Use Restriction

Do acquisition, rehabilitation, and new construction projects carry a use restriction? (§ 578.81)

Any project that receives funding for acquisition, rehabilitation, and new construction must remain in use for that homeless housing and/or service for 15 years from the date of initial occupancy by a program participant or the date of initial service provision by the recipient/subrecipient. For more information, please see the FAQ on use restriction.

Looking for definitions of the common CoC and ESG Program terms referenced throughout the Virtual Binders?

Virtual Binders Glossary

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Always refer to the project’s grant agreement and resulting restrictive covenant – there may be additional use restrictions based on the requirements in the corresponding NOFA! For example, there may be a requirement to serve a specific population identified in the grant agreement/restrictive covenant.

Legacy SHP projects that used acquisition, rehabilitation, or new construction funds were subject to use restrictions of 20 years. The SHP use restrictions still apply to all projects operating within that 20-year period.

If a property is not used for the intended purpose for the 15- or 20-year timeframe, the recipient of the funds may have to pay back all or a portion of the original grant (§ 578.81(c)). See the following chart for details.

Repayment of Grant Funds – CoC and SHP

Time Project is Operated as Detailed in Project Application

Percentage of Grant to be Repaid – CoC Program

Percentage of Grant to be Repaid – Legacy SHP

10 years or Less

100%

100%

11 years

80%

90%

12 years

60%

80%

13 years

40%

70%

14 years

20%

60%

15 years

0%

50%

16 years

 

40%

17 years

30%

18 years

20%

19 years

10%

20 years

0%

HUD does provide exceptions to the use restriction requirements for both CoC Program projects and legacy SHP projects, as long as the property continues to be used for homeless assistance or to serve very low-income people. For more information on how to convert these properties without having to repay grant funds, see: Converting Site-Based Projects Under 15- or 20-Year Use Restrictions Without Having to Repay Funds.