CDBG Entitlement FAQ
Q

What are the basic principles to meet CDBG eligibility and national objective requirements for acquisition, demolition, and disposition activities?

Date Published: October 2018

Print ShareThis

A

Each CDBG project must be an eligible activity and meet a national objective. Acquisition of real property, demolition and disposition are all eligible activities. Meeting a national objective can be more complex. CDBG grantees must identify the planned end use for all properties that they acquire. However, when the planned use does not come to fruition, grantees often struggle to find alternative end uses for these properties. Nonetheless, grantees should ensure that their acquisitions support the overall community development program. The table below attempts to provide additional clarification and examples.

Common Scenarios Involving Acquisition, Demolition, and Disposition in CDBG

  • LMA: Low- to Moderate-Income Area
  • LMC: Low- to Moderate-Income Clientele
  • LMH: Low- to Moderate-Income Housing
  • LMJ: Low- to Moderate-Income Jurisdiction
  • SB: Slum and Blight
  • SBA: Slum and Blight Area
  • URG: Urgent Need
Eligible Activity End Use of Property National Objective Consequences
Acquisition Only

Property remains in public control.

Example: Land acquired for public facility.

Never put to permanent use.

National objective based on end use; LMA or LMC in this example.

Never achieved a national objective.

Document national objective. Ineligible activity. Reimburse the program for all CDBG funds expended.*

Demolition Only

CDBG is not used for acquisition.

Remains in private ownership or public property acquired through other sources. Demolition is the only eligible activity.

Example: Dangerous building taken down, site planted with grass.

Spot Slum and Blight (SB)

Possibly Slum and Blight Area (SBA)

Possibly Urgent Need (URG) in limited situations.**

LMA not available in CDBG. NSP allowed this because there was no slum and blight national objective.

Eligible if property meets criteria in 24 CFR 570.208(b) or 24 CFR 570.483(c) and 70% overall benefit maintained.

Meet SB criteria or reimburse the CDBG program.

Disposition Only

CDBG funded upkeep and subsequent sale of CDBG-assisted property for eligible use.

Example: affordable housing.

LMH, SB, or other, depending on end use.

If no end use, ineligible.

If not acquired with CDBG funds, ineligible.

See Note A below.

This scenario will generally involve CDBG acquisition.

Acquisition & Demolition Clearance is the end use; no further activity planned. Meets national objective for clearance, which also applies to the acquisition. Any subsequent activity will trigger Change of Use. See Note C below.
Acquisition & Demolition

If public property supports and eligible activity and meets a national objective, then remains eligible program activity.

Example: Community garden in LMA; flood zone buyouts.

Property does not have an eligible end use.
Demolition did not meet national objective.

Example: Demolition of property that was not blighted with no resale.

National objective for Demolition: SB

National objective for Acquisition: Depends on the end use. SB or SBA is allowable if the end use is clearing blighted property in a flood zone.

Urgent Need (URG) in limited situations**

If property never met national objective: It is ineligible.

Document national objective for both acquisition and demolition.

Reimbursement of all costs is required (Not just current value).

See Note D below.

Acquisition & Disposition (no Demolition)

If property sold to private entity, and supports an eligible activity, then remains eligible activity.

Example: Affordable housing.

National objective for acquisition/disposition. Depends on the end use of the property.
LMA, LMH, LMC, LMJ, or SBA

The disposition (end use) drives the national objective.

See Note A below.

Acquisition & Disposition (no Demolition)

If publicly or privately owned and does not meet a national objective.

Example: Vacant land acquired and sold for church.

If no national objective is ever met for either Acquisition or Disposition, then it is ineligible. Reimbursement of all costs required (not just current value).
Acquisition & Demolition & Disposition Dangerous structure acquired and demolished, then sold or donated to non-profit developer of affordable housing. SB for demolition. National objective for acquisition and disposition based on end use. In this example: LMH Document national objective.
Acquisition & Demolition & Disposition

Demolition meets national objective, but Acquisition/Disposition does not.

Example: Structure razed but land remains unused.

Property not blighted. Grantee sells cleared land for parking lot in upper income Census Block Group.

Acquisition for clearance can meet SB test.

No disposition for an eligible use does not result in a Change of Use.

No SB for demo. Parking lot does not meet a national objective.

Repay current market value if a Change of Use does not meet a national objective.

See Note C below.

Ineligible Activity

Repay all costs

Notes

*Sales proceeds are program income. Repayments of ineligible costs are not considered program income. Repayments must be made to the line of credit from which they were drawn unless the funds were drawn from a grant that has since expired (over eight years old). Those repayments must be made to the grantee's local CDBG program account.

**In very limited situations, the urgent need national objective could be possible: e.g., demolition or acquisition-plus-demolition on buildings damaged by a tornado, massive fire, mudslide, etc. The grantee would have to demonstrate that its current conditions present a serious and immediate threat to public health and safety. If the property is sold or reused for another purpose, the reuse must meet a national objective or change of use applies (reimbursement of current fair market value required).

A. If no accomplishments have been demonstrated after 3-5 years, HUD may have reason to question the national objective compliance.

B. Acquisition by Eminent Domain: There is a statutory prohibition against using CDBG funds in conjunction with eminent domain for economic development projects benefitting private for profit businesses.

C. Change of Use: 24 CFR 570.503 for entitlement subrecipients; 24 CFR 570.505 for entitlement grantees; 24 CFR 570.489(j) for the State CDBG program.

D. Acquiring and/or holding property "for future use" is not an eligible activity.

Regulatory References

ELIGIBILITY: Acquisition - 24 CFR 570.201(a) for Entitlements, Section 105(a)(1) for States; Disposition - 24 CFR 570.201(b) for Entitlements, Section 105(a)(7) for States; Clearance-Demolition - 24 CFR 570.201(d) for Entitlements, Section 105(a)(4) for States.

NATIONAL OBJECTIVES: Activities benefiting low- and moderate-income persons. 24 CFR 570.208(a) for Entitlements; 24 CFR 570.483(b) for States; Slums and Blight 24 CFR 570.208(b) for Entitlements, 24 CFR 483(c) for States; Urgent Need 24 CFR 570.208(c) for Entitlements, 24 CFR 570.483(d) for States.


Tags: CDBG Entitlement Program Acquisition-Disposition-Demolition

FAQ ID:

3451