CDBG Entitlement FAQ

How do we ensure compliance with the change of use rules with our CDBG activities?

Date Published: October 2018

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First, determine that the property originally met a national objective; if it never met a national objective, the costs are ineligible and all funds expended on the property must be reimbursed to the program. Second, if the property did meet a national objective, calculate whether the CDBG costs of acquisition and improvements exceeded $25,000. If lower than $25,000, the grantee may dispose of property with no further requirements. If over $25,000, the grantee must give affected citizens reasonable opportunity to comment on the proposed change. If the new use meets a national objective, the grantee may proceed with the change. If the new use does not meet a national objective, then the grantee may retain or dispose of the property by reimbursing the CDBG program for the current fair market value of the property, less any portion of the value not attributable to CDBG. Sale proceeds are program income.

For example, an entitlement city renovated an older structure for a youth center in a low- to moderate-income area (LMA). Now, the demographics in the neighborhood have changed; the young people have grown and the community has many more adult and senior members. The entitlement community believes that it should demolish the building and change the use by selling the land to a business which does not directly benefit the low and moderate income area or create jobs. If the grantee follows the procedures for change of use and obtains approval from affected citizens, it may sell the land to the business, reimburse the CDBG program, and the property will no longer be subject to CDBG requirements.

Tags: CDBG Entitlement Program Acquisition-Disposition-Demolition