must not prevent an individual or 
family from being immediately admitted to emergency shelter, receiving 
street outreach services, or being immediately admitted to shelter or 
receiving services provided by a victim service provider. Records 
contained in an HMIS or comparable database used by victim service or 
legal service providers are acceptable evidence of third-party 
documentation and intake worker observations if the HMIS retains an 
auditable history of all entries, including the person who entered the 
data, the date of entry, and the change made; and if the HMIS prevents 
overrides or changes of the dates on which entries are made.
    (1) If the individual or family qualifies as homeless under 
paragraph (1)(i) or (ii) of the homeless definition in Sec. 576.2, 
acceptable evidence includes a written observation by an outreach worker 
of the conditions where the individual or family was living, a written 
referral by another housing or service provider, or a certification by 
the individual or head of household seeking assistance.
    (2) If the individual qualifies as homeless under paragraph (1)(iii) 
of the homeless definition in Sec. 576.2, because he or she resided in 
an emergency shelter or place not meant for human habitation and is 
exiting an institution where he or she resided for 90 days or less, 
acceptable evidence includes the evidence described in paragraph (b)(1) 
of this section and one of the following:
    (i) Discharge paperwork or a written or oral referral from a social 
worker, case manager, or other appropriate official of the institution, 
stating the beginning and end dates of the time residing in the 
institution. All oral statements must be recorded by the intake worker; 
or
    (ii) Where the evidence in paragraph (b)(2)(i) of this section is 
not obtainable, a written record of the intake worker's due diligence in 
attempting to obtain the evidence described in paragraph (b)(2)(i) and a 
certification by the individual seeking assistance that states he or she 
is exiting or has just exited an institution where he or she resided for 
90 days or less.
    (3) If the individual or family qualifies as homeless under 
paragraph (2) of the homeless definition in Sec. 576.2, because the 
individual or family will imminently lose their housing, the evidence 
must include:

[[Page 212]]

    (i)(A) A court order resulting from an eviction action that requires 
the individual or family to leave their residence within 14 days after 
the date of their application for homeless assistance; or the equivalent 
notice under applicable state law, a Notice to Quit, or a Notice to 
Terminate issued under state law;
    (B) For individuals and families whose primary nighttime residence 
is a hotel or motel room not paid for by charitable organizations or 
federal, state, or local government programs for low-income individuals, 
evidence that the individual or family lacks the resources necessary to 
reside there for more than 14 days after the date of application for 
homeless assistance; or
    (C) An oral statement by the individual or head of household that 
the owner or renter of the housing in which they currently reside will 
not allow them to stay for more than 14 days after the date of 
application for homeless assistance. The intake worker must record the 
statement and certify that it was found credible. To be found credible, 
the oral statement must either: (I) be verified by the owner or renter 
of the housing in which the individual or family resides at the time of 
application for homeless assistance and documented by a written 
certification by the owner or renter or by the intake worker's recording 
of the owner or renter's oral statement; or (II) if the intake worker is 
unable to contact the owner or renter, be documented by a written 
certification by the intake worker of his or her due diligence in 
attempting to obtain the owner or renter's verification and the written 
certification by the individual or head of household seeking assistance 
that his or her statement was true and complete;
    (ii) Certification by the individual or head of household that no 
subsequent residence has been identified; and
    (iii) Certification or other written documentation that the 
individual or family lacks the resources and support networks needed to 
obtain other permanent housing.
    (4) If the individual or family qualifies as homeless under 
paragraph (3) of the homeless definition in Sec. 576.2, because the 
individual or family does not otherwise qualify as homeless under the 
homeless definition but is an unaccompanied youth under 25 years of age, 
or homeless family with one or more children or youth, and is defined as 
homeless under another Federal statute or section 725(2) of the 
McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2)), the 
evidence must include:
    (i) For paragraph (3)(i) of the homeless definition in Sec. 576.2, 
certification of homeless status by the local private nonprofit 
organization or state or local governmental entity responsible for 
administering assistance under the Runaway and Homeless Youth Act (42 
U.S.C. 5701 et seq.), the Head Start Act (42 U.S.C. 9831 et seq.), 
subtitle N of the Violence Against Women Act of 1994 (42 U.S.C. 14043e 
et seq.), section 330 of the Public Health Service Act (42 U.S.C. 254b), 
the Food and Nutrition Act of 2008 (7 U.S.C. 2011 et seq.), section 17 
of the Child Nutrition Act of 1966 (42 U.S.C. 1786), or subtitle B of 
title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 
et seq.), as applicable;
    (ii) For paragraph (3)(ii) of the homeless definition in Sec. 576.2, 
referral by a housing or service provider, written observation by an 
outreach worker, or certification by the homeless individual or head of 
household seeking assistance;
    (iii) For paragraph (3)(iii) of the homeless definition in 
Sec. 576.2, certification by the individual or head of household and any 
available supporting documentation that the individual or family moved 
two or more times during the 60-day period immediately preceding the 
date of application for homeless assistance, including: recorded 
statements or records obtained from each owner or renter of housing, 
provider of shelter or housing, or social worker, case worker, or other 
appropriate official of a hospital or institution in which the 
individual or family resided; or, where these statements or records are 
unobtainable, a written record of the intake worker's due diligence in 
attempting to obtain these statements or records. Where a move was due 
to the individual or family fleeing domestic violence, dating violence, 
sexual assault, or stalking, then

[[Page 213]]

the intake worker may alternatively obtain a written certification from 
the individual or head of household seeking assistance that they were 
fleeing that situation and that they resided at that address; and
    (iv) For paragraph (3)(iv) of the homeless definition in Sec. 576.2, 
written diagnosis from a professional who is licensed by the state to 
diagnose and treat that condition (or intake staff-recorded observation 
of disability that within 45 days of date of the application for 
assistance is confirmed by a professional who is licensed by the state 
to diagnose and treat that condition); employment records; department of 
corrections records; literacy, English proficiency tests; or other 
reasonable documentation of the conditions required under paragraph 
(3)(iv) of the homeless definition.
    (5) If the individual or family qualifies under paragraph (4) of the 
homeless definition in Sec. 576.2, because the individual or family is 
fleeing domestic violence, dating violence, sexual assault, stalking, or 
other dangerous or life-threatening conditions related to violence, then 
acceptable evidence includes an oral statement by the individual or head 
of household seeking assistance that they are fleeing that situation, 
that no subsequent residence has been identified and that they lack the 
resources or support networks, e.g., family, friends, faith-based or 
other social networks, needed to obtain other housing. If the individual 
or family is receiving shelter or services provided by a victim service 
provider, the oral statement must be documented by either a 
certification by the individual or head of household; or a certification 
by the intake worker. Otherwise, the oral statement that the individual 
or head of household seeking assistance has not identified a subsequent 
residence and lacks the resources or support networks, e.g., family, 
friends, faith-based or other social networks, needed to obtain housing 
must be documented by a certification by the individual or head of 
household that the oral statement is true and complete, and, where the 
safety of the individual or family would not be jeopardized, the 
domestic violence, dating violence, sexual assault, stalking, or other 
dangerous or life-threatening condition must be verified by a written 
observation by the intake worker or a written referral by a housing or 
service provider, social worker, legal assistance provider, health-care 
provider, law enforcement agency, legal assistance provider, pastoral 
counselor, or any other organization from whom the individual or head of 
household has sought assistance for domestic violence, dating violence, 
sexual assault, or stalking. The written referral or observation need 
only include the minimum amount of information necessary to document 
that the individual or family is fleeing, or attempting to flee domestic 
violence, dating violence, sexual assault, and stalking.
    (c) At risk of homelessness status. For each individual or family 
who receives Emergency Solutions Grant (ESG) homelessness prevention 
assistance, the records must include the evidence relied upon to 
establish and verify the individual or family's ``at risk of 
homelessness'' status. This evidence must include an intake and 
certification form that meets HUD specifications and is completed by the 
recipient or subrecipient. The evidence must also include:
    (1) If the program participant meets the criteria under paragraph 
(1) of the ``at risk of homelessness'' definition in Sec. 576.2:
    (i) The documentation specified under this section for determining 
annual income;
    (ii) The program participant's certification on a form specified by 
HUD that the program participant has insufficient financial resources 
and support networks; e.g., family, friends, faith-based or other social 
networks, immediately available to attain housing stability and meets 
one or more of the conditions under paragraph (1)(iii) of the definition 
of ``at risk of homelessness'' in Sec. 576.2;
    (iii) The most reliable evidence available to show that the program 
participant does not have sufficient resources or support networks; 
e.g., family,

[[Page 214]]

friends, faith-based or other social networks, immediately available to 
prevent them from moving to an emergency shelter or another place 
described in paragraph (1) of the ``homeless'' definition. Acceptable 
evidence includes:
    (A) Source documents (e.g., notice of termination from employment, 
unemployment compensation statement, bank statement, health-care bill 
showing arrears, utility bill showing arrears);
    (B) To the extent that source documents are unobtainable, a written 
statement by the relevant third party (e.g., former employer, public 
administrator, relative) or the written certification by the recipient's 
or subrecipient's intake staff of the oral verification by the relevant 
third party that the applicant meets one or both of the criteria under 
paragraph (1)(ii) of the definition of ``at risk of homelessness'' in 
Sec. 576.2; or
    (C) To the extent that source documents and third-party verification 
are unobtainable, a written statement by the recipient's or 
subrecipient's intake staff describing the efforts taken to obtain the 
required evidence; and
    (iv) The most reliable evidence available to show that the program 
participant meets one or more of the conditions under paragraph (1)(iii) 
of the definition of ``at risk of homelessness'' in Sec. 576.2. 
Acceptable evidence includes:
    (A) Source documents that evidence one or more of the conditions 
under paragraph (1)(iii) of the definition (e.g., eviction notice, 
notice of termination from employment, bank statement);
    (B) To the extent that source documents are unobtainable, a written 
statement by the relevant third party (e.g., former employer, owner, 
primary leaseholder, public administrator, hotel or motel manager) or 
the written certification by the recipient's or subrecipient's intake 
staff of the oral verification by the relevant third party that the 
applicant meets one or more of the criteria under paragraph (1)(iii) of 
the definition of ``at risk of homelessness''; or
    (C) To the extent that source documents and third-party verification 
are unobtainable, a written statement by the recipient's or 
subrecipient's intake staff that the staff person has visited the 
applicant's residence and determined that the applicant meets one or 
more of the criteria under paragraph (1)(iii) of the definition or, if a 
visit is not practicable or relevant to the determination, a written 
statement by the recipient's or subrecipient's intake staff describing 
the efforts taken to obtain the required evidence; or
    (2) If the program participant meets the criteria under paragraph 
(2) or (3) of the ``at risk of homelessness'' definition in Sec. 576.2, 
certification of the child or youth's homeless status by the agency or 
organization responsible for administering assistance under the Runaway 
and Homeless Youth Act (42 U.S.C. 5701 et seq.), the Head Start Act (42 
U.S.C. 9831 et seq.), subtitle N of the Violence Against Women Act of 
1994 (42 U.S.C. 14043e et seq.), section 330 of the Public Health 
Service Act (42 U.S.C. 254b), the Food and Nutrition Act of 2008 (7 
U.S.C. 2011 et seq.), section 17 of the Child Nutrition Act of 1966 (42 
U.S.C. 1786) or subtitle B of title VII of the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11431 et seq.), as applicable.
    (d) Determinations of ineligibility. For each individual and family 
determined ineligible to receive Emergency Solutions Grant (ESG) 
assistance, the record must include documentation of the reason for that 
determination.
    (e) Annual income. For each program participant who receives 
homelessness prevention assistance, or who receives rapid re-housing 
assistance longer than one year, the following documentation of annual 
income must be maintained:
    (1) Income evaluation form containing the minimum requirements 
specified by HUD and completed by the recipient or subrecipient; and
    (2) Source documents for the assets held by the program participant 
and income received over the most recent period for which representative 
data is available before the date of the evaluation (e.g., wage 
statement, unemployment compensation statement, public benefits 
statement, bank statement);
    (3) To the extent that source documents are unobtainable, a written 
statement by the relevant third party (e.g., employer, government 
benefits

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administrator) or the written certification by the recipient's or 
subrecipient's intake staff of the oral verification by the relevant 
third party of the income the program participant received over the most 
recent period for which representative data is available; or
    (4) To the extent that source documents and third party verification 
are unobtainable, the written certification by the program participant 
of the amount of income the program participant received for the most 
recent period representative of the income that the program participant 
is reasonably expected to receive over the 3-month period following the 
evaluation.
    (f) Program participant records. In addition to evidence of homeless 
status or ``at risk of homelessness'' status, as applicable, records 
must be kept for each program participant that document:
    (1) The services and assistance provided to that program 
participant, including, as applicable, the security deposit, rental 
assistance, and utility payments made on behalf of the program 
participant;
    (2) Compliance with the applicable requirements for providing 
services and assistance to that program participant under the program 
components and eligible activities provisions at Sec. 576.101 through 
Sec. 576.106, the provision on determining eligibility and amount and 
type of assistance at Sec. 576.401(a) and (b), and the provision on 
using appropriate assistance and services at Sec. 576.401(d) and (e); 
and
    (3) Where applicable, compliance with the termination of assistance 
requirement in Sec. 576.402.
    (g) Centralized or coordinated assessment systems and procedures. 
The recipient and its subrecipients must keep documentation evidencing 
the use of, and written intake procedures for, the centralized or 
coordinated assessment system(s) developed by the Continuum of Care(s) 
in accordance with the requirements established by HUD.
    (h) Rental assistance agreements and payments. The records must 
include copies of all leases and rental assistance agreements for the 
provision of rental assistance, documentation of payments made to owners 
for the provision of rental assistance, and supporting documentation for 
these payments, including dates of occupancy by program participants.
    (i) Utility allowance. The records must document the monthly 
allowance for utilities (excluding telephone) used to determine 
compliance with the rent restriction.
    (j) Shelter and housing standards. The records must include 
documentation of compliance with the shelter and housing standards in 
Sec. 576.403, including inspection reports.
    (k) Emergency shelter facilities. The recipient must keep records of 
the emergency shelters assisted under the ESG program, including the 
amount and type of assistance provided to each emergency shelter. As 
applicable, the recipient's records must also include documentation of 
the value of the building before the rehabilitation of an existing 
emergency shelter or after the conversion of a building into an 
emergency shelter and copies of the recorded deed or use restrictions.
    (l) Services and assistance provided. The recipient must keep 
records of the types of essential services, rental assistance, and 
housing stabilization and relocation services provided under the 
recipient's program and the amounts spent on these services and 
assistance. The recipient and its subrecipients that are units of 
general purpose local government must keep records to demonstrate 
compliance with the maintenance of effort requirement, including records 
of the unit of the general purpose local government's annual budgets and 
sources of funding for street outreach and emergency shelter services.
    (m) Coordination with Continuum(s) of Care and other programs. The 
recipient and its subrecipients must document their compliance with the 
requirements of Sec. 576.400 for consulting with the Continuum(s) of 
Care and coordinating and integrating ESG assistance with programs 
targeted toward homeless people and mainstream service and assistance 
programs.
    (n) HMIS. The recipient must keep records of the participation in 
HMIS or a comparable database by all projects of the recipient and its 
subrecipients.

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    (o) Matching. The recipient must keep records of the source and use 
of contributions made to satisfy the matching requirement in 
Sec. 576.201. The records must indicate the particular fiscal year grant 
for which each matching contribution is counted. The records must show 
how the value placed on third-party, noncash contributions was derived. 
To the extent feasible, volunteer services must be supported by the same 
methods that the organization uses to support the allocation of regular 
personnel costs.
    (p) Conflicts of interest. The recipient and its subrecipients must 
keep records to show compliance with the organizational conflicts-of-
interest requirements in Sec. 576.404(a), a copy of the personal 
conflicts of interest policy or codes of conduct developed and 
implemented to comply with the requirements in Sec. 576.404(b), and 
records supporting exceptions to the personal conflicts of interest 
prohibitions.
    (q) Homeless participation. The recipient must document its 
compliance with the homeless participation requirements under 
Sec. 576.405.
    (r) Faith-based activities. The recipient and its subrecipients must 
document their compliance with the faith-based activities requirements 
under Sec. 576.406.
    (s) Other Federal requirements. The recipient and its subrecipients 
must document their compliance with the Federal requirements in 
Sec. 576.407 and Sec. 576.409, as applicable, including:
    (1) Records demonstrating compliance with the nondiscrimination and 
equal opportunity requirements under Sec. 576.407(a) and the affirmative 
outreach requirements in Sec. 576.407(b), including:
    (i) Data concerning race, ethnicity, disability status, sex, and 
family characteristics of persons and households who are applicants for, 
or program participants in, any program or activity funded in whole or 
in part with ESG funds; and
    (ii) Documentation required under 24 CFR 5.168 in regard to the 
recipient's Assessment of Fair Housing and the certification that the 
recipient will affirmatively further fair housing.
    (2) Records demonstrating compliance with the uniform administrative 
requirements in 2 CFR part 200.
    (3) Records demonstrating compliance with the environmental review 
requirements, including flood insurance requirements.
    (4) Certifications and disclosure forms required under the lobbying 
and disclosure requirements in 24 CFR part 87.
    (5) Data on emergency transfers requested under Sec. 576.409, 
pertaining to victims of domestic violence, dating violence, sexual 
assault, or stalking, including data on the outcomes of such requests.
    (t) Relocation. The records must include documentation of compliance 
with the displacement, relocation, and acquisition requirements in 
Sec. 576.408.
    (u) Financial records. (1) The recipient must retain supporting 
documentation for all costs charged to the ESG grant.
    (2) The recipient and its subrecipients must keep documentation 
showing that ESG grant funds were spent on allowable costs in accordance 
with the requirements for eligible activities under ``Secs. 576.101 
through 576.109, financial management in 2 CFR 200.302, and the cost 
principles in 2 CFR part 200, subpart E.
    (3) The recipient and its subrecipients must retain records of the 
receipt and use of program income.
    (4) The recipient must keep documentation of compliance with the 
expenditure limits in Sec. 576.100 and the expenditure deadline in 
Sec. 576.203.
    (v) Subrecipients and contractors. (1) The recipient must retain 
copies of all solicitations of and agreements with subrecipients, 
records of all payment requests by and dates of payments made to 
subrecipients, and documentation of all monitoring and sanctions of 
subrecipients, as applicable. If the recipient is a State, the recipient 
must keep records of each recapture and distribution of recaptured funds 
under Sec. 576.501.
    (2) The recipient and its subrecipients must retain copies of all 
procurement contracts and documentation of compliance with the 
procurement requirements in 2 CFR part 200, subpart D.
    (3) The recipient must ensure that its subrecipients comply with the 
recordkeeping requirements specified by the

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recipient and HUD notice or regulations.
    (w) Other records specified by HUD. The recipient must keep other 
records specified by HUD.
    (x) Confidentiality. (1) The recipient and its subrecipients must 
develop and implement written procedures to ensure:
    (i) All records containing personally identifying information (as 
defined in HUD's standards for participation, data collection, and 
reporting in a local HMIS) of any individual or family who applies for 
and/or receives ESG assistance will be kept secure and confidential;
    (ii) The address or location of any domestic violence, dating 
violence, sexual assault, or stalking shelter project assisted under the 
ESG will not be made public, except with written authorization of the 
person responsible for the operation of the shelter; and
    (iii) The address or location of any housing of a program 
participant will not be made public, except as provided under a 
preexisting privacy policy of the recipient or subrecipient and 
consistent with state and local laws regarding privacy and obligations 
of confidentiality.
    (2) The confidentiality procedures of the recipient and its 
subrecipients must be in writing and must be maintained in accordance 
with this section.
    (y) Period of record retention. All records pertaining to each 
fiscal year of ESG funds must be retained for the greater of 5 years or 
the period specified below. Copies made by microfilming, photocopying, 
or similar methods may be substituted for the original records.
    (1) Documentation of each program participant's qualification as a 
family or individual at risk of homelessness or as a homeless family or 
individual and other program participant records must be retained for 5 
years after the expenditure of all funds from the grant under which the 
program participant was served;
    (2) Where ESG funds are used for the renovation of an emergency 
shelter involves costs charged to the ESG grant that exceed 75 percent 
of the value of the building before renovation, records must be retained 
until 10 years after the date that ESG funds are first obligated for the 
renovation; and
    (3) Where ESG funds are used to convert a building into an emergency 
shelter and the costs charged to the ESG grant for the conversion exceed 
75 percent of the value of the building after conversion, records must 
be retained until 10 years after the date that ESG funds are first 
obligated for the conversion.
    (z) Access to records. (1) Federal Government rights. 
Notwithstanding the confidentiality procedures established under 
paragraph (x) of this section, the recipient and its subrecipients must 
comply with the requirements for access to records in 2 CFR 200.336.
    (2) Public rights. The recipient must provide citizens, public 
agencies, and other interested parties with reasonable access 
(consistent with state and local laws regarding privacy and obligations 
of confidentiality and the confidentiality requirements in this part) to 
records regarding any uses of ESG funds the recipient received during 
the preceding 5 years.
    (aa) Reports. The recipient must collect and report data on its use 
of ESG funds in the Integrated Disbursement and Information System 
(IDIS) and other reporting systems, as specified by HUD. The recipient 
must also comply with the reporting requirements in 2 CFR part 200 and 
24 CFR part 91 and the reporting requirements under the Federal Funding 
Accountability and Transparency Act of 2006, (31 U.S.C. 6101 note), 
which are set forth in appendix A to 2 CFR part 170.

[76 FR 75974, Dec. 5, 2011, as amended at 80 FR 42368, July 16, 2015; 80 
FR 75939, Dec. 7, 2015; 81 FR 80809, Nov. 16, 2016]



Sec. 576.501  Enforcement.

    (a) Performance reviews. (1) HUD will review the performance of each 
recipient in carrying out its responsibilities under this part whenever 
determined necessary by HUD, but at least annually. In conducting 
performance reviews, HUD will rely primarily on information obtained 
from the records and reports from the recipient and, when appropriate, 
its subrecipients, as well as information from onsite monitoring, audit 
reports, and information from IDIS and HMIS. Where applicable,

[[Page 218]]

HUD may also consider relevant information pertaining to the recipient's 
performance gained from other sources, including citizen comments, 
complaint determinations, and litigation. Reviews to determine 
compliance with specific requirements of this part will be conducted as 
necessary, with or without prior notice to the recipient.
    (2) If HUD determines preliminarily that the recipient or one of its 
subrecipients has not complied with an ESG program requirement, HUD will 
give the recipient notice of this determination and an opportunity to 
demonstrate, within the time prescribed by HUD and on the basis of 
substantial facts and data, that the recipient has complied with 
Emergency Solutions Grant (ESG) requirements. HUD may change the method 
of payment to require the recipient to obtain HUD's prior approval each 
time the recipient draws down Emergency Solutions Grant (ESG) funds. To 
obtain prior approval, the recipient may be required to manually submit 
its payment requests and supporting documentation to HUD in order to 
show that the funds to be drawn down will be expended on eligible 
activities in accordance with all ESG program requirements.
    (3) If the recipient fails to demonstrate to HUD's satisfaction that 
the activities were carried out in compliance with ESG program 
requirements, HUD will take one or more of the remedial actions or 
sanctions specified in paragraph (b) of this section.
    (b) Remedial actions and sanctions. Remedial actions and sanctions 
for a failure to meet an ESG program requirement will be designed to 
prevent a continuation of the deficiency; mitigate, to the extent 
possible, its adverse effects or consequences; and prevent its 
recurrence.
    (1) HUD may instruct the recipient to submit and comply with 
proposals for action to correct, mitigate, and prevent noncompliance 
with ESG requirements, including:
    (i) Preparing and following a schedule of actions for carrying out 
activities affected by the noncompliance, including schedules, 
timetables, and milestones necessary to implement the affected 
activities;
    (ii) Establishing and following a management plan that assigns 
responsibilities for carrying out the remedial actions;
    (iii) Canceling or revising activities likely to be affected by the 
noncompliance, before expending ESG funds for the activities;
    (iv) Reprogramming ESG funds that have not yet been expended from 
affected activities to other eligible activities;
    (v) Suspending disbursement of ESG funds for some or all activities;
    (vi) Reducing or terminating the remaining grant of a subrecipient 
and reallocating those funds to other subrecipients; and
    (vii) Making matching contributions before or as draws are made from 
the recipient's ESG grant.
    (2) HUD may change the method of payment to a reimbursement basis.
    (3) HUD may suspend payments to the extent HUD deems it necessary to 
preclude the further expenditure of funds for affected activities.
    (4) HUD may remove the recipient from participation in reallocations 
of funds under subpart D of this part.
    (5) HUD may deny matching credit for all or part of the cost of the 
affected activities and require the recipient to make further matching 
contributions to make up for the contribution determined to be 
ineligible.
    (6) HUD may require the recipient to reimburse its line of credit in 
an amount equal to the funds used for the affected activities.
    (7) HUD may reduce or terminate the remaining grant of a recipient 
and reallocate those funds to other recipients in accordance with 
subpart D of this part.
    (8) HUD may condition a future grant.
    (9) HUD may take other remedies that are legally available.
    (c) Recipient sanctions. If the recipient determines that a 
subrecipient is not complying with an ESG program requirement or its 
subgrant agreement, the recipient must take appropriate actions, as 
prescribed for HUD in paragraphs (a) and (b) of this section. If the 
recipient is a State and funds become available as a result of an action 
under

[[Page 219]]

this section, the recipient must reallocate those funds to other 
subrecipients as soon as practicable. If the recipient is a unit of 
general purpose local government of territory, it must either reallocate 
those funds to other subrecipients or reprogram the funds for other 
activities to be carried out by the recipient as soon as practicable. 
The recipient must amend its Consolidated Plan in accordance with its 
citizenship participation plan if funds become available and are 
reallocated or reprogrammed under this section. The reallocated or 
reprogrammed funds must be used by the expenditure deadline in 
Sec. 576.203.



PART 578_CONTINUUM OF CARE PROGRAM--Table of Contents



                      Subpart A_General Provisions

Sec.
578.1  Purpose and scope.
578.3  Definitions.

        Subpart B_Establishing and Operating a Continuum of Care

578.5  Establishing the Continuum of Care.
578.7  Responsibilities of the Continuum of Care.
578.9  Preparing an application for funds.
578.11  Unified Funding Agency.
578.13  Remedial action.

              Subpart C_Application and Grant Award Process

578.15  Eligible applicants.
578.17  Overview of application and grant award process.
578.19  Application process.
578.21  Awarding funds.
578.23  Executing grant agreements.
578.25  Site control.
578.27  Consolidated plan.
578.29  Subsidy layering.
578.31  Environmental review.
578.33  Renewals.
578.35  Appeal.

             Subpart D_Program Components and Eligible Costs

578.37  Program components and uses of assistance.
578.39  Continuum of Care planning activities.
578.41  Unified Funding Agency costs.
578.43  Acquisition.
578.45  Rehabilitation.
578.47  New construction.
578.49  Leasing.
578.51  Rental assistance.
578.53  Supportive services.
578.55  Operating costs.
578.57  Homeless Management Information System.
578.59  Project administrative costs.
578.61  Relocation costs.
578.63  Indirect costs.

                  Subpart E_High-Performing Communities

578.65  Standards.
578.67  Publication of application.
578.69  Cooperation among entities.
578.71  HPC-eligible activities.

                     Subpart F_Program Requirements

578.73  Matching requirements.
578.75  General operations.
578.77  Calculating occupancy charges and rent.
578.79  Limitation on transitional housing.
578.81  Term of commitment, repayment of grants, and prevention of undue 
          benefits.
578.83  Displacement, relocation, and acquisition.
578.85  Timeliness standards.
578.87  Limitation on use of funds.
578.89  Limitation on use of grant funds to serve persons defined as 
          homeless under other federal laws.
578.91  Termination of assistance to program participants.
578.93  Fair Housing and Equal Opportunity.
578.95  Conflicts of interest.
578.97  Program income.
578.99  Applicability of other federal requirements.

                     Subpart G_Grant Administration

578.101  Technical assistance.
578.103  Recordkeeping requirements.
578.105  Grant and project changes.
578.107  Sanctions.
578.109  Closeout.

    Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11381 et seq., 42 
U.S.C. 3535(d).

    Source: 77 FR 45442, July 31, 2012, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 578.1  Purpose and scope.

    (a) The Continuum of Care program is authorized by subtitle C of 
title IV of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11381-
11389).
    (b) The program is designed to:
    (1) Promote communitywide commitment to the goal of ending 
homelessness;

[[Page 220]]

    (2) Provide funding for efforts by nonprofit providers, States, and 
local governments to quickly rehouse homeless individuals (including 
unaccompanied youth) and families, while minimizing the trauma and 
dislocation caused to homeless individuals, families, and communities by 
homelessness;
    (3) Promote access to and effective utilization of mainstream 
programs by homeless individuals and families; and
    (4) Optimize self-sufficiency among individuals and families 
experiencing homelessness.



Sec. 578.3  Definitions.

    As used in this part:
    Act means the McKinney-Vento Homeless Assistance Act as amended (42 
U.S.C. 11371 et seq.).
    Annual renewal amount means the amount that a grant can be awarded 
on an annual basis when renewed. It includes funds only for those 
eligible activities (operating, supportive services, leasing, rental 
assistance, HMIS, and administration) that were funded in the original 
grant (or the original grant as amended), less the unrenewable 
activities (acquisition, new construction, rehabilitation, and any 
administrative costs related to these activities).
    Applicant means an eligible applicant that has been designated by 
the Continuum of Care to apply for assistance under this part on behalf 
of that Continuum.
    At risk of homelessness. (1) An individual or family who:
    (i) Has an annual income below 30 percent of median family income 
for the area, as determined by HUD;
    (ii) Does not have sufficient resources or support networks, e.g., 
family, friends, faith-based or other social networks, immediately 
available to prevent them from moving to an emergency shelter or another 
place described in paragraph (1) of the ``Homeless'' definition in this 
section; and
    (iii) Meets one of the following conditions:
    (A) Has moved because of economic reasons two or more times during 
the 60 days immediately preceding the application for homelessness 
prevention assistance;
    (B) Is living in the home of another because of economic hardship;
    (C) Has been notified in writing that their right to occupy their 
current housing or living situation will be terminated within 21 days of 
the date of application for assistance;
    (D) Lives in a hotel or motel and the cost of the hotel or motel 
stay is not paid

by charitable organizations or by federal, State, or local government 
programs for low-income individuals;
    (E) Lives in a single-room occupancy or efficiency apartment unit in 
which there reside more than two persons, or lives in a larger housing 
unit in which there reside more than 1.5 people per room, as defined by 
the U.S. Census Bureau;
    (F) Is exiting a publicly funded institution, or system of care 
(such as a health-care facility, a mental health facility, foster care 
or other youth facility, or correction program or institution); or
    (G) Otherwise lives in housing that has characteristics associated 
with instability and an increased risk of homelessness, as identified in 
the recipient's approved consolidated plan;
    (2) A child or youth who does not qualify as ``homeless'' under this 
section, but qualifies as ``homeless'' under section 387(3) of the 
Runaway and Homeless Youth Act (42 U.S.C. 5732a(3)), section 637(11) of 
the Head Start Act (42 U.S.C. 9832(11)), section 41403(6) of the 
Violence Against Women Act of 1994 (42 U.S.C. 14043e-2(6)), section 
330(h)(5)(A) of the Public Health Service Act (42 U.S.C. 254b(h)(5)(A)), 
section 3(m) of the Food and Nutrition Act of 2008 (7 U.S.C. 2012(m)), 
or section 17(b)(15) of the Child Nutrition Act of 1966 (42 U.S.C. 
1786(b)(15)); or
    (3) A child or youth who does not qualify as ``homeless'' under this 
section, but qualifies as ``homeless'' under section 725(2) of the 
McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2)), and the 
parent(s) or guardian(s) of that child or youth if living with her or 
him.
    Centralized or coordinated assessment system means a centralized or 
coordinated process designed to coordinate program participant intake 
assessment

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and provision of referrals. A centralized or coordinated assessment 
system covers the geographic area, is easily accessed by individuals and 
families seeking housing or services, is well advertized, and includes a 
comprehensive and standardized assessment tool.
    Chronically homeless means:
    (1) A ``homeless individual with a disability,'' as defined in 
section 401(9) of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 
11360(9)), who:
    (i) Lives in a place not meant for human habitation, a safe haven, 
or in an emergency shelter; and
    (ii) Has been homeless and living as described in paragraph (1)(i) 
of this definition continuously for at least 12 months or on at least 4 
separate occasions in the last 3 years, as long as the combined 
occasions equal at least 12 months and each break in homelessness 
separating the occasions included at least 7 consecutive nights of not 
living as described in paragraph (1)(i). Stays in institutional care 
facilities for fewer than 90 days will not constitute as a break in 
homelessness, but rather such stays are included in the 12-month total, 
as long as the individual was living or residing in a place not meant 
for human habitation, a safe haven, or an emergency shelter immediately 
before entering the institutional care facility;
    (2) An individual who has been residing in an institutional care 
facility, including a jail, substance abuse or mental health treatment 
facility, hospital, or other similar facility, for fewer than 90 days 
and met all of the criteria in paragraph (1) of this definition, before 
entering that facility; or
    (3) A family with an adult head of household (or if there is no 
adult in the family, a minor head of household) who meets all of the 
criteria in paragraph (1) or (2) of this definition, including a family 
whose composition has fluctuated while the head of household has been 
homeless.
    Collaborative applicant means the eligible applicant that has been 
designated by the Continuum of Care to apply for a grant for Continuum 
of Care planning funds under this part on behalf of the Continuum.
    Consolidated plan means the HUD-approved plan developed in 
accordance with 24 CFR 91.
    Continuum of Care and Continuum means the group organized to carry 
out the responsibilities required under this part and that is composed 
of representatives of organizations, including nonprofit homeless 
providers, victim service providers, faith-based organizations, 
governments, businesses, advocates, public housing agencies, school 
districts, social service providers, mental health agencies, hospitals, 
universities, affordable housing developers, law enforcement, 
organizations that serve homeless and formerly homeless veterans, and 
homeless and formerly homeless persons to the extent these groups are 
represented within the geographic area and are available to participate.
    Developmental disability means, as defined in section 102 of the 
Developmental Disabilities Assistance and Bill of Rights Act of 2000 (42 
U.S.C. 15002):
    (1) A severe, chronic disability of an individual that--
    (i) Is attributable to a mental or physical impairment or 
combination of mental and physical impairments;
    (ii) Is manifested before the individual attains age 22;
    (iii) Is likely to continue indefinitely;
    (iv) Results in substantial functional limitations in three or more 
of the following areas of major life activity:
    (A) Self-care;
    (B) Receptive and expressive language;
    (C) Learning;
    (D) Mobility;
    (E) Self-direction;
    (F) Capacity for independent living;
    (G) Economic self-sufficiency.
    (v) Reflects the individual's need for a combination and sequence of 
special, interdisciplinary, or generic services, individualized 
supports, or other forms of assistance that are of lifelong or extended 
duration and are individually planned and coordinated.
    (2) An individual from birth to age 9, inclusive, who has a 
substantial developmental delay or specific congenital or acquired 
condition, may be considered to have a developmental disability without 
meeting three or more of the

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criteria described in paragraphs (1)(i) through (v) of the definition of 
``developmental disability'' in this section if the individual, without 
services and supports, has a high probability of meeting these criteria 
later in life.
    Eligible applicant means a private nonprofit organization, State, 
local government, or instrumentality of State and local government.
    Emergency shelter is defined in 24 CFR part 576.
    Emergency Solutions Grants (ESG) means the grants provided under 24 
CFR part 576.
    Fair Market Rent (FMR) means the Fair Market Rents published in the 
Federal Register annually by HUD.
    High-performing community (HPC) means a Continuum of Care that meets 
the standards in subpart E of this part and has been designated as a 
high-performing community by HUD.
    Homeless means:
    (1) An individual or family who lacks a fixed, regular, and adequate 
nighttime residence, meaning:
    (i) An individual or family with a primary nighttime residence that 
is a public or private place not designed for or ordinarily used as a 
regular sleeping accommodation for human beings, including a car, park, 
abandoned building, bus or train station, airport, or camping ground;
    (ii) An individual or family living in a supervised publicly or 
privately operated shelter designated to provide temporary living 
arrangements (including congregate shelters, transitional housing, and 
hotels and motels paid for by charitable organizations or by federal, 
State, or local government programs for low-income individuals); or
    (iii) An individual who is exiting an institution where he or she 
resided for 90 days or less and who resided in an emergency shelter or 
place not meant for human habitation immediately before entering that 
institution;
    (2) An individual or family who will imminently lose their primary 
nighttime residence, provided that:
    (i) The primary nighttime residence will be lost within 14 days of 
the date of application for homeless assistance;
    (ii) No subsequent residence has been identified; and
    (iii) The individual or family lacks the resources or support 
networks, e.g., family, friends, faith-based or other social networks, 
needed to obtain other permanent housing;
    (3) Unaccompanied youth under 25 years of age, or families with 
children and youth, who do not otherwise qualify as homeless under this 
definition, but who:
    (i) Are defined as homeless under section 387 of the Runaway and 
Homeless Youth Act (42 U.S.C. 5732a), section 637 of the Head Start Act 
(42 U.S.C. 9832), section 41403 of the Violence Against Women Act of 
1994 (42 U.S.C. 14043e-2), section 330(h) of the Public Health Service 
Act (42 U.S.C. 254b(h)), section 3 of the Food and Nutrition Act of 2008 
(7 U.S.C. 2012), section 17(b) of the Child Nutrition Act of 1966 (42 
U.S.C. 1786(b)), or section 725 of the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11434a);
    (ii) Have not had a lease, ownership interest, or occupancy 
agreement in permanent housing at any time during the 60 days 
immediately preceding the date of application for homeless assistance;
    (iii) Have experienced persistent instability as measured by two 
moves or more during the 60-day period immediately preceding the date of 
applying for homeless assistance; and
    (iv) Can be expected to continue in such status for an extended 
period of time because of chronic disabilities; chronic physical health 
or mental health conditions; substance addiction; histories of domestic 
violence or childhood abuse (including neglect); the presence of a child 
or youth with a disability; or two or more barriers to employment, which 
include the lack of a high school degree or General Education 
Development (GED), illiteracy, low English proficiency, a history of 
incarceration or detention for criminal activity, and a history of 
unstable employment; or
    (4) Any individual or family who:
    (i) Is fleeing, or is attempting to flee, domestic violence, dating 
violence, sexual assault, stalking, or other dangerous or life-
threatening conditions that relate to violence against the individual or 
a family member, including a

[[Page 223]]

child, 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;
    (ii) Has no other residence; and
    (iii) Lacks the resources or support networks, e.g., family, 
friends, and faith-based or other social networks, to obtain other 
permanent housing.
    Homeless Management Information System (HMIS) means the information 
system designated by the Continuum of Care to comply with the HMIS 
requirements prescribed by HUD.
    HMIS Lead means the entity designated by the Continuum of Care in 
accordance with this part to operate the Continuum's HMIS on its behalf.
    Permanent housing means community-based housing without a designated 
length of stay, and includes both permanent supportive housing and rapid 
rehousing. To be permanent housing, the program participant must be the 
tenant on a lease for a term of at least one year, which is renewable 
for terms that are a minimum of one month long, and is terminable only 
for cause.
    Permanent supportive housing means permanent housing in which 
supportive services are provided to assist homeless persons with a 
disability to live independently.
    Point-in-time count means a count of sheltered and unsheltered 
homeless persons carried out on one night in the last 10 calendar days 
of January or at such other time as required by HUD.
    Private nonprofit organization means an organization:
    (1) No part of the net earnings of which inure to the benefit of any 
member, founder, contributor, or individual;
    (2) That has a voluntary board;
    (3) That has a functioning accounting system that is operated in 
accordance with generally accepted accounting principles, or has 
designated a fiscal agent that will maintain a functioning accounting 
system for the organization in accordance with generally accepted 
accounting principles; and
    (4) That practices nondiscrimination in the provision of assistance.
    A private nonprofit organization does not include governmental 
organizations, such as public housing agencies.
    Program participant means an individual (including an unaccompanied 
youth) or family who is assisted with Continuum of Care program funds.
    Project means a group of eligible activities, such as HMIS costs, 
identified as a project in an application to HUD for Continuum of Care 
funds and includes a structure (or structures) that is (are) acquired, 
rehabilitated, constructed, or leased with assistance provided under 
this part or with respect to which HUD provides rental assistance or 
annual payments for operating costs, or supportive services under this 
subtitle.
    Recipient means an applicant that signs a grant agreement with HUD.
    Safe haven means, for the purpose of defining chronically homeless, 
supportive housing that meets the following:
    (1) Serves hard to reach homeless persons with severe mental illness 
who came from the streets and have been unwilling or unable to 
participate in supportive services;
    (2) Provides 24-hour residence for eligible persons for an 
unspecified period;
    (3) Has an overnight capacity limited to 25 or fewer persons; and
    (4) Provides low-demand services and referrals for the residents.
    State means each of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, American Samoa, Guam, the Commonwealth of 
the Northern Marianas, and the Virgin Islands.
    Subrecipient means a private nonprofit organization, State, local 
government, or instrumentality of State or local government that 
receives a subgrant from the recipient to carry out a project.
    Transitional housing means housing, where all program participants 
have signed a lease or occupancy agreement, the purpose of which is to 
facilitate the movement of homeless individuals and families into 
permanent housing within 24 months or such longer period as HUD 
determines necessary. The program participant must have a lease or 
occupancy agreement for a term of at least one month that ends in 24 
months and cannot be extended.
    Unified Funding Agency (UFA) means an eligible applicant selected by 
the

[[Page 224]]

Continuum of Care to apply for a grant for the entire Continuum, which 
has the capacity to carry out the duties in Sec. 578.11(b), which is 
approved by HUD and to which HUD awards a grant.
    Victim service provider means a private nonprofit organization whose 
primary mission is to provide services to victims of domestic violence, 
dating violence, sexual assault, or stalking. This term includes rape 
crisis centers, battered women's shelters, domestic violence 
transitional housing programs, and other programs.



        Subpart B_Establishing and Operating a Continuum of Care



Sec. 578.5  Establishing the Continuum of Care.

    (a) The Continuum of Care. Representatives from relevant 
organizations within a geographic area shall establish a Continuum of 
Care for the geographic area to carry out the duties of this part. 
Relevant organizations include nonprofit homeless assistance providers, 
victim service providers, faith-based organizations, governments, 
businesses, advocates, public housing agencies, school districts, social 
service providers, mental health agencies, hospitals, universities, 
affordable housing developers, law enforcement, and organizations that 
serve veterans and homeless and formerly homeless individuals.
    (b) The board. The Continuum of Care must establish a board to act 
on behalf of the Continuum using the process established as a 
requirement by Sec. 578.7(a)(3) and must comply with the conflict-of-
interest requirements at Sec. 578.95(b). The board must:
    (1) Be representative of the relevant organizations and of projects 
serving homeless subpopulations; and
    (2) Include at least one homeless or formerly homeless individual.
    (c) Transition. Continuums of Care shall have 2 years after August 
30, 2012 to comply with the requirements of paragraph (b) of this 
section.



Sec. 578.7  Responsibilities of the Continuum of Care.

    (a) Operate the Continuum of Care. The Continuum of Care must:
    (1) Hold meetings of the full membership, with published agendas, at 
least semi-annually;
    (2) Make an invitation for new members to join publicly available 
within the geographic at least annually;
    (3) Adopt and follow a written process to select a board to act on 
behalf of the Continuum of Care. The process must be reviewed, updated, 
and approved by the Continuum at least once every 5 years;
    (4) Appoint additional committees, subcommittees, or workgroups;
    (5) In consultation with the collaborative applicant and the HMIS 
Lead, develop, follow, and update annually a governance charter, which 
will include all procedures and policies needed to comply with subpart B 
of this part and with HMIS requirements as prescribed by HUD; and a code 
of conduct and recusal process for the board, its chair(s), and any 
person acting on behalf of the board;
    (6) Consult with recipients and subrecipients to establish 
performance targets appropriate for population and program type, monitor 
recipient and subrecipient performance, evaluate outcomes, and take 
action against poor performers;
    (7) Evaluate outcomes of projects funded under the Emergency 
Solutions Grants program and the Continuum of Care program, and report 
to HUD;
    (8) In consultation with recipients of Emergency Solutions Grants 
program funds within the geographic area, establish and operate either a 
centralized or coordinated assessment system that provides an initial, 
comprehensive assessment of the needs of individuals and families for 
housing and services. The Continuum must develop a specific policy to 
guide the operation of the centralized or coordinated assessment system 
on how its system will address the needs of individuals and families who 
are fleeing, or attempting to flee, domestic violence, dating violence, 
sexual assault, or stalking, but who are seeking shelter or services 
from nonvictim service providers. This system must comply with any 
requirements established by HUD by Notice.
    (9) In consultation with recipients of Emergency Solutions Grants 
program

[[Page 225]]

funds within the geographic area, establish and consistently follow 
written standards for providing Continuum of Care assistance. At a 
minimum, these written standards must include:
    (i) Policies and procedures for evaluating individuals' and 
families' eligibility for assistance under this part;
    (ii) Policies and procedures for determining and prioritizing which 
eligible individuals and families will receive transitional housing 
assistance (these policies must include the emergency transfer priority 
required under Sec. 578.99(j)(8));
    (iii) Policies and procedures for determining and prioritizing which 
eligible individuals and families will receive rapid rehousing 
assistance (these policies must include the emergency transfer priority 
required under Sec. 578.99(j)(8));
    (iv) Standards for determining what percentage or amount of rent 
each program participant must pay while receiving rapid rehousing 
assistance;
    (v) Policies and procedures for determining and prioritizing which 
eligible individuals and families will receive permanent supportive 
housing assistance (these policies must include the emergency transfer 
priority required under Sec. 578.99(j)(8)); and
    (vi) Where the Continuum is designated a high-performing community, 
as described in subpart G of this part, policies and procedures set 
forth in 24 CFR 576.400(e)(3)(vi), (e)(3)(vii), (e)(3)(viii), and 
(e)(3)(ix).
    (b) Designating and operating an HMIS. The Continuum of Care must:
    (1) Designate a single Homeless Management Information System (HMIS) 
for the geographic area;
    (2) Designate an eligible applicant to manage the Continuum's HMIS, 
which will be known as the HMIS Lead;
    (3) Review, revise, and approve a privacy plan, security plan, and 
data quality plan for the HMIS.
    (4) Ensure consistent participation of recipients and subrecipients 
in the HMIS; and
    (5) Ensure the HMIS is administered in compliance with requirements 
prescribed by HUD.
    (c) Continuum of Care planning. The Continuum must develop a plan 
that includes:
    (1) Coordinating the implementation of a housing and service system 
within its geographic area that meets the needs of the homeless 
individuals (including unaccompanied youth) and families. At a minimum, 
such system encompasses the following:
    (i) Outreach, engagement, and assessment;
    (ii) Shelter, housing, and supportive services;
    (iii) Prevention strategies.
    (2) Planning for and conducting, at least biennially, a point-in-
time count of homeless persons within the geographic area that meets the 
following requirements:
    (i) Homeless persons who are living in a place not designed or 
ordinarily used as a regular sleeping accommodation for humans must be 
counted as unsheltered homeless persons.
    (ii) Persons living in emergency shelters and transitional housing 
projects must be counted as sheltered homeless persons.
    (iii) Other requirements established by HUD by Notice.
    (3) Conducting an annual gaps analysis of the homeless needs and 
services available within the geographic area;
    (4) Providing information required to complete the Consolidated 
Plan(s) within the Continuum's geographic area;
    (5) Consulting with State and local government Emergency Solutions 
Grants program recipients within the Continuum's geographic area on the 
plan for allocating Emergency Solutions Grants program funds and 
reporting on and evaluating the performance of Emergency Solutions 
Grants program recipients and subrecipients.
    (d) VAWA emergency transfer plan. The Continuum of Care must develop 
the emergency transfer plan for the Continuum of Care that meets the 
requirements under Sec. 578.99(j)(8).

[77 FR 45442, July 31, 2012,as amended at 81 FR 80809, Nov. 16, 2016]



Sec. 578.9  Preparing an application for funds.

    (a) The Continuum must:
    (1) Design, operate, and follow a collaborative process for the 
development of applications and approve the submission of applications 
in response to a

[[Page 226]]

NOFA published by HUD under Sec. 578.19 of this subpart;
    (2) Establish priorities for funding projects in the geographic 
area;
    (3) Determine if one application for funding will be submitted for 
all projects within the geographic area or if more than one application 
will be submitted for the projects within the geographic area;
    (i) If more than one application will be submitted, designate an 
eligible applicant to be the collaborative applicant that will collect 
and combine the required application information from all applicants and 
for all projects within the geographic area that the Continuum has 
selected funding. The collaborative applicant will also apply for 
Continuum of Care planning activities. If the Continuum is an eligible 
applicant, it may designate itself;
    (ii) If only one application will be submitted, that applicant will 
be the collaborative applicant and will collect and combine the required 
application information from all projects within the geographic area 
that the Continuum has selected for funding and apply for Continuum of 
Care planning activities;
    (b) The Continuum retains all of its responsibilities, even if it 
designates one or more eligible applicants other than itself to apply 
for funds on behalf of the Continuum. This includes approving the 
Continuum of Care application.



Sec. 578.11  Unified Funding Agency.

    (a) Becoming a Unified Funding Agency. To become designated as the 
Unified Funding Agency (UFA) for a Continuum, a collaborative applicant 
must be selected by the Continuum to apply to HUD to be designated as 
the UFA for the Continuum.
    (b) Criteria for designating a UFA. HUD will consider these criteria 
when deciding whether to designate a collaborative applicant a UFA:
    (1) The Continuum of Care it represents meets the requirements in 
Sec. 578.7;
    (2) The collaborative applicant has financial management systems 
that meet the standards set forth in 2 CFR 200.302;
    (3) The collaborative applicant demonstrates the ability to monitor 
subrecipients; and
    (4) Such other criteria as HUD may establish by NOFA.
    (c) Requirements. HUD-designated UFAs shall:
    (1) Apply to HUD for funding for all of the projects within the 
geographic area and enter into a grant agreement with HUD for the entire 
geographic area.
    (2) Enter into legally binding agreements with subrecipients, and 
receive and distribute funds to subrecipients for all projects within 
the geographic area.
    (3) Require subrecipients to establish fiscal control and accounting 
procedures as necessary to assure the proper disbursal of and accounting 
for federal funds in accordance with the requirements of 2 CFR part 200, 
subpart D.
    (4) Obtain approval of any proposed grant agreement amendments by 
the Continuum of Care before submitting a request for an amendment to 
HUD.

[77 FR 45442, July 31, 2012, as amended at 80 FR 75939, Dec. 7, 2015]



Sec. 578.13  Remedial action.

    (a) If HUD finds that the Continuum of Care for a geographic area 
does not meet the requirements of the Act or its implementing 
regulations, or that there is no Continuum for a geographic area, HUD 
may take remedial action to ensure fair distribution of grant funds 
within the geographic area. Such measures may include:
    (1) Designating a replacement Continuum of Care for the geographic 
area;
    (2) Designating a replacement collaborative applicant for the 
Continuum's geographic area; and
    (3) Accepting applications from other eligible applicants within the 
Continuum's geographic area.
    (b) HUD must provide a 30-day prior written notice to the Continuum 
and its collaborative applicant and give them an opportunity to respond.

[[Page 227]]



              Subpart C_Application and Grant Award Process



Sec. 578.15  Eligible applicants.

    (a) Who may apply. Nonprofit organizations, States, local 
governments, and instrumentalities of State or local governments are 
eligible to apply for grants.
    (b) Designation by the Continuum of Care. Eligible applicant(s) must 
have been designated by the Continuum of Care to submit an application 
for grant funds under this part. The designation must state whether the 
Continuum is designating more than one applicant to apply for funds and, 
if it is, which applicant is being designated as the collaborative 
applicant. If the Continuum is designating only one applicant to apply 
for funds, the Continuum must designate that applicant to be the 
collaborative applicant.
    (c) Exclusion. For-profit entities are not eligible to apply for 
grants or to be subrecipients of grant funds.



Sec. 578.17  Overview of application and grant award process.

    (a) Formula. (1) After enactment of the annual appropriations act 
for each fiscal year, and issuance of the NOFA, HUD will publish, on its 
Web site, the Preliminary Pro Rata Need (PPRN) assigned to metropolitan 
cities, urban counties, and all other counties.
    (2) HUD will apply the formula used to determine PPRN established in 
paragraph (a)(3) of this section, to the amount of funds being made 
available under the NOFA. That amount is calculated by:
    (i) Determining the total amount for the Continuum of Care 
competition in accordance with section 413 of the Act or as otherwise 
directed by the annual appropriations act;
    (ii) From the amount in paragraph (a)(2)(i) of this section, 
deducting the amount published in the NOFA as being set aside to provide 
a bonus to geographic areas for activities that have proven to be 
effective in reducing homelessness generally or for specific 
subpopulations listed in the NOFA or achieving homeless prevention and 
independent living goals established in the NOFA and to meet policy 
priorities set in the NOFA; and
    (iii) Deducting the amount of funding necessary for Continuum of 
Care planning activities and UFA costs.
    (3) PPRN is calculated on the amount determined under paragraph 
(a)(2) of this section by using the following formula:
    (i) Two percent will be allocated among the four insular areas 
(American Samoa, Guam, the Commonwealth of the Northern Marianas, and 
the Virgin Islands) on the basis of the ratio of the population of each 
insular area to the population of all insular areas.
    (ii) Seventy-five percent of the remaining amount will be allocated, 
using the Community Development Block Grant (CDBG) formula, to 
metropolitan cities and urban counties that have been funded under 
either the Emergency Shelter Grants or Emergency Solutions Grants 
programs in any one year since 2004.
    (iii) The amount remaining after the allocation under paragraphs 
(a)(1) and (2) of this section will be allocated, using the CDBG 
formula, to metropolitan cities and urban counties that have not been 
funded under the Emergency Solutions Grants program in any year since 
2004 and all other counties in the United States and Puerto Rico.
    (4) If the calculation in paragraph (a)(2) of this section results 
in an amount less than the amount required to renew all projects 
eligible for renewal in that year for at least one year, after making 
adjustments proportional to increases in fair market rents for the 
geographic area for leasing, operating, and rental assistance for 
permanent housing, HUD will reduce, proportionately, the total amount 
required to renew all projects eligible for renewal in that year for at 
least one year, for each Continuum of Care. HUD will publish, via the 
NOFA, the total dollar amount that every Continuum will be required to 
deduct from renewal projects Continuum-wide.
    (b) Calculating a Continuum of Care's maximum award amount. (1) 
Establish the PPRN amount. First, HUD will total the PPRN amounts for 
each metropolitan city, urban county, other county, and insular area 
claimed by the Continuum as part of its geographic area, excluding any 
counties applying for or receiving funding from the Rural Housing

[[Page 228]]

Stability Assistance program under 24 CFR part 579.
    (2) Establishing renewal demand. Next, HUD will determine the 
renewal demand within the Continuum's geographic area. Renewal demand is 
the sum of the annual renewal amounts of all projects within the 
Continuum eligible to apply for renewal in that fiscal year's 
competition, before any adjustments to rental assistance, leasing, and 
operating line items based on FMR changes.
    (3) Establishing FPRN. The higher of PPRN or renewal demand for the 
Continuum of Care is the FPRN, which is the base for the maximum award 
amount for the Continuum.
    (4) Establishing the maximum award amount. The maximum award amount 
for the Continuum is the FPRN amount plus any additional eligible 
amounts for Continuum planning; UFA costs; adjustments to leasing, 
operating and rental assistance line items based on changes to FMR; and 
available bonuses.



Sec. 578.19  Application process.

    (a) Notice of Funding Availability. After enactment of the annual 
appropriations act for the fiscal year, HUD will issue a NOFA in 
accordance with the requirements of 24 CFR part 4.
    (b) Applications. All applications to HUD, including applications 
for grant funds and requests for designation as a UFA or HPC, must be 
submitted at such time and in such manner as HUD may require, and 
contain such information as HUD determines necessary. At a minimum, an 
application for grant funds must contain a list of the projects for 
which it is applying for funds; a description of the projects; a list of 
the projects that will be carried out by subrecipients and the names of 
the subrecipients; a description of the subpopulations of homeless or at 
risk of homelessness to be served by projects; the number of units to be 
provided and/or the number of persons to be served by each project; a 
budget request by project; and reasonable assurances that the applicant, 
or the subrecipient, will own or have control of a site for the proposed 
project not later than the expiration of the 12-month period beginning 
upon notification of an award for grant assistance.



Sec. 578.21  Awarding funds.

    (a) Selection. HUD will review applications in accordance with the 
guidelines and procedures provided in the NOFA and will award funds to 
recipients through a national competition based on selection criteria as 
defined in section 427 of the Act.
    (b) Announcement of awards. HUD will announce awards and notify 
selected applicants of any conditions imposed on awards. Conditions must 
be satisfied before HUD will execute a grant agreement with the 
applicant.
    (c) Satisfying conditions. HUD will withdraw an award if the 
applicant does not satisfy all conditions imposed on it. Correcting all 
issues and conditions attached to an award must be completed within the 
time frame established in the NOFA. Proof of site control, match, 
environmental review, and the documentation of financial feasibility 
must be completed within 12 months of the announcement of the award, or 
24 months in the case of funds for acquisition, rehabilitation, or new 
construction. The 12-month deadline may be extended by HUD for up to 12 
additional months upon a showing of compelling reasons for delay due to 
factors beyond the control of the recipient or subrecipient.



Sec. 578.23  Executing grant agreements.

    (a) Deadline. No later than 45 days from the date when all 
conditions are satisfied, the recipient and HUD must execute the grant 
agreement.
    (b) Grant agreements. (1) Multiple applicants for one Continuum. If 
a Continuum designates more than one applicant for the geographic area, 
HUD will enter into a grant agreement with each designated applicant for 
which an award is announced.
    (2) One applicant for a Continuum. If a Continuum designates only 
one applicant for the geographic area, after awarding funds, HUD may 
enter into a grant agreement with that applicant for new awards, if any, 
and one grant agreement for renewals, Continuum of Care planning, and 
UFA costs, if any. These two grants will cover the entire

[[Page 229]]

geographic area. A default by the recipient under one of those grant 
agreements will also be a default under the other.
    (3) Unified Funding Agencies. If a Continuum is a UFA that HUD has 
approved, then HUD will enter into one grant agreement with the UFA for 
new awards, if any, and one grant agreement for renewals, Continuum of 
Care planning and UFA costs, if any. These two grants will cover the 
entire geographic area. A default by the UFA under one of those grant 
agreements will also be a default under the other.
    (c) Required agreements. Recipients will be required to sign a grant 
agreement in which the recipient agrees:
    (1) To ensure the operation of the project(s) in accordance with the 
provisions of the McKinney-Veto Act and all requirements under 24 CFR 
part 578;
    (2) To monitor and report the progress of the project(s) to the 
Continuum of Care and HUD;
    (3) To ensure, to the maximum extent practicable, that individuals 
and families experiencing homelessness are involved, through employment, 
provision of volunteer services, or otherwise, in constructing, 
rehabilitating, maintaining, and operating facilities for the project 
and in providing supportive services for the project;
    (4) To require certification from all subrecipients that:
    (i) Subrecipients will maintain the confidentiality of records 
pertaining to any individual or family that was provided family violence 
prevention or treatment services through the project;
    (ii) The address or location of any family violence project assisted 
under this part will not be made public, except with written 
authorization of the person responsible for the operation of such 
project;
    (iii) Subrecipients will establish policies and practices that are 
consistent with, and do not restrict, the exercise of rights provided by 
subtitle B of title VII of the Act and other laws relating to the 
provision of educational and related services to individuals and 
families experiencing homelessness;
    (iv) In the case of projects that provide housing or services to 
families, that subrecipients will designate a staff person to be 
responsible for ensuring that children being served in the program are 
enrolled in school and connected to appropriate services in the 
community, including early childhood programs such as Head Start, part C 
of the Individuals with Disabilities Education Act, and programs 
authorized under subtitle B of title VII of the Act;
    (v) The subrecipient, its officers, and employees are not debarred 
or suspended from doing business with the Federal Government; and
    (vi) Subrecipients will provide information, such as data and 
reports, as required by HUD; and
    (5) To establish such fiscal control and accounting procedures as 
may be necessary to assure the proper disbursal of, and accounting for 
grant funds in order to ensure that all financial transactions are 
conducted, and records maintained in accordance with generally accepted 
accounting principles, if the recipient is a UFA;
    (6) To monitor subrecipient match and report on match to HUD;
    (7) To take the educational needs of children into account when 
families are placed in housing and will, to the maximum extent 
practicable, place families with children as close as possible to their 
school of origin so as not to disrupt such children's education;
    (8) To monitor subrecipients at least annually;
    (9) To use the centralized or coordinated assessment system 
established by the Continuum of Care as set forth in Sec. 578.7(a)(8). A 
victim service provider may choose not to use the Continuum of Care's 
centralized or coordinated assessment system, provided that victim 
service providers in the area use a centralized or coordinated 
assessment system that meets HUD's minimum requirements and the victim 
service provider uses that system instead;
    (10) To follow the written standards for providing Continuum of Care 
assistance developed by the Continuum of Care, including the minimum 
requirements set forth in Sec. 578.7(a)(9);
    (11) Enter into subrecipient agreements requiring subrecipients to 
operate the project(s) in accordance with the provisions of this Act and 
all requirements under 24 CFR part 578; and

[[Page 230]]

    (12) To comply with such other terms and conditions as HUD may 
establish by NOFA.



Sec. 578.25  Site control.

    (a) In general. When grant funds will be used for acquisition, 
rehabilitation, new construction, operating costs, or to provide 
supportive services, the recipient or subrecipient must demonstrate that 
it has site control within the time frame established in section 
Sec. 578.21 before HUD will execute a grant agreement. This requirement 
does not apply to funds used for housing that will eventually be owned 
or controlled by the individuals or families served or for supportive 
services provided at sites not operated by the recipient or 
subrecipient.
    (b) Evidence. Acceptable evidence of site control is a deed or 
lease. If grant funds will be used for acquisition, acceptable evidence 
of site control will be a purchase agreement. The owner, lessee, and 
purchaser shown on these documents must be the selected applicant or 
intended subrecipient identified in the application for assistance.
    (c) Tax credit projects. (1) Applicants that plan to use the low-
income housing tax credit authorized under 26 U.S.C. 42 to finance a 
project must prove to HUD's satisfaction that the applicant or 
subrecipient identified in the application is in control of the limited 
partnership or limited liability corporation that has a deed or lease 
for the project site.
    (i) To have control of the limited partnership, the applicant or 
subrecipient must be the general partner of the limited partnership or 
have a 51 percent controlling interest in that general partner.
    (ii) To have control of the limited liability company, the applicant 
or subrecipient must be the sole managing member.
    (2) If grant funds are to be used for acquisition, rehabilitation, 
or new construction, the recipient or subrecipient must maintain control 
of the partnership or corporation and must ensure that the project is 
operated in compliance with law and regulation for 15 years from the 
date of initial occupancy or initial service provision. The partnership 
or corporation must own the project site throughout the 15-year period. 
If grant funds were not used for acquisition, rehabilitation, or new 
construction, then the recipient or subrecipient must maintain control 
for the term of the grant agreement and any renewals thereof.



Sec. 578.27  Consolidated plan.

    (a) States or units of general local government. An applicant that 
is a State or a unit of general local government must have a HUD-
approved, complete or abbreviated, consolidated plan in accordance with 
24 CFR part 91. The applicant must submit a certification that the 
application for funding is consistent with the HUD-approved consolidated 
plan(s) for the jurisdiction(s) in which the proposed project will be 
located. Funded applicants must certify in a grant agreement that they 
are following the HUD-approved consolidated plan.
    (b) Other applicants. Applicants that are not States or units of 
general local government must submit a certification by the 
jurisdiction(s) in which the proposed project will be located that the 
applicant's application for funding is consistent with the 
jurisdiction's HUD-approved consolidated plan. The certification must be 
made by the unit of general local government or the State, in accordance 
with the consistency certification provisions under 24 CFR part 91, 
subpart F. If the jurisdiction refuses to provide a certification of 
consistency, the applicant may appeal to HUD under Sec. 578.35.
    (c) Timing of consolidated plan certification submissions. The 
required certification that the application for funding is consistent 
with the HUD-approved consolidated plan must be submitted by the funding 
application submission deadline announced in the NOFA.



Sec. 578.29  Subsidy layering.

    HUD may provide assistance under this program only in accordance 
with HUD subsidy layering requirements in section 102 of the Housing and 
Urban Development Reform Act of 1989 (42 U.S.C. 3545) and 24 CFR part 4, 
subpart A. An applicant must submit information in its application on 
other sources of governmental assistance that the applicant has 
received, or reasonably

[[Page 231]]

expects to receive, for a proposed project or activities. HUD's review 
of this information is intended to prevent excessive public assistance 
for proposed project or activities by combining (layering) assistance 
under this program with other governmental housing assistance from 
federal, State, or local agencies, including assistance such as tax 
concessions or tax credits.



Sec. 578.31  Environmental review.

    (a) Activities under this part are subject to environmental review 
by HUD under 24 CFR part 50. The recipient or subrecipient shall supply 
all available, relevant information necessary for HUD to perform, for 
each property, any environmental review required by 24 CFR part 50. The 
recipient or subrecipient must carry out mitigating measures required by 
HUD or select an alternate eligible property. HUD may eliminate from 
consideration any application that would require an Environmental Impact 
Statement.
    (b) The recipient or subrecipient, its project partners, and their 
contractors may not acquire, rehabilitate, convert, lease, repair, 
dispose of, demolish, or construct property for a project under this 
part, or commit or expend HUD or local funds for such eligible 
activities under this part, until HUD has performed an environmental 
review under 24 CFR part 50 and the recipient or subrecipient has 
received HUD approval of the property.



Sec. 578.33  Renewals.

    (a) In general. Awards made under this part and title IV of the Act, 
as in effect before August 30, 2012 (the Supportive Housing Program and 
the Shelter Plus Care program), may be renewed to continue ongoing 
leasing, operations, supportive services, rental assistance, HMIS, and 
administration beyond the initial funding period. To be considered for 
funding, recipients must submit a request in a form specified by HUD, 
must meet the requirements of this part, and must submit the request 
within the time frame established by HUD.
    (b) Length of renewal. HUD may award up to 3 years of funds for 
supportive services, leasing, HMIS, and operating costs. Renewals of 
tenant-based and sponsor-based rental assistance may be for up to one 
year of rental assistance. Renewals of project-based rental assistance 
may be for up to 15 years of rental assistance, subject to availability 
of annual appropriations.
    (c) Assistance available. (1) Assistance during each year of a 
renewal period may be for:
    (i) Up to 100 percent of the amount for supportive services and HMIS 
costs in the final year of the prior funding period;
    (ii) Up to 100 percent of the amount for leasing and operating in 
the final year of the prior funding period adjusted in proportion to 
changes in the FMR for the geographic area; and
    (iii) For rental assistance, up to 100 percent of the result of 
multiplying the number and unit size(s) in the grant agreement by the 
number of months in the renewal grant term and the applicable FMR.
    (d) Review criteria. (1) Awards made under title IV of the Act, as 
in effect before August 30, 2012 are eligible for renewal in the 
Continuum of Care program even if the awardees would not be eligible for 
a new grant under the program, so long as they continue to serve the 
same population and the same number of persons or units in the same type 
of housing as identified in their most recently amended grant agreement 
signed before August 30, 2012. Grants will be renewed if HUD receives a 
certification from the Continuum that there is a demonstrated need for 
the project, and HUD finds that the project complied with program 
requirements applicable before August 30, 2012. For purposes of meeting 
the requirements of this part, a project will continue to be 
administered in accordance with 24 CFR 582.330, if the project received 
funding under the Shelter Plus Care program, or 24 CFR 583.325, if the 
project received funding under the Supportive Housing Program.
    (2) Renewal of awards made after August 30, 2012. Review criteria 
for competitively awarded renewals made after August 30, 2012 will be 
described in the NOFA.
    (e) Unsuccessful projects. HUD may renew a project that was eligible 
for renewal in the competition and was part of an application that was 
not funded

[[Page 232]]

despite having been submitted on time, in the manner required by HUD, 
and containing the information required by HUD, upon a finding that the 
project meets the purposes of the Continuum of Care program. The renewal 
will not exceed more than one year and will be under such conditions as 
HUD deems appropriate.
    (f) Annual Performance Report condition. HUD may terminate the 
renewal of any grant and require the recipient to repay the renewal 
grant if:
    (1) The recipient fails to timely submit a HUD Annual Performance 
Report (APR) for the grant year immediately prior to renewal; or
    (2) The recipient submits an APR that HUD deems unacceptable or 
shows noncompliance with the requirements of the grant and this part.



Sec. 578.35  Appeal.

    (a) In general. Failure to follow the procedures or meet the 
deadlines established in this section will result in denial of the 
appeal.
    (b) Solo applicants. (1) Who may appeal. Nonprofits, States, and 
local governments, and instrumentalities of State or local governments 
that attempted to participate in the Continuum of Care planning process 
in the geographic area in which they operate, that believe they were 
denied the right to participate in a reasonable manner, and that 
submitted a solo application for funding by the application deadline 
established in the NOFA, may appeal the decision of the Continuum to 
HUD.
    (2) Notice of intent to appeal. The solo applicant must submit a 
written notice of intent to appeal, with a copy to the Continuum, with 
their funding application.
    (3) Deadline for submitting proof. No later than 30 days after the 
date that HUD announces the awards, the solo applicant shall submit in 
writing, with a copy to the Continuum, all relevant evidence supporting 
its claim, in such manner as HUD may require by Notice.
    (4) Response from the Continuum of Care. The Continuum shall have 30 
days from the date of its receipt of the solo applicant's evidence to 
respond to HUD in writing and in such manner as HUD may require, with a 
copy to the solo applicant.
    (5) Decision. HUD will notify the solo applicant and the Continuum 
of its decision within 60 days of receipt of the Continuum's response.
    (6) Funding. If HUD finds that the solo applicant was not permitted 
to participate in the Continuum of Care planning process in a reasonable 
manner, then HUD may award a grant to the solo applicant when funds next 
become available and may direct the Continuum of Care to take remedial 
steps to ensure reasonable participation in the future. HUD may also 
reduce the award to the Continuum's applicant(s).
    (c) Denied or decreased funding. (1) Who may appeal. Eligible 
applicants that are denied funds by HUD, or that requested more funds 
than HUD awarded to them, may appeal the award by filing a written 
appeal, in such form and manner as HUD may require by Notice, within 45 
days of the date of HUD's announcement of the award.
    (2) Decision. HUD will notify the applicant of its decision on the 
appeal within 60 days of HUD's receipt of the written appeal. HUD will 
reverse a decision only when the applicant can show that HUD error 
caused the denial or decrease.
    (3) Funding. Awards and increases to awards made upon appeal will be 
made from next available funds.
    (d) Competing Continuums of Care. (1) In general. If more than one 
Continuum of Care claims the same geographic area, HUD will award funds 
to the Continuum applicant(s) whose application(s) has the highest total 
score. No projects will be funded from the lower scoring Continuum. No 
projects that are submitted in two or more competing Continuum of Care 
applications will be funded.
    (2) Who may appeal. The designated applicant(s) for the lower 
scoring Continuum may appeal HUD's decision to fund the application(s) 
from the competing Continuum by filing a written appeal, in such form 
and manner as HUD may require by Notice, within 45 days of the date of 
HUD's announcement of the award.
    (3) Decision. HUD will notify the applicant(s) of its decision on 
the appeal within 60 days of the date of HUD's receipt of the written 
appeal. HUD will

[[Page 233]]

reverse a decision only upon a showing by the applicant that HUD error 
caused the denial.
    (e) Consolidated plan certification. (1) In general. An applicant 
may appeal to HUD a jurisdiction's refusal to provide a certification of 
consistency with the Consolidated Plan.
    (2) Procedure. The applicant must submit a written appeal with its 
application to HUD and send a copy of the appeal to the jurisdiction 
that denied the certification of consistency. The appeal must include, 
at a minimum:
    (i) A copy of the applicant's request to the jurisdiction for the 
certification of consistency with the Consolidated Plan;
    (ii) A copy of the jurisdiction's response stating the reasons for 
denial, including the reasons the proposed project is not consistent 
with the jurisdiction's Consolidated Plan in accordance with 24 CFR 
91.500(c); and
    (iii) A statement of the reasons why the applicant believes its 
project is consistent with the jurisdiction's Consolidated Plan.
    (3) Jurisdiction response. The jurisdiction that refused to provide 
the certification of consistency with the jurisdiction's Consolidated 
Plan shall have 10 days after receipt of a copy of the appeal to submit 
a written explanation of the reasons originally given for refusing to 
provide the certification and a written rebuttal to any claims made by 
the applicant in the appeal.
    (4) HUD review. (i) HUD will issue its decision within 45 days of 
the date of HUD's receipt of the jurisdiction's response. As part of its 
review, HUD will consider:
    (A) Whether the applicant submitted the request to the appropriate 
political jurisdiction; and
    (B) The reasonableness of the jurisdiction's refusal to provide the 
certificate.
    (ii) If the jurisdiction did not provide written reasons for 
refusal, including the reasons why the project is not consistent with 
the jurisdiction's Consolidated Plan in its initial response to the 
applicant's request for a certification, HUD will find for the applicant 
without further inquiry or response from the political jurisdiction.



             Subpart D_Program Components and Eligible Costs



Sec. 578.37  Program components and uses of assistance.

    (a) Continuum of Care funds may be used to pay for the eligible 
costs listed in Sec. 578.39 through Sec. 578.63 when used to establish 
and operate projects under five program components: permanent housing; 
transitional housing; supportive services only; HMIS; and, in some 
cases, homelessness prevention. Although grant funds may be used by 
recipients and subrecipients in all components for the eligible costs of 
contributing data to the HMIS designated by the Continuum of Care, only 
HMIS Leads may use grant funds for an HMIS component. Administrative 
costs are eligible for all components. All components are subject to the 
restrictions on combining funds for certain eligible activities in a 
single project found in Sec. 578.87(c). The eligible program components 
are:
    (1) Permanent housing (PH). Permanent housing is community-based 
housing, the purpose of which is to provide housing without a designated 
length of stay. Grant funds may be used for acquisition, rehabilitation, 
new construction, leasing, rental assistance, operating costs, and 
supportive services. PH includes:
    (i) Permanent supportive housing for persons with disabilities 
(PSH). PSH can only provide assistance to individuals with disabilities 
and families in which one adult or child has a disability. Supportive 
services designed to meet the needs of the program participants must be 
made available to the program participants.
    (ii) Rapid rehousing. Continuum of Care funds may provide supportive 
services, as set forth in Sec. 578.53, and/or short-term (up to 3 
months) and/or medium-term (for 3 to 24 months) tenant-based rental 
assistance, as set forth in Sec. 578.51(c), as necessary to help a 
homeless individual or family, with or without disabilities, move as 
quickly as possible into permanent housing and achieve stability in that 
housing. When providing short-term and/or medium-term rental assistance 
to program participants, the rental assistance is subject to 
Sec. 578.51(a)(1), but not

[[Page 234]]

Sec. 578.51(a)(1)(i) and (ii); (a)(2); (c) and (f) through (i); and 
(l)(1). These projects:
    (A) Must follow the written policies and procedures established by 
the Continuum of Care for determining and prioritizing which eligible 
families and individuals will receive rapid rehousing assistance, as 
well as the amount or percentage of rent that each program participant 
must pay.
    (B) May set a maximum amount or percentage of rental assistance that 
a program participant may receive, a maximum number of months that a 
program participant may receive rental assistance, and/or a maximum 
number of times that a program participant may receive rental 
assistance. The recipient or subrecipient may also require program 
participants to share in the costs of rent. For the purposes of 
calculating rent for rapid rehousing, the rent shall equal the sum of 
the total monthly rent for the unit and, if the tenant pays separately 
for utilities, the monthly allowance for utilities (excluding telephone) 
established by the public housing authority for the area in which the 
housing is located.
    (C) Limit rental assistance to no more than 24 months to a 
household.
    (D) May provide supportive services for no longer than 6 months 
after rental assistance stops.
    (E) Must re-evaluate, not less than once annually, that the program 
participant lacks sufficient resources and support networks necessary to 
retain housing without Continuum of Care assistance and the types and 
amounts of assistance that the program participant needs to retain 
housing. The recipient or subrecipient may require each program 
participant receiving assistance to notify the recipient or subrecipient 
of changes in the program participant's income or other circumstances 
(e.g., changes in household composition) that affect the program 
participant's need for assistance. When notified of a relevant change, 
the recipient or subrecipient must reevaluate the program participant's 
eligibility and the amount and types of assistance that the program 
participant needs.
    (F) Require the program participant to meet with a case manager not 
less than once per month to assist the program participant in ensuring 
long-term housing stability. The project is exempt from this requirement 
if the Violence Against Women Act of 1994 (42 U.S.C. 13925 et seq.) or 
the Family Violence Prevention and Services Act (42 U.S.C. 10401 et 
seq.) prohibits the recipient carrying out the project from making its 
housing conditional on the participant's acceptance of services.
    (2) Transitional Housing (TH). Transitional housing facilitates the 
movement of homeless individuals and families to PH within 24 months of 
entering TH. Grant funds may be used for acquisition, rehabilitation, 
new construction, leasing, rental assistance, operating costs, and 
supportive services.
    (3) Supportive Service Only (SSO). Funds may be used for 
acquisition, rehabilitation, relocation costs, or leasing of a facility 
from which supportive services will be provided, and supportive services 
in order to provide supportive services to unsheltered and sheltered 
homeless persons for whom the recipient or subrecipient is not providing 
housing or housing assistance. SSO includes street outreach.
    (4) HMIS. Funds may be used by HMIS Leads to lease a structure in 
which the HMIS is operated or as operating funds to operate a structure 
in which the HMIS is operated, and for other costs eligible in 
Sec. 578.57.
    (5) Homelessness prevention. Funds may be used by recipients in 
Continuums of Care-designated high-performing communities for housing 
relocation and stabilization services, and short- and/or medium-term 
rental assistance, as described in 24 CFR 576.105 and 24 CFR 576.106, 
that are necessary to prevent an individual or family from becoming 
homeless.
    (b) Uses of assistance. Funds are available to pay for the eligible 
costs listed in Sec. 578.39 through Sec. 578.63 when used to:
    (1) Establish new housing or new facilities to provide supportive 
services;
    (2) Expand existing housing and facilities in order to increase the 
number of homeless persons served;
    (3) Bring existing housing and facilities into compliance with State 
and local government health and safety standards, as described in 
Sec. 578.87;
    (4) Preserve existing permanent housing and facilities that provide 
supportive services;

[[Page 235]]

    (5) Provide supportive services for residents of supportive housing 
or for homeless persons not residing in supportive housing;
    (6) Continue funding permanent housing when the recipient has 
received funding under this part for leasing, supportive services, 
operating costs, or rental assistance;
    (7) Establish and operate an HMIS or comparable database; and
    (8) Establish and carry out a Continuum of Care planning process and 
operate a Continuum of Care.
    (c) Multiple purposes. Structures used to provide housing, 
supportive housing, supportive services, or as a facility for HMIS 
activities may also be used for other purposes. However, assistance 
under this part will be available only in proportion to the use of the 
structure for supportive housing or supportive services. If eligible and 
ineligible activities are carried out in separate portions of the same 
structure or in separate structures, grant funds may not be used to pay 
for more than the actual cost of acquisition, construction, or 
rehabilitation of the portion of the structure or structures used for 
eligible activities. If eligible and ineligible activities are carried 
out in the same structure, the costs will be prorated based on the 
amount of time that the space is used for eligible versus ineligible 
activities.



Sec. 578.39  Continuum of Care planning activities.

    (a) In general. Collaborative applicants may use up to 3 percent of 
their FPRN, or a maximum amount to be established by the NOFA, for costs 
of:
    (1) Designing and carrying out a collaborative process for the 
development of an application to HUD;
    (2) Evaluating the outcomes of projects for which funds are awarded 
in the geographic area under the Continuum of Care and the Emergency 
Solutions Grants programs; and
    (3) Participating in the consolidated plan(s) for the geographic 
area(s).
    (b) Continuum of Care planning activities. Eligible planning costs 
include the costs of:
    (1) Developing a communitywide or regionwide process involving the 
coordination of nonprofit homeless providers, victim service providers, 
faith-based organizations, governments, businesses, advocates, public 
housing agencies, school districts, social service providers, mental 
health agencies, hospitals, universities, affordable housing developers, 
law enforcement, organizations that serve veterans, and homeless and 
formerly homeless individuals;
    (2) Determining the geographic area that the Continuum of Care will 
serve;
    (3) Developing a Continuum of Care system;
    (4) Evaluating the outcomes of projects for which funds are awarded 
in the geographic area, including the Emergency Solutions Grants 
program;
    (5) Participating in the consolidated plan(s) of the jurisdiction(s) 
in the geographic area; and
    (6) Preparing and submitting an application to HUD on behalf of the 
entire Continuum of Care membership, including conducting a sheltered 
and unsheltered point-in-time count and other data collection as 
required by HUD.
    (c) Monitoring costs. The costs of monitoring recipients and 
subrecipients and enforcing compliance with program requirements are 
eligible.



Sec. 578.41  Unified Funding Agency costs.

    (a) In general. UFAs may use up to 3 percent of their FPRN, or a 
maximum amount to be established by the NOFA, whichever is less, for 
fiscal control and accounting costs necessary to assure the proper 
disbursal of, and accounting for, federal funds awarded to subrecipients 
under the Continuum of Care program.
    (b) UFA costs. UFA costs include costs of ensuring that all 
financial transactions carried out under the Continuum of Care program 
are conducted and records are maintained in accordance with generally 
accepted accounting principles, including arranging for an annual 
survey, audit, or evaluation of the financial records of each project 
carried out by a subrecipient funded by a grant received through the 
Continuum of Care program.
    (c) Monitoring costs. The costs of monitoring subrecipients and 
enforcing compliance with program requirements are eligible for costs.

[[Page 236]]



Sec. 578.43  Acquisition.

    Grant funds may be used to pay up to 100 percent of the cost of 
acquisition of real property selected by the recipient or subrecipient 
for use in the provision of housing or supportive services for homeless 
persons.



Sec. 578.45  Rehabilitation.

    (a) Use. Grant funds may be used to pay up to 100 percent of the 
cost of rehabilitation of structures to provide housing or supportive 
services to homeless persons.
    (b) Eligible costs. Eligible rehabilitation costs include installing 
cost-effective energy measures, and bringing an existing structure to 
State and local government health and safety standards.
    (c) Ineligible costs. Grant funds may not be used for rehabilitation 
of leased property.
    (d) Broadband infrastructure. Any substantial rehabilitation, as 
defined by 24 CFR 5.100, of a building with more than 4 rental units and 
funded by a grant awarded after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the grantee determines and, in accordance 
with Sec. 578.103, documents the determination that:
    (1) The location of the substantial rehabilitation makes 
installation of broadband infrastructure infeasible;
    (2) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (3) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[77 FR 45442, July 31, 2012, as amended at 81 FR 92637, Dec. 20, 2016]



Sec. 578.47  New construction.

    (a) Use. Grant funds may be used to:
    (1) Pay up to 100 percent of the cost of new construction, including 
the building of a new structure or building an addition to an existing 
structure that increases the floor area by 100 percent or more, and the 
cost of land associated with that construction, for use as housing.
    (2) If grant funds are used for new construction, the applicant must 
demonstrate that the costs of new construction are substantially less 
than the costs of rehabilitation or that there is a lack of available 
appropriate units that could be rehabilitated at a cost less than new 
construction. For purposes of this cost comparison, costs of 
rehabilitation or new construction may include the cost of real property 
acquisition.
    (b) Ineligible costs. Grant funds may not be used for new 
construction on leased property.
    (c) Broadband infrastructure. Any new construction of a building 
with more than 4 rental units and funded by a grant awarded after 
January 19, 2017 must include installation of broadband infrastructure, 
as this term is defined in 24 CFR 5.100, except where the grantee 
determines and, in accordance with Sec. 578.103, documents the 
determination that:
    (1) The location of the new construction makes installation of 
broadband infrastructure infeasible; or
    (2) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden.

[77 FR 45442, July 31, 2012, as amended at 81 FR 92637, Dec. 20, 2016]



Sec. 578.49  Leasing.

    (a) Use. (1) Where the recipient or subrecipient is leasing the 
structure, or portions thereof, grant funds may be used to pay for 100 
percent of the costs of leasing a structure or structures, or portions 
thereof, to provide housing or supportive services to homeless persons 
for up to 3 years. Leasing funds may not be used to lease units or 
structures owned by the recipient, subrecipient, their parent 
organization(s), any other related organization(s), or organizations 
that are members of a partnership, where the partnership owns the 
structure, unless HUD authorized an exception for good cause.
    (2) Any request for an exception must include the following:

[[Page 237]]

    (i) A description of how leasing these structures is in the best 
interest of the program;
    (ii) Supporting documentation showing that the leasing charges paid 
with grant funds are reasonable for the market; and
    (iii) A copy of the written policy for resolving disputes between 
the landlord and tenant, including a recusal for officers, agents, and 
staff who work for both the landlord and tenant.
    (b) Requirements. (1) Leasing structures. When grants are used to 
pay rent for all or part of a structure or structures, the rent paid 
must be reasonable in relation to rents being charged in the area for 
comparable space. In addition, the rent paid may not exceed rents 
currently being charged by the same owner for comparable unassisted 
space.
    (2) Leasing individual units. When grants are used to pay rent for 
individual housing units, the rent paid must be reasonable in relation 
to rents being charged for comparable units, taking into account the 
location, size, type, quality, amenities, facilities, and management 
services. In addition, the rents may not exceed rents currently being 
charged for comparable units, and the rent paid may not exceed HUD-
determined fair market rents.
    (3) Utilities. If electricity, gas, and water are included in the 
rent, these utilities may be paid from leasing funds. If utilities are 
not provided by the landlord, these utility costs are an operating cost, 
except for supportive service facilities. If the structure is being used 
as a supportive service facility, then these utility costs are a 
supportive service cost.
    (4) Security deposits and first and last month's rent. Recipients 
and subrecipients may use grant funds to pay security deposits, in an 
amount not to exceed 2 months of actual rent. An advance payment of the 
last month's rent may be provided to the landlord in addition to the 
security deposit and payment of the first month's rent.
    (5) Occupancy agreements and subleases. Occupancy agreements and 
subleases are required as specified in Sec. 578.77(a).
    (6) Calculation of occupancy charges and rent. Occupancy charges and 
rent from program participants must be calculated as provided in 
Sec. 578.77.
    (7) Program income. Occupancy charges and rent collected from 
program participants are program income and may be used as provided 
under Sec. 578.97.
    (8) Transition. Beginning in the first year awards are made under 
the Continuum of Care program, renewals of grants for leasing funds 
entered into under the authority of title IV, subtitle D of the Act as 
it existed before May 20, 2009, will be renewed either as grants for 
leasing or as rental assistance, depending on the characteristics of the 
project. Leasing funds will be renewed as rental assistance if the funds 
are used to pay rent on units where the lease is between the program 
participant and the landowner or sublessor. Projects requesting leasing 
funds will be renewed as leasing if the funds were used to lease a unit 
or structure and the lease is between the recipient or subrecipient and 
the landowner.



Sec. 578.51  Rental assistance.

    (a) Use. (1) Grant funds may be used for rental assistance for 
homeless individuals and families. Rental assistance cannot be provided 
to a program participant who is already receiving rental assistance, or 
living in a housing unit receiving rental assistance or operating 
assistance through other federal, State, or local sources.
    (i) The rental assistance may be short-term, up to 3 months of rent; 
medium-term, for 3 to 24 months of rent; or long-term, for longer than 
24 months of rent and must be administered in accordance with the 
policies and procedures established by the Continuum as set forth in 
Sec. 578.7(a)(9) and this section.
    (ii) The rental assistance may be tenant-based, project-based, or 
sponsor-based, and may be for transitional or permanent housing.
    (2) Grant funds may be used for security deposits in an amount not 
to exceed 2 months of rent. An advance payment of the last month's rent 
may be provided to the landlord, in addition to the security deposit and 
payment of first month's rent.

[[Page 238]]

    (b) Rental assistance administrator. Rental assistance must be 
administered by a State, unit of general local government, or a public 
housing agency.
    (c) Tenant-based rental assistance. Tenant-based rental assistance 
is rental assistance in which program participants choose housing of an 
appropriate size in which to reside. Up to 5 years' worth of rental 
assistance may be awarded to a project in one competition.
    (1) When necessary to facilitate the coordination of supportive 
services, recipients and subrecipients may require program participants 
to live in a specific area for their entire period of participation, or 
in a specific structure for the first year and in a specific area for 
the remainder of their period of participation. Program participants who 
are receiving rental assistance in transitional housing may be required 
to live in a specific structure for their entire period of participation 
in transitional housing.
    (2) Program participants who have complied with all program 
requirements during their residence retain the rental assistance if they 
move.
    (3) Program participants who have complied with all program 
requirements during their residence, who have been a victim of domestic 
violence, dating violence, sexual assault, or stalking, who reasonably 
believe they are imminently threatened by harm from further domestic 
violence, dating violence, sexual assault, or stalking (which would 
include threats from a third party, such as a friend or family member of 
the perpetrator of the violence) if they remain in the assisted unit, 
and who are able to document the violence and basis for their belief, 
may retain the rental assistance and move to a different Continuum of 
Care geographic area if they move out of the assisted unit to protect 
their health and safety. These program participants may move to a 
different Continuum of Care's geographic service area even if the 
recipient or subrecipient cannot meet all regulatory requirements of 
this part in the new geographic area where the unit is located. The 
recipient or subrecipient, however, must be able to meet all statutory 
requirements of the Continuum of Care program either directly or through 
a third-party contract or agreement.
    (4) Program participants other than those described in paragraph 
(c)(3) of this section may choose housing outside of the Continuum of 
Care's geographic area if the recipient or subrecipient, through its 
employees or contractors, is able to meet all requirements of this part 
in the geographic area where the program participant chooses housing. If 
the recipient or subrecipient is unable to meet the requirements of this 
part, either directly or through a third-party contract or agreement, 
the recipient or subrecipient may refuse to permit the program 
participant to retain the tenant-based rental assistance if the program 
participant chooses to move outside of the Continuum of Care's 
geographic area.
    (d) Sponsor-based rental assistance. Sponsor-based rental assistance 
is provided through contracts between the recipient and sponsor 
organization. A sponsor may be a private, nonprofit organization, or a 
community mental health agency established as a public nonprofit 
organization. Program participants must reside in housing owned or 
leased by the sponsor. Up to 5 years worth of rental assistance may be 
awarded to a project in one competition.
    (e) Project-based rental assistance. Project-based rental assistance 
is provided through a contract with the owner of an existing structure, 
where the owner agrees to lease the subsidized units to program 
participants. Program participants will not retain rental assistance if 
they move. Up to 15 years of rental assistance may be awarded in one 
competition.
    (f) Grant amount. The amount of rental assistance in each project 
will be based on the number and size of units proposed by the applicant 
to be assisted over the grant period. The amount of rental assistance in 
each project will be calculated by multiplying the number and size of 
units proposed by the FMR of each unit on the date the application is 
submitted to HUD, by the term of the grant.
    (g) Rent reasonableness. HUD will only provide rental assistance for 
a unit if

[[Page 239]]

the rent is reasonable. The recipient or subrecipient must determine 
whether the rent charged for the unit receiving rental assistance is 
reasonable in relation to rents being charged for comparable unassisted 
units, taking into account the location, size, type, quality, amenities, 
facilities, and management and maintenance of each unit. Reasonable rent 
must not exceed rents currently being charged by the same owner for 
comparable unassisted units.
    (h) Payment of grant. (1) The amount of rental assistance in each 
project will be reserved for rental assistance over the grant period. An 
applicant's request for rental assistance in each grant is an estimate 
of the amount needed for rental assistance. Recipients will make draws 
from the grant funds to pay the actual costs of rental assistance for 
program participants.
    (2) For tenant-based rental assistance, on demonstration of need:
    (i) Up to 25 percent of the total rental assistance awarded may be 
spent in any year of a 5-year grant term; or
    (ii) A higher percentage if approved in advance by HUD, if the 
recipient provides evidence satisfactory to HUD that it is financially 
committed to providing the housing assistance described in the 
application for the full 5-year period.
    (3) A recipient must serve at least as many program participants as 
shown in its application for assistance.
    (4) If the amount in each grant reserved for rental assistance over 
the grant period exceeds the amount that will be needed to pay the 
actual costs of rental assistance, due to such factors as contract rents 
being lower than FMRs and program participants being able to pay a 
portion of the rent, recipients or subrecipients may use the excess 
funds for covering the costs of rent increases, or for serving a greater 
number of program participants.
    (i) Vacancies. If a unit assisted under this section is vacated 
before the expiration of the lease, the assistance for the unit may 
continue for a maximum of 30 days from the end of the month in which the 
unit was vacated, unless occupied by another eligible person. No 
additional assistance will be paid until the unit is occupied by another 
eligible person. Brief periods of stays in institutions, not to exceed 
90 days for each occurrence, are not considered vacancies.
    (j) Property damage. Recipients and subrecipients may use grant 
funds in an amount not to exceed one month's rent to pay for any damage 
to housing due to the action of a program participant. This shall be a 
one-time cost per participant, incurred at the time a participant exits 
a housing unit.
    (k) Resident rent. Rent must be calculated as provided in 
Sec. 578.77. Rents collected from program participants are program 
income and may be used as provided under Sec. 578.97.
    (l) Leases. (1) Initial lease. For project-based, sponsor-based, or 
tenant-based rental assistance, program participants must enter into a 
lease agreement for a term of at least one year, which is terminable for 
cause. The leases must be automatically renewable upon expiration for 
terms that are a minimum of one month long, except on prior notice by 
either party.
    (2) Initial lease for transitional housing. Program participants in 
transitional housing must enter into a lease agreement for a term of at 
least one month. The lease must be automatically renewable upon 
expiration, except on prior notice by either party, up to a maximum term 
of 24 months.
    (m) VAWA emergency transfer plan costs. Recipients and subrecipients 
of grants for tenant-based rental assistance may use grant funds to pay 
amounts owed for breaking the lease if the family qualifies for an 
emergency transfer under the emergency transfer plan established under 
Sec. 578.99(j)(8).

[77 FR 45442, July 31, 2012, as amended at 81 FR 38584, June 14, 2016; 
81 FR 80810, Nov. 16, 2016]



Sec. 578.53  Supportive services.

    (a) In general. Grant funds may be used to pay the eligible costs of 
supportive services that address the special needs of the program 
participants. If the supportive services are provided in a supportive 
service facility not contained in a housing structure, the costs of day-
to-day operation of the supportive service facility, including 
maintenance, repair, building security, furniture, utilities, and 
equipment are eligible as a supportive service.

[[Page 240]]

    (1) Supportive services must be necessary to assist program 
participants obtain and maintain housing.
    (2) Recipients and subrecipients shall conduct an annual assessment 
of the service needs of the program participants and should adjust 
services accordingly.
    (b) Duration. (1) For a transitional housing project, supportive 
services must be made available to residents throughout the duration of 
their residence in the project.
    (2) Permanent supportive housing projects must provide supportive 
services for the residents to enable them to live as independently as is 
practicable throughout the duration of their residence in the project.
    (3) Services may also be provided to former residents of 
transitional housing and current residents of permanent housing who were 
homeless in the prior 6 months, for no more than 6 months after leaving 
transitional housing or homelessness, respectively, to assist their 
adjustment to independent living.
    (4) Rapid rehousing projects must require the program participant to 
meet with a case manager not less than once per month as set forth in 
Sec. 578.37(a)(1)(ii)(F), to assist the program participant in 
maintaining long-term housing stability.
    (c) Special populations. All eligible costs are eligible to the same 
extent for program participants who are unaccompanied homeless youth; 
persons living with HIV/AIDS; and victims of domestic violence, dating 
violence, sexual assault, or stalking.
    (d) Ineligible costs. Any cost that is not described as an eligible 
cost under this section is not an eligible cost of providing supportive 
services using Continuum of Care program funds. Staff training and the 
costs of obtaining professional licenses or certifications needed to 
provide supportive services are not eligible costs.
    (e) Eligible costs. (1) Annual Assessment of Service Needs. The 
costs of the assessment required by Sec. 578.53(a)(2) are eligible 
costs.
    (2) Assistance with moving costs. Reasonable one-time moving costs 
are eligible and include truck rental and hiring a moving company.
    (3) Case management. The costs of assessing, arranging, 
coordinating, and monitoring the delivery of individualized services to 
meet the needs of the program participant(s) are eligible costs. 
Component services and activities consist of:
    (i) Counseling;
    (ii) Developing, securing, and coordinating services;
    (iii) Using the centralized or coordinated assessment system as 
required under Sec. 578.23(c)(9).
    (iv) Obtaining federal, State, and local benefits;
    (v) Monitoring and evaluating program participant progress;
    (vi) Providing information and referrals to other providers;
    (vii) Providing ongoing risk assessment and safety planning with 
victims of domestic violence, dating violence, sexual assault, and 
stalking; and
    (viii) Developing an individualized housing and service plan, 
including planning a path to permanent housing stability.
    (4) Child care. The costs of establishing and operating child care, 
and providing child-care vouchers, for children from families 
experiencing homelessness, including providing meals and snacks, and 
comprehensive and coordinated developmental activities, are eligible.
    (i) The children must be under the age of 13, unless they are 
disabled children.
    (ii) Disabled children must be under the age of 18.
    (iii) The child-care center must be licensed by the jurisdiction in 
which it operates in order for its costs to be eligible.
    (5) Education services. The costs of improving knowledge and basic 
educational skills are eligible.
    (i) Services include instruction or training in consumer education, 
health education, substance abuse prevention, literacy, English as a 
Second Language, and General Educational Development (GED).
    (ii) Component services or activities are screening, assessment and 
testing; individual or group instruction; tutoring; provision of books, 
supplies, and instructional material; counseling; and referral to 
community resources.

[[Page 241]]

    (6) Employment assistance and job training. The costs of 
establishing and operating employment assistance and job training 
programs are eligible, including classroom, online and/or computer 
instruction, on-the-job instruction, services that assist individuals in 
securing employment, acquiring learning skills, and/or increasing 
earning potential. The cost of providing reasonable stipends to program 
participants in employment assistance and job training programs is also 
an eligible cost.
    (i) Learning skills include those skills that can be used to secure 
and retain a job, including the acquisition of vocational licenses and/
or certificates.
    (ii) Services that assist individuals in securing employment consist 
of:
    (A) Employment screening, assessment, or testing;
    (B) Structured job skills and job-seeking skills;
    (C) Special training and tutoring, including literacy training and 
pre-vocational training;
    (D) Books and instructional material;
    (E) Counseling or job coaching; and
    (F) Referral to community resources.
    (7) Food. The cost of providing meals or groceries to program 
participants is eligible.
    (8) Housing search and counseling services. Costs of assisting 
eligible program participants to locate, obtain, and retain suitable 
housing are eligible.
    (i) Component services or activities are tenant counseling; 
assisting individuals and families to understand leases; securing 
utilities; and making moving arrangements.
    (ii) Other eligible costs are:
    (A) Mediation with property owners and landlords on behalf of 
eligible program participants;
    (B) Credit counseling, accessing a free personal credit report, and 
resolving personal credit issues; and
    (C) The payment of rental application fees.
    (iii) Housing counseling, as defined in Sec. 5.100, that is funded 
with or provided in connection with grant funds must be carried out in 
accordance with Sec. 5.111. When recipients or subrecipients provide 
housing services to eligible persons that are incidental to a larger set 
of holistic case management services, these services do not meet the 
definition of Housing counseling, as defined in Sec. 5.100, and 
therefore are not required to be carried out in accordance with the 
certification requirements of Sec. 5.111.
    (9) Legal services. Eligible costs are the fees charged by licensed 
attorneys and by person(s) under the supervision of licensed attorneys, 
for advice and representation in matters that interfere with the 
homeless individual or family's ability to obtain and retain housing.
    (i) Eligible subject matters are child support; guardianship; 
paternity; emancipation; legal separation; orders of protection and 
other civil remedies for victims of domestic violence, dating violence, 
sexual assault, and stalking; appeal of veterans and public benefit 
claim denials; landlord tenant disputes; and the resolution of 
outstanding criminal warrants.
    (ii) Component services or activities may include receiving and 
preparing cases for trial, provision of legal advice, representation at 
hearings, and counseling.
    (iii) Fees based on the actual service performed (i.e., fee for 
service) are also eligible, but only if the cost would be less than the 
cost of hourly fees. Filing fees and other necessary court costs are 
also eligible. If the subrecipient is a legal services provider and 
performs the services itself, the eligible costs are the subrecipient's 
employees' salaries and other costs necessary to perform the services.
    (iv) Legal services for immigration and citizenship matters and 
issues related to mortgages and homeownership are ineligible. Retainer 
fee arrangements and contingency fee arrangements are ineligible.
    (10) Life skills training. The costs of teaching critical life 
management skills that may never have been learned or have been lost 
during the course of physical or mental illness, domestic violence, 
substance abuse, and homelessness are eligible. These services must be 
necessary to assist the program participant to function

[[Page 242]]

independently in the community. Component life skills training are the 
budgeting of resources and money management, household management, 
conflict management, shopping for food and other needed items, 
nutrition, the use of public transportation, and parent training.
    (11) Mental health services. Eligible costs are the direct 
outpatient treatment of mental health conditions that are provided by 
licensed professionals. Component services are crisis interventions; 
counseling; individual, family, or group therapy sessions; the 
prescription of psychotropic medications or explanations about the use 
and management of medications; and combinations of therapeutic 
approaches to address multiple problems.
    (12) Outpatient health services. Eligible costs are the direct 
outpatient treatment of medical conditions when provided by licensed 
medical professionals including:
    (i) Providing an analysis or assessment of an individual's health 
problems and the development of a treatment plan;
    (ii) Assisting individuals to understand their health needs;
    (iii) Providing directly or assisting individuals to obtain and 
utilize appropriate medical treatment;
    (iv) Preventive medical care and health maintenance services, 
including in-home health services and emergency medical services;
    (v) Provision of appropriate medication;
    (vi) Providing follow-up services; and
    (vii) Preventive and noncosmetic dental care.
    (13) Outreach services. The costs of activities to engage persons 
for the purpose of providing immediate support and intervention, as well 
as identifying potential program participants, are eligible.
    (i) Eligible costs include the outreach worker's transportation 
costs and a cell phone to be used by the individual performing the 
outreach.
    (ii) Component activities and services consist of: initial 
assessment; crisis counseling; addressing urgent physical needs, such as 
providing meals, blankets, clothes, or toiletries; actively connecting 
and providing people with information and referrals to homeless and 
mainstream programs; and publicizing the availability of the housing 
and/or services provided within the geographic area covered by the 
Continuum of Care.
    (14) Substance abuse treatment services. The costs of program 
participant intake and assessment, outpatient treatment, group and 
individual counseling, and drug testing are eligible. Inpatient 
detoxification and other inpatient drug or alcohol treatment are 
ineligible.
    (15) Transportation. Eligible costs are:
    (i) The costs of program participant's travel on public 
transportation or in a vehicle provided by the recipient or subrecipient 
to and from medical care, employment, child care, or other services 
eligible under this section.
    (ii) Mileage allowance for service workers to visit program 
participants and to carry out housing quality inspections;
    (iii) The cost of purchasing or leasing a vehicle in which staff 
transports program participants and/or staff serving program 
participants;
    (iv) The cost of gas, insurance, taxes, and maintenance for the 
vehicle;
    (v) The costs of recipient or subrecipient staff to accompany or 
assist program participants to utilize public transportation; and
    (vi) If public transportation options are not sufficient within the 
area, the recipient may make a one-time payment on behalf of a program 
participant needing car repairs or maintenance required to operate a 
personal vehicle, subject to the following:
    (A) Payments for car repairs or maintenance on behalf of the program 
participant may not exceed 10 percent of the Blue Book value of the 
vehicle (Blue Book refers to the guidebook that compiles and quotes 
prices for new and used automobiles and other vehicles of all makes, 
models, and types);
    (B) Payments for car repairs or maintenance must be paid by the 
recipient or subrecipient directly to the third party that repairs or 
maintains the car; and
    (C) The recipients or subrecipients may require program participants 
to share in the cost of car repairs or

[[Page 243]]

maintenance as a condition of receiving assistance with car repairs or 
maintenance.
    (16) Utility deposits. This form of assistance consists of paying 
for utility deposits. Utility deposits must be a one-time fee, paid to 
utility companies.
    (17) Direct provision of services. If the service described in 
paragraphs (e)(1) through (e)(16) of this section is being directly 
delivered by the recipient or subrecipient, eligible costs for those 
services also include:
    (i) The costs of labor or supplies, and materials incurred by the 
recipient or subrecipient in directly providing supportive services to 
program participants; and
    (ii) The salary and benefit packages of the recipient and 
subrecipient staff who directly deliver the services.

[77 FR 45442, July 31, 2012, as amended at 81 FR 90660, Dec. 14, 2016]



Sec. 578.55  Operating costs.

    (a) Use. Grant funds may be used to pay the costs of the day-to-day 
operation of transitional and permanent housing in a single structure or 
individual housing units.
    (b) Eligible costs. (1) The maintenance and repair of housing;
    (2) Property taxes and insurance;
    (3) Scheduled payments to a reserve for replacement of major systems 
of the housing (provided that the payments must be based on the useful 
life of the system and expected replacement cost);
    (4) Building security for a structure where more than 50 percent of 
the units or area is paid for with grant funds;
    (5) Electricity, gas, and water;
    (6) Furniture; and
    (7) Equipment.
    (c) Ineligible costs. Program funds may not be used for rental 
assistance and operating costs in the same project. Program funds may 
not be used for the operating costs of emergency shelter- and supportive 
service-only facilities. Program funds may not be used for the 
maintenance and repair of housing where the costs of maintaining and 
repairing the housing are included in the lease.



Sec. 578.57  Homeless Management Information System.

    (a) Eligible costs. (1) The recipient or subrecipient may use 
Continuum of Care program funds to pay the costs of contributing data to 
the HMIS designated by the Continuum of Care, including the costs of:
    (i) Purchasing or leasing computer hardware;
    (ii) Purchasing software or software licenses;
    (iii) Purchasing or leasing equipment, including telephones, fax 
machines, and furniture;
    (iv) Obtaining technical support;
    (v) Leasing office space;
    (vi) Paying charges for electricity, gas, water, phone service, and 
high-speed data transmission necessary to operate or contribute data to 
the HMIS;
    (vii) Paying salaries for operating HMIS, including:
    (A) Completing data entry;
    (B) Monitoring and reviewing data quality;
    (C) Completing data analysis;
    (D) Reporting to the HMIS Lead;
    (E) Training staff on using the HMIS; and
    (F) Implementing and complying with HMIS requirements;
    (viii) Paying costs of staff to travel to and attend HUD-sponsored 
and HUD-approved training on HMIS and programs authorized by Title IV of 
the McKinney-Vento Homeless Assistance Act;
    (ix) Paying staff travel costs to conduct intake; and
    (x) Paying participation fees charged by the HMIS Lead, as 
authorized by HUD, if the recipient or subrecipient is not the HMIS 
Lead.
    (2) If the recipient or subrecipient is the HMIS Lead, it may also 
use Continuum of Care funds to pay the costs of:
    (i) Hosting and maintaining HMIS software or data;
    (ii) Backing up, recovering, or repairing HMIS software or data;
    (iii) Upgrading, customizing, and enhancing the HMIS;
    (iv) Integrating and warehousing data, including development of a 
data warehouse for use in aggregating data

[[Page 244]]

from subrecipients using multiple software systems;
    (v) Administering the system;
    (vi) Reporting to providers, the Continuum of Care, and HUD; and
    (vii) Conducting training on using the system, including traveling 
to the training.
    (3) If the recipient or subrecipient is a victim services provider, 
or a legal services provider, it may use Continuum of Care funds to 
establish and operate a comparable database that complies with HUD's 
HMIS requirements.
    (b) General restrictions. Activities funded under this section must 
comply with the HMIS requirements.



Sec. 578.59  Project administrative costs.

    (a) Eligible costs. The recipient or subrecipient may use up to 10 
percent of any grant awarded under this part, excluding the amount for 
Continuum of Care Planning Activities and UFA costs, for the payment of 
project administrative costs related to the planning and execution of 
Continuum of Care activities. This does not include staff and overhead 
costs directly related to carrying out activities eligible under 
Sec. 578.43 through Sec. 578.57, because those costs are eligible as 
part of those activities. Eligible administrative costs include:
    (1) General management, oversight, and coordination. Costs of 
overall program management, coordination, monitoring, and evaluation. 
These costs include, but are not limited to, necessary expenditures for 
the following:
    (i) Salaries, wages, and related costs of the recipient's staff, the 
staff of subrecipients, or other staff engaged in program 
administration. In charging costs to this category, the recipient may 
include the entire salary, wages, and related costs allocable to the 
program of each person whose primary responsibilities with regard to the 
program involve program administration assignments, or the pro rata 
share of the salary, wages, and related costs of each person whose job 
includes any program administration assignments. The recipient may use 
only one of these methods for each fiscal year grant. Program 
administration assignments include the following:
    (A) Preparing program budgets and schedules, and amendments to those 
budgets and schedules;
    (B) Developing systems for assuring compliance with program 
requirements;
    (C) Developing agreements with subrecipients and contractors to 
carry out program activities;
    (D) Monitoring program activities for progress and compliance with 
program requirements;
    (E) Preparing reports and other documents directly related to the 
program for submission to HUD;
    (F) Coordinating the resolution of audit and monitoring findings;
    (G) Evaluating program results against stated objectives; and
    (H) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraph (a)(1)(i)(A) through (G) of this section.
    (ii) Travel costs incurred for monitoring of subrecipients;
    (iii) Administrative services performed under third-party contracts 
or agreements, including general legal services, accounting services, 
and audit services; and
    (iv) Other costs for goods and services required for administration 
of the program, including rental or purchase of equipment, insurance, 
utilities, office supplies, and rental and maintenance (but not 
purchase) of office space.
    (2) Training on Continuum of Care requirements. Costs of providing 
training on Continuum of Care requirements and attending HUD-sponsored 
Continuum of Care trainings.
    (3) Environmental review. Costs of carrying out the environmental 
review responsibilities under Sec. 578.31.
    (b) Sharing requirement. (1) UFAs. If the recipient is a UFA that 
carries out a project, it may use up to 10 percent of the grant amount 
awarded for the project on project administrative costs. The UFA must 
share the remaining project administrative funds with its subrecipients.
    (2) Recipients that are not UFAs. If the recipient is not a UFA, it 
must share at least 50 percent of project administrative funds with its 
subrecipients.

[[Page 245]]



Sec. 578.61  Relocation costs.

    (a) In general. Relocation costs under the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 are 
eligible.
    (b) Eligible relocation costs. Eligible costs are costs to provide 
relocation payments and other assistance to persons displaced by a 
project assisted with grant funds in accordance with Sec. 578.83.



Sec. 578.63  Indirect costs.

    (a) In general. Continuum of Care funds may be used to pay indirect 
costs in accordance with 2 CFR part 200, subpart E.
    (b) Allocation. Indirect costs may be allocated to each eligible 
activity as provided in this subpart, so long as that allocation is 
consistent with an indirect cost rate proposal developed in accordance 
with 2 CFR part 200, subpart E.
    (c) Expenditure limits. The indirect costs charged to an activity 
subject to an expenditure limit under Secs. 578.39, 578.41, and 578.59 
must be added to the direct costs charged for that activity when 
determining the total costs subject to the expenditure limits.

[77 FR 45442, July 31, 2012, as amended at 80 FR 75939, Dec. 7, 2015]



                  Subpart E_High-Performing Communities



Sec. 578.65  Standards.

    (a) In general. The collaborative applicant for a Continuum may 
apply to HUD to have the Continuum be designated a high-performing 
community (HPC). The designation shall be for grants awarded in the same 
competition in which the designation is applied for and made.
    (b) Applying for HPC designation. The application must be submitted 
at such time and in such manner as HUD may require, must use HMIS data 
where required to show the standards for qualifying are met, and must 
contain such information as HUD requires, including at a minimum:
    (1) A report showing how the Continuum of Care program funds 
received in the preceding year were expended;
    (2) A specific plan for how grant funds will be expended; and
    (3) Information establishing that the Continuum of Care meets the 
standards for HPCs.
    (c) Standards for qualifying as an HPC. To qualify as an HPC, a 
Continuum must demonstrate through:
    (1) Reliable data generated by the Continuum of Care's HMIS that it 
meets all of the following standards:
    (i) Mean length of homelessness. Either the mean length of episode 
of homelessness within the Continuum's geographic area is fewer than 20 
days, or the mean length of episodes of homelessness for individuals or 
families in similar circumstances was reduced by at least 10 percent 
from the preceding federal fiscal year.
    (ii) Reduced recidivism. Of individuals and families who leave 
homelessness, less than 5 percent become homeless again at any time 
within the next 2 years; or the percentage of individuals and families 
in similar circumstances who become homeless again within 2 years after 
leaving homelessness was decreased by at least 20 percent from the 
preceding federal fiscal year.
    (iii) HMIS coverage. The Continuum's HMIS must have a bed coverage 
rate of 80 percent and a service volume coverage rate of 80 percent as 
calculated in accordance with HUD's HMIS requirements.
    (iv) Serving families and youth. With respect to Continuums that 
served homeless families and youth defined as homeless under other 
federal statutes in paragraph (3) of the definition of homeless in 
Sec. 576.2:
    (A) 95 percent of those families and youth did not become homeless 
again within a 2-year period following termination of assistance; or
    (B) 85 percent of those families achieved independent living in 
permanent housing for at least 2 years following termination of 
assistance.
    (2) Reliable data generated from sources other than the Continuum's 
HMIS that is provided in a narrative or other form prescribed by HUD 
that it meets both of the following standards:
    (i) Community action. All the metropolitan cities and counties 
within the Continuum's geographic area have a

[[Page 246]]

comprehensive outreach plan, including specific steps for identifying 
homeless persons and referring them to appropriate housing and services 
in that geographic area.
    (ii) Renewing HPC status. If the Continuum was designated an HPC in 
the previous federal fiscal year and used Continuum of Care grant funds 
for activities described under Sec. 578.71, that such activities were 
effective at reducing the number of individuals and families who became 
homeless in that community.



Sec. 578.67  Publication of application.

    HUD will publish the application to be designated an HPC through the 
HUD Web site, for public comment as to whether the Continuum seeking 
designation as an HPC meets the standards for being one.



Sec. 578.69  Cooperation among entities.

    An HPC must cooperate with HUD in distributing information about its 
successful efforts to reduce homelessness.



Sec. 578.71  HPC-eligible activities.

    In addition to using grant funds for the eligible costs described in 
subpart D of this part, recipients and subrecipients in Continuums of 
Care designated as HPCs may also use grant funds to provide housing 
relocation and stabilization services and short- and/or medium-term 
rental assistance to individuals and families at risk of homelessness as 
set forth in 24 CFR 576.103 and 24 CFR 576.104, if necessary to prevent 
the individual or family from becoming homeless. Activities must be 
carried out in accordance with the plan submitted in the application. 
When carrying out housing relocation and stabilization services and 
short- and/or medium-term rental assistance, the written standards set 
forth in Sec. 578.7(a)(9)(v) and recordkeeping requirements of 24 CFR 
576.500 apply.



                     Subpart F_Program Requirements



Sec. 578.73  Matching requirements.

    (a) In general. The recipient or subrecipient must match all grant 
funds, except for leasing funds, with no less than 25 percent of funds 
or in-kind contributions from other sources. For Continuum of Care 
geographic areas in which there is more than one grant agreement, the 25 
percent match must be provided on a grant-by-grant basis. Recipients 
that are UFAs or are the sole recipient for their Continuum, may provide 
match on a Continuum-wide basis. Cash match must be used for the costs 
of activities that are eligible under subpart D of this part, except 
that HPCs may use such match for the costs of activities that are 
eligible under Sec. 578.71.
    (b) Cash sources. Notwithstanding 2 CFR 200.306(b)(5), a recipient 
or subrecipient may use funds from any source, including any other 
federal sources (excluding Continuum of Care program funds), as well as 
State, local, and private sources, provided that funds from the source 
are not statutorily prohibited to be used as a match. The recipient must 
ensure that any funds used to satisfy the matching requirements of this 
section are eligible under the laws governing the funds in order to be 
used as matching funds for a grant awarded under this program.
    (c) In-kind contributions. (1) The recipient or subrecipient may use 
the value of any real property, equipment, goods, or services 
contributed to the project as match, provided that if the recipient or 
subrecipient had to pay for them with grant funds, the costs would have 
been eligible under Subpart D, or, in the case of HPCs, eligible under 
Sec. 578.71.
    (2) The requirements of 2 CFR 200.306, with the exception of 
Sec. 200.306(b)(5) apply.
    (3) Before grant execution, services to be provided by a third party 
must be documented by a memorandum of understanding (MOU) between the 
recipient or subrecipient and the third party that will provide the 
services. Services provided by individuals must be valued at rates 
consistent with those ordinarily paid for similar work in the 
recipient's or subrecipient's organization. If the recipient or 
subrecipient does not have employees performing similar work, the rates 
must be consistent with those ordinarily paid by other employers for 
similar work in the same labor market.

[[Page 247]]

    (i) The MOU must establish the unconditional commitment, except for 
selection to receive a grant, by the third party to provide the 
services, the specific service to be provided, the profession of the 
persons providing the service, and the hourly cost of the service to be 
provided.
    (ii) During the term of the grant, the recipient or subrecipient 
must keep and make available, for inspection, records documenting the 
service hours provided.

[77 FR 45442, July 31, 2012, as amended at 80 FR 75940, Dec. 7, 2015]



Sec. 578.75  General operations.

    (a) State and local requirements. (1) Housing and facilities 
constructed or rehabilitated with assistance under this part must meet 
State or local building codes, and in the absence of State or local 
building codes, the International Residential Code or International 
Building Code (as applicable to the type of structure) of the 
International Code Council.
    (2) Services provided with assistance under this part must be 
provided in compliance with all applicable State and local requirements, 
including licensing requirements.
    (b) Housing quality standards. Housing leased with Continuum of Care 
program funds, or for which rental assistance payments are made with 
Continuum of Care program funds, must meet the applicable housing 
quality standards (HQS) under 24 CFR 982.401 of this title, except that 
24 CFR 982.401(j) applies only to housing occupied by program 
participants receiving tenant-based rental assistance. For housing 
rehabilitated with funds under this part, the lead-based paint 
requirements in 24 CFR part 35, subparts A, B, J, and R apply. For 
housing that receives project-based or sponsor-based rental assistance, 
24 CFR part 35, subparts A, B, H, and R apply. For residential property 
for which funds under this part are used for acquisition, leasing, 
services, or operating costs, 24 CFR part 35, subparts A, B, K, and R 
apply.
    (1) Before any assistance will be provided on behalf of a program 
participant, the recipient, or subrecipient, must physically inspect 
each unit to assure that the unit meets HQS. Assistance will not be 
provided for units that fail to meet HQS, unless the owner corrects any 
deficiencies within 30 days from the date of the initial inspection and 
the recipient or subrecipient verifies that all deficiencies have been 
corrected.
    (2) Recipients or subrecipients must inspect all units at least 
annually during the grant period to ensure that the units continue to 
meet HQS.
    (c) Suitable dwelling size. The dwelling unit must have at least one 
bedroom or living/sleeping room for each two persons.
    (1) Children of opposite sex, other than very young children, may 
not be required to occupy the same bedroom or living/sleeping room.
    (2) If household composition changes during the term of assistance, 
recipients and subrecipients may relocate the household to a more 
appropriately sized unit. The household must still have access to 
appropriate supportive services.
    (d) Meals. Each recipient and subrecipient of assistance under this 
part who provides supportive housing for homeless persons with 
disabilities must provide meals or meal preparation facilities for 
residents.
    (e) Ongoing assessment of supportive services. To the extent 
practicable, each project must provide supportive services for residents 
of the project and homeless persons using the project, which may be 
designed by the recipient or participants. Each recipient and 
subrecipient of assistance under this part must conduct an ongoing 
assessment of the supportive services needed by the residents of the 
project, the availability of such services, and the coordination of 
services needed to ensure long-term housing stability and must make 
adjustments, as appropriate.
    (f) Residential supervision. Each recipient and subrecipient of 
assistance under this part must provide residential supervision as 
necessary to facilitate the adequate provision of supportive services to 
the residents of the housing throughout the term of the commitment to 
operate supportive housing. Residential supervision may include the 
employment of a full- or part-time residential supervisor with

[[Page 248]]

sufficient knowledge to provide or to supervise the provision of 
supportive services to the residents.
    (g) Participation of homeless individuals. (1) Each recipient and 
subrecipient must provide for the participation of not less than one 
homeless individual or formerly homeless individual on the board of 
directors or other equivalent policymaking entity of the recipient or 
subrecipient, to the extent that such entity considers and makes 
policies and decisions regarding any project, supportive services, or 
assistance provided under this part. This requirement is waived if a 
recipient or subrecipient is unable to meet such requirement and obtains 
HUD approval for a plan to otherwise consult with homeless or formerly 
homeless persons when considering and making policies and decisions.
    (2) Each recipient and subrecipient of assistance under this part 
must, to the maximum extent practicable, involve homeless individuals 
and families through employment; volunteer services; or otherwise in 
constructing, rehabilitating, maintaining, and operating the project, 
and in providing supportive services for the project.
    (h) Supportive service agreement. Recipients and subrecipients may 
require the program participants to take part in supportive services 
that are not disability-related services provided through the project as 
a condition of continued participation in the program. Examples of 
disability-related services include, but are not limited to, mental 
health services, outpatient health services, and provision of 
medication, which are provided to a person with a disability to address 
a condition caused by the disability. Notwithstanding this provision, if 
the purpose of the project is to provide substance abuse treatment 
services, recipients and subrecipients may require program participants 
to take part in such services as a condition of continued participation 
in the program.
    (i) Retention of assistance after death, incarceration, or 
institutionalization for more than 90 days of qualifying member. For 
permanent supportive housing projects surviving, members of any 
household who were living in a unit assisted under this part at the time 
of the qualifying member's death, long-term incarceration, or long-term 
institutionalization, have the right to rental assistance under this 
section until the expiration of the lease in effect at the time of the 
qualifying member's death, long-term incarceration, or long-term 
institutionalization.
    (j) Remaining program participants following bifurcation of a lease 
or eviction as a result of domestic violence. For permanent supportive 
housing projects, members of any household who were living in a unit 
assisted under this part at the time of a qualifying member's eviction 
from the unit because the qualifying member was found to have engaged in 
criminal activity directly relating to domestic violence, dating 
violence, sexual assault, or stalking, have the right to rental 
assistance under this section until the expiration of the lease in 
effect at the time of the qualifying member's eviction.

[77 FR 45442, July 31, 2012, as amended at 81 FR 80810, Nov. 16, 2016]



Sec. 578.77  Calculating occupancy charges and rent.

    (a) Occupancy agreements and leases. Recipients and subrecipients 
must have signed occupancy agreements or leases (or subleases) with 
program participants residing in housing.
    (b) Calculation of occupancy charges. Recipients and subrecipients 
are not required to impose occupancy charges on program participants as 
a condition of residing in the housing. However, if occupancy charges 
are imposed, they may not exceed the highest of:
    (1) 30 percent of the family's monthly adjusted income (adjustment 
factors include the number of people in the family, age of family 
members, medical expenses, and child-care expenses);
    (2) 10 percent of the family's monthly income; or
    (3) If the family is receiving payments for welfare assistance from 
a public agency and a part of the payments (adjusted in accordance with 
the family's actual housing costs) is specifically designated by the 
agency to meet the family's housing costs, the portion of the payments 
that is designated for housing costs.
    (4) Income. Income must be calculated in accordance with 24 CFR 
5.609 and 24

[[Page 249]]

CFR 5.611(a). Recipients and subrecipients must examine a program 
participant's income initially, and if there is a change in family 
composition (e.g., birth of a child) or a decrease in the resident's 
income during the year, the resident may request an interim 
reexamination, and the occupancy charge will be adjusted accordingly.
    (c) Resident rent. (1) Amount of rent. (i) Each program participant 
on whose behalf rental assistance payments are made must pay a 
contribution toward rent in accordance with section 3(a)(1) of the U.S. 
Housing Act of 1937 (42 U.S.C. 1437a(a)(1)).
    (ii) Income of program participants must be calculated in accordance 
with 24 CFR 5.609 and 24 CFR 5.611(a).
    (2) Review. Recipients or subrecipients must examine a program 
participant's income initially, and at least annually thereafter, to 
determine the amount of the contribution toward rent payable by the 
program participant. Adjustments to a program participant's contribution 
toward the rental payment must be made as changes in income are 
identified.
    (3) Verification. As a condition of participation in the program, 
each program participant must agree to supply the information or 
documentation necessary to verify the program participant's income. 
Program participants must provide the recipient or subrecipient with 
information at any time regarding changes in income or other 
circumstances that may result in changes to a program participant's 
contribution toward the rental payment.



Sec. 578.79  Limitation on transitional housing.

    A homeless individual or family may remain in transitional housing 
for a period longer than 24 months, if permanent housing for the 
individual or family has not been located or if the individual or family 
requires additional time to prepare for independent living. However, HUD 
may discontinue assistance for a transitional housing project if more 
than half of the homeless individuals or families remain in that project 
longer than 24 months.



Sec. 578.81  Term of commitment, repayment of grants, and prevention of
undue benefits.

    (a) In general. All recipients and subrecipients receiving grant 
funds for acquisition, rehabilitation, or new construction must operate 
the housing or provide supportive services in accordance with this part, 
for at least 15 years from the date of initial occupancy or date of 
initial service provision. Recipient and subrecipients must execute and 
record a HUD-approved Declaration of Restrictive Covenants before 
receiving payment of grant funds.
    (b) Conversion. Recipients and subrecipients carrying out a project 
that provides transitional or permanent housing or supportive services 
in a structure may submit a request to HUD to convert a project for the 
direct benefit of very low-income persons. The request must be made 
while the project is operating as homeless housing or supportive 
services for homeless individuals and families, must be in writing, and 
must include an explanation of why the project is no longer needed to 
provide transitional or permanent housing or supportive services. The 
primary factor in HUD's decision on the proposed conversion is the unmet 
need for transitional or permanent housing or supportive services in the 
Continuum of Care's geographic area.
    (c) Repayment of grant funds. If a project is not operated as 
transitional or permanent housing for 10 years following the date of 
initial occupancy, HUD will require repayment of the entire amount of 
the grant used for acquisition, rehabilitation, or new construction, 
unless conversion of the project has been authorized under paragraph (b) 
of this section. If the housing is used for such purposes for more than 
10 years, the payment amount will be reduced by 20 percentage points for 
each year, beyond the 10-year period in which the project is used for 
transitional or permanent housing.
    (d) Prevention of undue benefits. Except as provided under paragraph 
(e) of this section, upon any sale or other disposition of a project 
site that received grant funds for acquisition, rehabilitation, or new 
construction, occurring

[[Page 250]]

before the 15-year period, the recipient must comply with such terms and 
conditions as HUD may prescribe to prevent the recipient or subrecipient 
from unduly benefiting from such sale or disposition.
    (e) Exception. A recipient or subrecipient will not be required to 
comply with the terms and conditions prescribed under paragraphs (c) and 
(d) of this section if:
    (1) The sale or disposition of the property used for the project 
results in the use of the property for the direct benefit of very low-
income persons;
    (2) All the proceeds are used to provide transitional or permanent 
housing that meet the requirements of this part;
    (3) Project-based rental assistance or operating cost assistance 
from any federal program or an equivalent State or local program is no 
longer made available and the project is meeting applicable performance 
standards, provided that the portion of the project that had benefitted 
from such assistance continues to meet the tenant income and rent 
restrictions for low-income units under section 42(g) of the Internal 
Revenue Code of 1986; or
    (4) There are no individuals and families in the Continuum of Care 
geographic area who are homeless, in which case the project may serve 
individuals and families at risk of homelessness.



Sec. 578.83  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, recipients and subrecipients must ensure that 
they have taken all reasonable steps to minimize the displacement of 
persons (families, individuals, businesses, nonprofit organizations, and 
farms) as a result of projects assisted under this part. ``Project,'' as 
used in this section, means any activity or series of activities 
assisted with Continuum of Care funds received or anticipated in any 
phase of an undertaking.
    (b) Temporary relocation. (1) Existing Building Not Assisted under 
Title IV of the McKinney-Vento Act. No tenant may be required to 
relocate temporarily for a project if the building in which the project 
is being undertaken or will be undertaken is not currently assisted 
under Title IV of the McKinney-Vento Act. The absence of such assistance 
to the building means the tenants are not homeless and the tenants are 
therefore not eligible to receive assistance under the Continuum of Care 
program. When a tenant moves for such a project under conditions that 
cause the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970 (URA), 42 U.S.C. 4601-4655, to apply, the tenant 
must be treated as permanently displaced and offered relocation 
assistance and payments consistent with paragraph (c) of this section.
    (2) Existing Transitional Housing or Permanent Housing Projects 
Assisted Under Title IV of the McKinney-Vento Act. Consistent with 
paragraph (c)(2)(ii) of this section, no program participant may be 
required to relocate temporarily for a project if the person cannot be 
offered a decent, safe, and sanitary unit in the same building or 
complex upon project completion under reasonable terms and conditions. 
The length of occupancy requirements in Sec. 578.79 may prevent a 
program participant from returning to the property upon completion (See 
paragraph (c)(2)(iii)(D) of this section). Any program participant who 
has been temporarily relocated for a period beyond one year must be 
treated as permanently displaced and offered relocation assistance and 
payments consistent with paragraph (c) of this section. Program 
participants temporarily relocated in accordance with the policies 
described in this paragraph must be provided:
    (i) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporarily occupied housing and any increase in 
monthly rent/occupancy charges and utility costs; and
    (ii) Appropriate advisory services, including reasonable advance 
written notice of:
    (A) The date and approximate duration of the temporary relocation;
    (B) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;

[[Page 251]]

    (C) The reasonable terms and conditions under which the program 
participant will be able to occupy a suitable, decent, safe, and 
sanitary dwelling in the building or complex upon completion of the 
project; and
    (D) The provisions of paragraph (b)(2)(i) of this section.
    (c) Relocation assistance for displaced persons. (1) In general. A 
displaced person (defined in paragraph (c)(2) of this section) must be 
provided relocation assistance in accordance with the requirements of 
the URA and implementing regulations at 49 CFR part 24. A displaced 
person must be advised of his or her rights under the Fair Housing Act. 
Whenever possible, minority persons must be given reasonable 
opportunities to relocate to decent, safe, and sanitary replacement 
dwellings, not located in an area of minority concentration, that are 
within their financial means. This policy, however, does not require 
providing a person a larger payment than is necessary to enable a person 
to relocate to a comparable replacement dwelling. See 49 CFR 
24.205(c)(2)(ii)(D).
    (2) Displaced person. (i) For the purposes of paragraph (c) of this 
section, the term ``displaced person'' means any person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, or 
demolition for a project. This includes any permanent, involuntary move 
for a project, including any permanent move from the real property that 
is made:
    (A) After the owner (or person in control of the site) issues a 
notice to move permanently from the property, or refuses to renew an 
expiring lease, if the move occurs after the date of the submission by 
the recipient or subrecipient of an application for assistance to HUD 
(or the recipient, as applicable) that is later approved and funded and 
the recipient or subrecipient has site control as evidenced in 
accordance with Sec. 578.25(b); or
    (B) After the owner (or person in control of the site) issues a 
notice to move permanently from the property, or refuses to renew an 
expiring lease, if the move occurs after the date the recipient or 
subrecipient obtains site control, as evidenced in accordance with 
Sec. 578.25(b), if that occurs after the application for assistance; or
    (C) Before the date described under paragraph (c)(2)(i)(A) or (B) of 
this section, if the recipient or HUD determines that the displacement 
resulted directly from acquisition, rehabilitation, or demolition for 
the project; or
    (D) By a tenant of a building that is not assisted under Title IV of 
the McKinney-Vento Act, if the tenant moves after execution of the 
agreement covering the acquisition, rehabilitation, or demolition of the 
property for the project; or
    (ii) For the purposes of paragraph (c) of this section, the term 
``displaced person'' means any person (family, individual, business, 
nonprofit organization, or farm) that moves from real property, or moves 
personal property from real property, permanently, as a direct result of 
acquisition, rehabilitation, or demolition for a project. This includes 
any permanent, involuntary move for a project that is made by a program 
participant occupying transitional housing or permanent housing assisted 
under Title IV of the McKinney-Vento Act, if any one of the following 
three situations occurs:
    (A) The program participant moves after execution of the agreement 
covering the acquisition, rehabilitation, or demolition of the property 
for the project and is either not eligible to return upon project 
completion or the move occurs before the program participant is provided 
written notice offering the program participant an opportunity to occupy 
a suitable, decent, safe, and sanitary dwelling in the same building or 
complex upon project completion under reasonable terms