[Title 24 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2012 Edition]
[From the U.S. Government Printing Office]



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                              Title 24

                     Housing and Urban Development


                          ________________________

                             Parts 500 to 699

                         Revised as of April 1, 2012

          Containing a codification of documents of general 
          applicability and future effect

          As of April 1, 2012
                    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........................     367
      Alphabetical List of Agencies Appearing in the CFR......     387
      List of CFR Sections Affected...........................     397

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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 24 CFR 510.1 refers 
                       to title 24, part 510, 
                       section 1.

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

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
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parts covering specific regulatory areas.
    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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    Office of the Federal Register.
    April 1, 2012.







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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, 2012.

    For this volume, Michele Bugenhagen was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.

[[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--SLUM CLEARANCE AND URBAN RENEWAL
Part                                                                Page
500-509         [Reserved]

510             Section 312 Rehabilitation Loan Program.....           7
511             Rental Rehabilitation Grant Program.........           7
                         SUBCHAPTER B [RESERVED]
                   SUBCHAPTER C--COMMUNITY FACILITIES
570             Community development block grants..........          31
572             Hope for homeownership of single family 
                    homes program (HOPE 3)..................         176
573             Loan guarantee recovery fund................         198
574             Housing opportunities for persons with AIDS.         203
576             Emergency Solutions Grants Program..........         217
581             Use of Federal real property to assist the 
                    homeless................................         254
582             Shelter Plus Care...........................         263
583             Supportive Housing Program..................         279
585             Youthbuild Program..........................         299
586             Revitalizing base closure communities and 
                    community assistance--community 
                    redevelopment and homeless assistance...         314
590             Urban homesteading..........................         323
594             John Heinz Neighborhood Development Program.         328
597             Urban empowerment zones and enterprise 
                    communities: Round one designations.....         331
598             Urban Empowerment Zones: Round two and three 
                    designations............................         342
599             Renewal communities.........................         354

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              SUBCHAPTER A_SLUM CLEARANCE AND URBAN RENEWAL



                        PARTS 500	509 [RESERVED]



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



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



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]



PART 511_RENTAL REHABILITATION GRANT PROGRAM--Table of Contents



                            Subpart A_General

Sec.
511.1 Applicability and purpose.
511.2 Definitions.
511.3-511.5 [Reserved]

                     Subpart B_Program Requirements

511.10 Grant requirements.
511.11 Project requirements.
511.12 Conflicts of interest.
511.13 Nondiscrimination, equal opportunity, and affirmative marketing 
          requirements.
511.14 Tenant assistance, displacement, relocation, and acquisition.
511.15 Lead-based paint.
511.16 Other Federal requirements.

Subpart C [Reserved]

             Subpart D_Allocation Formula and Reallocations

511.30-511.31 [Reserved]
511.33 Deobligation of rental rehabilitation grant amounts.
511.34 [Reserved]

Subpart E [Reserved]

                         Subpart F_State Program

511.50 State election to administer a rental rehabilitation program.
511.51 State-administered program.
511.52 [Reserved]

Subpart G [Reserved]

                     Subpart H_Grant Administration

511.70 Responsibility for grant administration.
511.71 Administrative costs.
511.72 Applicability of uniform Federal administrative requirements.
511.73 Grantee records.
511.74 Audit.
511.75 Disbursement of rental rehabilitation grant amounts: Cash and 
          Management Information System.
511.76 Program income.
511.77 Grant closeout.

   Subpart I_Grantee Performance: Review, Reporting and Corrective or 
                            Remedial Actions

511.80 Performance review.
511.81 Grantee reports to HUD.
511.82 Corrective and remedial actions.

    Authority: 42 U.S.C. 1437o and 3535(d).

    Source: 55 FR 20050, May 14, 1990, unless otherwise noted.



                            Subpart A_General



Sec.  511.1  Applicability and purpose.

    (a) This part implements the Rental Rehabilitation Program (RRP) 
contained in section 17 of the United States Housing Act of 1937, as 
amended (the ``Act''). As more fully described in this part, the Act 
authorizes the Secetary of Housing and Urban Development to make rental 
rehabilitation

[[Page 8]]

grants to help support the rehabilitation of eligible real property to 
be used for primarily residential rental purposes, and to pay for 
eligible administrative costs of grantees (not to exceed 10 percent of a 
grantee's initial grant obligation for Fiscal Year 1988 and later 
years). Grants are made on a formula basis to cities having populations 
of 50,000 or more, urban counties, States, and qualifying consortia of 
geographically proximate units of general local government. States may 
use all or part of their grants to carry out their own rental 
rehabilitation programs or to distribute them to eligible units of 
general local government. HUD will administer a State's grant if the 
State chooses not to do so.
    (b) The purpose of the Program is to help provide affordable, 
standard permanent housing for low-income families and to increase the 
availability of housing units for use by housing voucher and certificate 
holders under section 8 of the United States Housing Act of 1937. 
Subject to rules for the tenant-based Certificate Program (24 CFR part 
882) and for the Housing Voucher Program (24 CFR part 887), certificates 
and housing vouchers must be allocated to ensure that sufficient 
resources are available for families in Rental Rehabilitation projects 
who are required to move out of their units because of the physical 
rehabilitation activities or because of overcrowding; and at the PHA's 
discretion, to assist eligible families whose post-rehabilitation rents 
would be greater than 30 percent of their adjusted incomes.



Sec.  511.2  Definitions.

    The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR 
part 5.
    Administrative costs means eligible administrative costs as 
described inSec. 511.71.
    C/MI System means the Cash and Management Information System for 
drawdown of Rental Rehabilitation grant amounts and collection of 
program information described inSec. 511.75.
    Certificate means the document issued by a PHA to a family eligible 
for participation in the tenant-based Section 8 Certificate Program 
under 24 CFR part 882.
    Chief executive officer of a governmental entity 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'' 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; the official designated under law by the governing body of 
the unit of general local government; and the Governor of a State.
    City means a unit of general local government that was classified as 
a city under section 102(a)(5) of the Housing and Community Development 
Act of 1974 for purposes of the Community Development Block Grant (CDBG) 
Entitlement Program for the fiscal year immediately preceding the fiscal 
year for which rental rehabilitation grant amounts are made available.
    Commit to a specific local project or commitment means:
    (a) For a project which is privately owned when the commitment is 
made, a written legally binding agreement between a grantee (or in the 
case of a State distributing rental rehabilitation grant amounts to 
units of general local government, a State recipient) and the project 
owner under which the grantee or State recipient agrees to provide 
rental rehabilitation grant amounts to the owner for an identifiable 
rehabilitation project that can reasonably be expected to start 
construction within 90 days of the agreement and in which the owner 
agrees to start construction within that period; or
    (b) For a project that is publicly owned when the commitment is 
made, the Pre-Rehabilitation Report submitted under the C/MI System 
which identifies a specific rehabilitation project that will start 
rehabilitation within 90 days of receipt of the Pre-Rehabilitation 
Report. Under both paragraphs (a) and (b) of this definition, the date 
HUD enters into the C/MI System an acceptable Pre-Rehabilitation Report 
for a project is deemed to be the date of project commitment.
    Completion of rehabilitation means all necessary rehabilitation work 
has been performed and the project in HUD's

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judgment complies with the requirements of this part (including the 
rehabilitation standards adopted underSec. 511.10(e)); the final 
drawdown has been disbursed for the project; for projects that were 
publicly owned when commitment occurred, the project has been legally 
transferred to a private owner; and a Project Completion Report has been 
submitted and processed in the C/MI System as prescribed by HUD.
    Family means a ``family'' as defined at 24 CFR 812.2.
    Grantee means--
    (a) Any city, urban county, or approved consortium receiving a grant 
on the basis of the formula contained in subpart D of this part;
    (b) Any State administering a rental rehabilitation program, as 
provided inSec. 511.51; and
    (c) Any unit of general local government receiving a rental 
rehabilitation grant from HUD, as provided inSec. 511.52.
    Housing voucher means the document issued by a PHA to a family 
eligible for participation in the Section 8 Housing Voucher Program 
under 24 CFR part 887.
    Low-income family means a low-income family, as defined in 24 CFR 
813.102.
    Manufactured housing means a dwelling unit which meets the 
requirements ofSec. 511.11(c)(4).
    Owner means one or more individuals, corporations, partnerships, or 
other privately-controlled legal entities that hold valid legal title to 
the project to be rehabilitated.
    Project means an entire building (including a manufactured housing 
unit), or two or more contiguous buildings under common ownership and 
management, to be rehabilitated with a rental rehabilitation grant, 
under a commitment by the owner, as a single undertaking under this 
part.
    Rents affordable to low-income families means that the sum of the 
utility allowance and the rent payable monthly to the owner with respect 
to a unit is at or below the applicable fair market rent published under 
24 CFR part 888 for the Section 8 Certificate Program (24 CFR part 882) 
or at or below such higher maximum Gross Rent as approved by HUD for 
units of a given size or type under 24 CFR 882.106(a)(3). In the case of 
cooperative or mutual housing, rent means the occupancy charges under 
the occupancy agreement between the members and the cooperative.
    State includes any of the 50 States and the Commonwealth of Puerto 
Rico.
    State recipient means any unit of general local government to which 
a State distributes rental rehabilitation grant amounts, as provided in 
Sec.  511.51 (a)(2) and (a)(3).
    Unit or dwelling unit means a residential space that qualifies under 
the laws of the State and locality and under this part as a place of 
permanent habitation or abode for a family, including an apartment or 
house that contains a living room, kitchen area, sleeping area, and 
bathroom(s), or such other definition as may be proposed by a grantee 
and approved by HUD under this part. The HUD Field Office may approve 
congregate housing units meeting the requirements of 24 CFR 882.109(m) 
or single room occupancy units meeting the requirements of 24 CFR 
882.109(p) as zero bedroom units for purposes of this part.
    Unit of general 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 section 102(a)(6) of the Housing and Community Development Act of 
1974, as amended, for the fiscal year immediately preceding the fiscal 
year for which rental rehabilitation grant amounts are made available.
    Utility allowance means the amount determined by a PHA under 24 CFR 
part 882 for the cost of utilities (except telephones) and other housing 
services that is not included in the rent payable to the owner, but is 
the responsibility of the family occupying the unit.
    Very low income family means a very low income family, as defined in 
24 CFR 813.102.

[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]

[[Page 10]]



Sec.Sec. 511.3-511.5  [Reserved]



                     Subpart B_Program Requirements



Sec.  511.10  Grant requirements.

    A rental rehabilitation program shall comply with the following 
requirements:
    (a) Lower income benefit--(1) 100 percent benefit standard. Except 
as provided in paragraphs (a)(2) and (a)(3) of this section, all rental 
rehabilitation grant amounts must be used for the benefit of low-income 
families.
    (2) Reduction to 70 percent benefit standard. The 100 percent 
benefit standard will be reduced to 70 percent if the grantee certifies 
in its Program Description underSec. 511.20 (or thereafter in a 
written amendment to its grant agreement) that:
    (i) The reduction is necessary to meet one or both of the following 
objectives:
    (A) To minimize the displacement of tenants in projects to be 
rehabilitated; or
    (B) To provide a reasonable margin for error due to unforeseen, 
sudden changes in neighborhood rent or for other reasonable 
contingencies;
    (ii) A rental rehabilitation program that meets the 100 percent 
benefit standard cannot be developed; and
    (iii) The public has been consulted regarding this inability.
    (3) Reduction to 50 percent benefit standard. The benefit standard 
will be reduced to not less than 50 percent only in extraordinary 
circumstances approved by HUD. Approval may be granted at the request of 
the grantee before undertaking any project that will have the effect of 
reducing the benefit for low-income families for the grantee's program 
below 70 percent, only where HUD determines that a reduction is 
necessary to meet an important community need and that the net program 
impact will strongly favor low-income families. Approval may be granted 
thereafter only where HUD determines that the grantee made reasonable 
efforts to meet the higher benefit standard, but was unable to do so 
because of circumstances beyond its control.
    (4) Definition of benefit. For purposes of this paragraph (a), 
benefit for low-income families will be considered to occur only where 
dwelling units in projects rehabilitated with rental rehabilitation 
grants are initially occupied by such families after rehabilitation.
    (b) Use of rental rehabilitation grants for housing for families. 
(1) Each grantee shall ensure that an equitable share of rental 
rehabilitation grant amounts will be used to assist in the provision of 
housing designed for occupancy by families with children, particularly 
families requiring three or more bedrooms. HUD will assure that on a 
national basis at least 15 percent of each year's rental rehabilitation 
grant amounts (excluding those grant amounts expended for administrative 
costs underSec. 511.71) are used to rehabilitate units containing 
three or more bedrooms. HUD reserves the right prospectively to 
establish three or more bedroom unit targets for individual grantees if 
the national goal is in danger of not being met, or if HUD finds that a 
grantee's production of three or more bedroom units is significantly 
below that of grantees in similar circumstances. In addition, at least 
70 percent of each grantee's annual rental rehabilitation grant must be 
used to rehabilitate units containing two or more bedrooms. HUD may 
approve a lower percentage standard submitted by the grantee in its 
Program Description underSec. 511.20, or thereafter, based on HUD's 
determination that the lower standard is justified by factors such as a 
short waiting list of large families requiring assistance or the nature 
of the housing stock available for rehabilitation.
    (2) If a unit of general local government has an ordinance which 
requires rehabilitation to meet seismic standards, the grantee may use 
up to the full amount of its annual rental rehabilitation grant for 
Federal Fiscal Year 1988 and later years (including reallocations under 
Sec.  511.33(b) of funds for the same fiscal year) without regard to the 
requirements of paragraph (b)(1) of this section, but only to the extent 
it uses such grant amounts to rehabilitate projects to meet the seismic 
standards required by the local ordinance and to the extent these units 
in the rehabilitated project are initially occupied after rehabilitation 
by very low income

[[Page 11]]

families. The grantee or State recipient shall identify as prescribed by 
HUD in reports required under the C/MI System projects which have been 
rehabilitated to meet the requirements of a local seismic standards 
ordinance and contain units which are initially occupied by very low 
income families after rehabilitation. In determining compliance with 
paragraph (b)(1) of this section for annual grants under which one or 
more projects have been rehabilitated to meet the requirements of a 
local seismic standards ordinance, based on the grantee's or State 
recipient's reports, HUD will:
    (i) Calculate the maximum rental rehabilitation grant amount 
permissible underSec. 511.11(e)(2)(i) for the project(s) rehabilitated 
to meet seismic standards;
    (ii) Calculate the maximum permissible rental rehabilitation grant 
amount for the 0 to 1 bedroom units in such project(s) initially 
occupied by very low income families after rehabilitation;
    (iii) Divide the amount calculated inSec. 511.10(b)(2)(ii) by the 
amount calculated inSec. 511.10(b)(2)(i);
    (iv) Multiply the quotient inSec. 511.10(b)(2)(iii) by the actual 
rental rehabilitation grant amount expended for the project; and
    (v) Deduct the product inSec. 511.10(b)(iv) from the amount of the 
grantee's annual rental rehabilitation grant. The grantee will be 
required to meet the 70 percent, or other approved level, under this 
Sec.  511.10(b) only as to the amount of its annual grant remaining 
after making the foregoing deduction.
    (c) Selection of neighborhoods--(1) Neighborhood median income and 
area. Rental rehabilitation grants shall only be used to assist the 
rehabilitation of projects located in neighborhoods where the median 
family income does not exceed 80 percent of the median family income for 
the area. For purposes of paragraph (c) of this section, neighborhood 
means an area (as determined by the grantee or, as appropriate, the 
State recipient) that surrounds a project and tends to determine, along 
with the condition and quality of the project and the dwelling units 
therein, the rents that are charged for such units. A neighborhood must 
have a median family income that does not exceed 80 percent of the 
median family income for the Metropolitan Statistical Area (MSA) in 
which it is located, or, in the case of a neighborhood not within an 
MSA, a median family income that does not exceed 80 percent of the 
median family income for the State's non-metropolitan areas, or at the 
grantee's option, the non-metropolitan county in which the neighborhood 
is located.
    (2) Neighborhood rent affordability. Rental rehabilitation grant 
amounts shall only be used to assist the rehabilitation of projects 
located in neighborhoods in which--
    (i) The rents for standard units are generally affordable to low-
income families at the time of the selection of the neighborhood; and
    (ii) The character of the neighborhood indicates that the rents are 
not likely to increase at a rate significantly greater than the rate for 
rent increases that can reasonably be anticipated to occur in the market 
area for the 5-year period following the selection of the neighborhood.
    (d) [Reserved]
    (e) Rehabilitation standards. Each grantee or State recipient shall 
adopt written rehabilitation standards with which each assisted project 
must comply after rehabilitation. At a minimum, such standards shall 
require that after rehabilitation each unit in the entire project must 
meet the Section 8 Housing Quality Standards for Existing Housing 
contained at 24 CFR 882.109.
    (f) Eligible project costs. Eligible project costs include only:
    (1) The actual rehabilitation costs necessary to:
    (i) Correct substandard conditions, as reasonably defined by the 
grantee in its rehabilitation standards adopted underSec. 511.10(e);
    (ii) Make essential improvements, as reasonably defined by the 
grantee or State recipient in its rehabilitation standards adopted under 
Sec.  511.10(e), including energy-related repairs, improvements 
necessary to permit the use of rehabilitated projects by handicapped 
persons, and activities of lead

[[Page 12]]

based paint hazards, as required by part 35 of this title;
    (iii) Repair major housing systems in danger of failure, as 
reasonably defined by the grantee or State recipient in its 
rehabilitation standards underSec. 511.10(e); and
    (2) Other costs (soft costs) that are associated with the 
rehabilitation or rehabilitation financing; are not for services 
provided or costs incurred by the grantee, State recipient, or the PHA; 
and are not paid for as administrative costs underSec. 511.71. Such 
costs may include (but are not limited to):
    (i) Architectural, engineering or related professional services 
required in the preparation of rehabilitation plans and drawings or 
writeups;
    (ii) Costs of processing and settling the financing for a project, 
such as private lender origination fees, credit reports, fees for title 
evidence, fees for recordation and filing of legal documents, building 
permits, attorneys' fees, private appraisal fees and fees for an 
independent rehabilitation cost estimate;
    (iii) Relocation payments made to tenants who are displaced by the 
rehabilitation activities; and
    (iv) Costs for the owner to provide information services to tenants 
as required by Sec.Sec. 511.13(b), 511.14 (a)(3) and (a)(4), and 
511.15(b).
    (3)(i) Rehabilitation eligible underSec. 511.10(f)(1) is limited 
to work done after the commitment to the project (as defined inSec. 
511.2) is made, except to the extent that such costs also meet all of 
the following conditions:
    (A) Prior to undertaking any rehabilitation before the project is 
committed in the C/MI System (hereafter called ``precommitment 
rehabilitation''), the owner and grantee or State recipient agree in 
writing to include such rehabilitation costs in the project cost, if and 
when the payment is approved for assistance under this part;
    (B) The precommitment rehabilitation costs meet all other 
requirements of this part, including compliance with the other Federal 
requirements cited inSec. 511.16, where applicable. In particular, HUD 
approval of the grantee's certification of completion of environmental 
responsibilities, when required under 24 CFR part 58, must occur prior 
to execution of the written agreements to include the costs; and
    (C) The precommitment rehabilitation costs were incurred by the 
owner after the date of the Appropriation Act which made available the 
grant amounts for the project in question.
    (ii) Other project-related costs eligible underSec. 511.10(f)(2) 
are also limited to those costs incurred after the commitment to the 
project is made by the grantee or State recipient and the project is set 
up in the C/MI System, except to the extent such costs also meet all of 
the following conditions:
    (A) The grantee or State recipient and the owner agreed in writing 
before the costs were incurred that such costs could be included in the 
project cost, if and when the project was approved for assistance under 
this part, or the grantee specifically agrees in writing to include such 
costs in the project cost on or before the date the project is set up in 
the C/MI System;
    (B) The costs also meet the conditions stated inSec. 
511.10(f)(3)(i)(B) andSec. 511.10(f)(3)(i)(C).
    (4) For projects where the owner or other individuals are performing 
some or all of the rehabilitation work without compensation (to the 
extent permitted bySec. 511.16(a)):
    (i) If the owner is not a practicing, licensed contractor, 
rehabilitation costs eligible underSec. 511.10(f)(1) are limited to 
the cost of materials purchased by the owner and used on the project and 
the cost of other eligible work performed by practicing, licensed 
contractors, subcontractors or tradesmen on the project.
    (ii) If the owner is a practicing, licensed contractor, then 
eligible project costs may include an amount, in addition to that 
permitted under paragraph (f)(4)(i) of this section, for the 
contractor's paid labor, overhead and profit, similar in amount to what 
these items would be if the work were being performed on a project that 
was not owned by the contractor.
    (iii) Under either paragraph (f)(4)(i) or (f)(4)(ii) of this 
section, donated labor or work is not part of eligible project cost.
    (g) Project selection priorities--(1) Projects with units occupied 
by very low income families. While the program can

[[Page 13]]

be used for rehabilitating both occupied and vacant units, the grantee 
shall assure that priority is given to the selection of projects 
containing units that do not meet the rehabilitation standards adopted 
underSec. 511.10(e) and which are occupied by very low income families 
before rehabilitation.
    (2) Units that are accessible to the handicapped. As stated in 24 
CFR 8.30, the grantee shall, subject to the priority inSec. 
511.10(g)(1) and in accordance with other requirements in this part, 
give priority to the selection of projects that will result in dwelling 
units being made readily accessible to and usable by individuals with 
handicaps.

(Approved by the Office of Management and Budget under control numbers 
2506-0110, 2506-0078, 2506-0080)

[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61 
FR 7061, Feb. 23, 1996; 64 FR 50225, Sept. 15, 1999]



Sec.  511.11  Project requirements.

    (a) Rehabilitation. To receive assistance under this part, a project 
must require rehabilitation, measured by whether the project before the 
assisted rehabilitation does not meet the rehabilitation standards under 
Sec.  511.10(e). If a project is terminated before completion of 
rehabilitation (as defined inSec. 511.2), whether voluntarily by the 
grantee or otherwise, amounts equal to the rental rehabilitation grant 
amounts already dispersed for the project under the C/MI System are not 
eligible project costs, whether or not the grantee has already expended 
such grant amounts to pay for project costs. If such amount is not 
repaid, the grantee may be subject to corrective and remedial actions 
underSec. 511.82.
    (b) Primarily residential rental use. Rental rehabilitation grants 
shall only be used to rehabilitate projects to be used for ``primarily 
residential rental'' use. For purposes of this part, a project is used 
for primarily residential rental purposes if at least 51 percent of the 
rentable floor space of the project is used for residential rental 
purposes after rehabilitation, except that in the case of a two-unit 
building, at least 50 percent of the rentable floor space after 
rehabilitation must be used for residential rental purposes after 
rehabilitation. ``Primarily residential rental'' use also includes 
cooperative or mutual housing that has a resale structure that enables 
the cooperative to maintain rents affordable to low-income families.
    (c) Privately owned real property--(1) General. Rental 
rehabilitation grant amounts shall only be used for eligible costs of 
projects that are in private ownership at the time the commitment is 
made to a specific local project, as defined inSec. 511.2, or projects 
that are publicly owned at commitment which meet the requirements in 
Sec.  511.11(c)(2).
    (2) Publicly owned project at the time of commitment. Rental 
rehabilitation grant amounts may be used to assist publicly owned 
projects under the following conditions:
    (i)(A) For a publicly owned project where the commitment to a 
specific local project occurs on or after December 22, 1989, the grantee 
or State recipient--taking into consideration: the size of the project; 
the complexity of the rehabilitation; the anticipated time necessary to 
identify, and transfer to, an eligible private owner; and other relevant 
factors--must determine that it will commence rehabilitation within 90 
days of commitment under the C/MI System, and that rehabilitation will 
be completed and the project transferred to an eligible private owner 
within the two years and 90 days from the date of commitment in the C/MI 
system or the time remaining underSec. 511.33(c) for expenditure of 
the rental rehabilitation grant amounts committed to the project, 
whichever is shorter. The Project Completion Report under the C/MI 
system identifying the private entity to which ownership has been 
transferred shall be submitted within 90 days of the final draw, but not 
later than two years and 90 days after the date of commitment.
    (B) For a publicly owned project where the commitment to a specific 
local project occurred before December 22, 1989, the grantee or State 
recipient--taking into consideration: the size of the project; the 
complexity of the rehabilitation; the anticipated time necessary to 
identify, and transfer to, an eligible private owner; and other relevant 
factors--must determine that the rehabilitation will be completed

[[Page 14]]

and the project transferred to an eligible private owner within the time 
remaining for expenditure of the rental rehabilitation fiscal year grant 
amounts proposed to be used for the project in accordance withSec. 
511.33(c) before drawing down rental rehabilitation grant amounts for 
the project. The Project Completion Report identifying the private 
entity to which ownership has been transferred shall be submitted within 
90 days of the final draw.
    (ii) If the grants or State recipient fails to complete the 
rehabilitation, transfer the property to an eligible private owner 
(which includes obtaining the agreements from the new owner required by 
this part, includingSec. 511.11(d)), and submit the Project Completion 
Report within the allowable period, then HUD will suspend the grantee's 
and/or the State recipient's authority to set up any new projects in the 
C/MI System and may require the grantee to repay to its grant account in 
the C/MI System all rental rehabilitation grant amounts drawn down with 
respect to the project. If payment is not received, HUD may proceed to 
deobligate up to the full amount of the grantee's remaining uncommitted 
rental rehabilitation grant amounts, whether or not such grant amounts 
otherwise are available for deobligation underSec. 511.33(c). A 
suspension of set-up authority shall terminate when the grantee or State 
recipient has transferred the project to private ownership, as required 
by this part, and has submitted a Project Completion Report under the C/
MI System identifying the private owner, or repays its grant account as 
required by this paragraph, or HUD lifts the suspension at its 
discretion.
    (iii) After the grantee has repaid the grant amounts to its grant 
account as provided inSec. 511.11(c)(2)(ii), the grant amounts may be 
committed and expended by the grantee for new projects within the 
periods originally allowed for these grant amounts, or deobligated by 
HUD underSec. 511.33 orSec. 511.82 to the same extent as any other 
grant amounts subject to this part.
    (3) Private, non-profit organizations. Non-profit organizations that 
are privately controlled are eligible to receive rental rehabilitation 
grant amounts under the same terms and conditions as any other private 
project owner under this part. For purposes of this requirement, non-
profit organizations must have governing bodies which are controlled 51 
percent or more by private individuals who are acting in a private 
capacity. For purposes of this provision, an individual is deemed to be 
acting in a private capacity if he or she is not legally bound to act on 
behalf of a public body (including the grantee), and is not being paid 
by a public body (including the grantee) while performing functions in 
connection with the non-profit organization.
    (4) Manufactured housing units. Notwithstanding whether they are 
classified as real or personal property under applicable State law, 
manufactured housing units may be assisted under this part under the 
following conditions:
    (i) The unit is on a permanent foundation;
    (ii) The utility hook-ups are permanent;
    (iii) The unit is designed for use as a permanent residence;
    (iv) The unit also meets the Section 8 Housing Quality Standards for 
Manufactured Homes set forth in 24 CFR 882.109(o).
    (5) Religious organizations. Rental Rehabilitation grant amounts may 
be used to assist the rehabilitation of properties formerly owned by 
religious organizations, such as churches, provided that both of the 
following conditions are met:
    (i) Title to the property to be rehabilitated must be transferred to 
a wholly secular entity prior to commitment, and this entity shall 
comply with all obligations of a project owner under this part. The 
entity may be an existing or newly established entity (which may be an 
entity established, but not controlled, by the religious organization); 
and
    (ii) The completed project must be used exclusively by the owner 
entity for secular purposes, available to all persons regardless of 
religion, for the period and subject to the obligations described in 
Sec.  511.11(d). In particular, there must be no religious or membership 
criteria for tenants of the property.

[[Page 15]]

    (d) Long-term owner obligations. (1) Each project assisted under 
this part is subject to the following specific obligations for a period 
of at least ten years after completion of the rehabilitation:
    (i) The project shall remain in private ownership and in primarily 
residential rental use for the required period, unless the project is 
sold to another private owner who agrees to continue to manage the 
property in accordance with Rental Rehabilitation Program requirements 
for the remainder of the required period, or a hardship exception is 
approved by the grantee for reasons that occur after completion of the 
rehabilitation.
    (ii) The owner shall not convert the units in the project to 
condominium ownership or any form of cooperative ownership not eligible 
for assistance under this part for the required period.
    (iii) The owner shall not discriminate against prospective tenants 
on the basis of their receipt of, or eligibility for, housing assistance 
under any Federal, State or local housing assistance program or, except 
for a housing project for elderly persons, on the basis that the tenants 
have a minor child or children who will be residing with them, for the 
required period.
    (iv) The owner shall comply with the nondiscrimination and equal 
opportunity requirements and with the affirmative marketing requirements 
and procedures adopted underSec. 511.13, for the required period.
    (2)(i) With respect to projects which are privately owned when the 
commitment to a specific local project is made, the obligations required 
underSec. 511.10 (d)(1) and (d)(3) shall be included in the written, 
legally binding commitment or project agreement between the owner and 
the grantee or State recipient which is executed on or before the date 
the project is committed.
    (ii) With respect to projects which are publicly owned when the 
commitment is made, these obligations shall be included in a written 
agreement between the grantee or State recipient and the private owner, 
executed on or before completion of rehabilitation.
    (iii) By drawing down rental rehabilitation grant amounts for a 
project which is publicly owned when the commitment is made, the public 
owner itself accepts the obligations of this part, includingSec. 
511.11(d)(1)(i) (except for private ownership before completion of 
rehabilitation), (d)(1)(ii), (d)(1)(iii) and (d)(1)(iv) and agrees to 
include these obligations in the agreement with the private owner 
required bySec. 511.11(d)(2)(ii).
    (3) The grantee or State recipient shall ensure that the written 
agreements with private owners required bySec. 511.11 (d)(1) and 
(d)(2) are legally enforceable, are recorded against the project in the 
local land records (or in the case of a manufactured housing unit, 
against the unit in the manner appropriate for such real or personal 
property under State and local law), and that the agreements contain 
remedies adequate to enforce their provisions. A remedy will be deemed 
adequate for purposes of this paragraph if it requires the entire amount 
of the rental rehabilitation grant assistance for the project to be a 
secondary lien secured by the property, repayable by the owner, or any 
subsequent transferee, upon a prohibited conversion, sale or use in an 
amount equal to the entire amount of such assistance, less 10 percent 
for each full year after completion of the project up to the time the 
prohibited conversion, sale or use occurs, except in the case of 
projects of 25 units or more. For projects of 25 units or more the 
entire amount of such assistance shall be repaid if the project is 
converted, sold or used in violation of this section during the 10-year 
period. Such lien may not be subordinate to a lien in favor of the 
grantee, State recipient or any person with whom the owner has business 
or family ties, except as may be necessary to secure federally tax 
exempt financing for the project.
    (e) Maximum rental rehabilitation grant amounts for projects. (1) 
Rental rehabilitation grant amounts used for any project shall not 
exceed 50 percent of the total eligible project costs, as defined in 
Sec.  511.10(f). However, where refinancing of existing indebtedness is 
involved, the grantee may approve a higher amount for a project where it 
determines, and documents in its records, that:
    (i)(A) Rehabilitation of the project is important to the overall 
stability of

[[Page 16]]

the neighborhood (as defined atSec. 511.10(c)(2)) and for the 
provision of housing at rents affordable to low-income families, or
    (B) The project has special costs to facilitate use by the elderly 
or handicapped; and
    (ii) The refinancing and the higher grant amount are necessary to 
make the project feasible.

This higher grant amount may not exceed the lesser of 75 percent of the 
eligible project costs or 50 percent of the sum of the eligible project 
costs and the amount necessary to refinance the existing indebtedness.
    (2) Per unit. (i) Except as provided in paragraph (e)(2)(ii) of this 
section, the rental rehabilitation grant amounts used for any project 
may not exceed the sum of the following dollar amounts for dwelling 
units in the project:
    (A) $5,000 per unit for units with no bedrooms;
    (B) $6,500 per unit for units with one bedroom;
    (C) $7,500 per unit for units with two bedrooms; and
    (D) $8,500 per unit for units with three or more bedrooms.
    (ii) HUD may approve higher rental rehabilitation grant amounts for 
projects in areas of high material and labor costs where the grantee 
demonstrates to HUD's satisfaction that a higher amount is necessary to 
conduct a rental rehabilitation program in the area and that it has 
taken every appropriate step to contain the amount of the rental 
rehabilitation grant within the dollar limits specified in paragraph 
(e)(2)(i) of this section. These higher amounts will be determined as 
follows:
    (A) HUD may approve higher per unit amounts for a unit of general 
local government's entire rental rehabilitation program up to, but not 
to exceed, an amount derived by applying the HUD-approved High Cost 
Percentage for Base Cities for the area to the applicable per unit 
dollar limits;
    (B) HUD may, on a project-by-project basis, increase the level 
permitted underSec. 511.11(e)(2)(i) by multiplying the original limits 
by up to a maximum of 140 percent and then adding the product to the 
original limits. Therefore, the maximum high cost grant amount per 
project that may be approved is 240 percent of the original per unit 
limits.
    (f) Rent or occupancy restrictions. (1) A project rehabilitated with 
rental rehabilitation grant amounts under this part is not subject to 
State or local rent control unless the rent control requirements or 
agreements:
    (i) Were entered into under a State law or local ordinance of 
general applicability that was enacted and in effect in the jurisdiction 
before November 30, 1983 and
    (ii) Apply generally to projects not assisted under the Rental 
Rehabilitation Program.
    (2) State and local rent controls expressly preempted by paragraph 
(f) of this section include, but are not limited to, rent laws or 
ordinances, rent regulating agreements, rent regulations, low income 
occupancy agreements extending beyond one year from the date of 
completion of rehabilitation of a project, financial penalties for 
failure to achieve certain low income occupancy or rent projections, or 
restrictions on return on investment or other similar policies that 
prevent an owner, whether for-profit or non-profit, from maximizing 
return or setting rent levels as the owner chooses. Grantees or State 
recipients shall not include any preempted rent or occupancy 
restrictions in any commitments or project agreements with the owners of 
Rental Rehabilitation projects.
    (g) [Reserved]

(Information collection requirements contained in this section have been 
approved by the Office of Management and Budget under control numbers 
2506-0080 and 2506-0110)

[55 FR 20050, May 14, 1990, as amended at 61 FR 7061, Feb. 23, 1996]



Sec.  511.12  Conflicts of interest.

    (a) No person who is an employee, agent, consultant, officer, or 
elected or appointed official of the grantee or State recipient (or of 
any public agency that performs administrative functions in the RRP) 
that receives rental rehabilitation grant amounts and who exercises or 
has exercised any functions or responsibilities with respect to assisted 
rehabilitation activities, or who is in a position to participate in a 
decision-making process or gain inside

[[Page 17]]

information with regard to such activities, may obtain a personal or 
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 themselves or those with whom they have 
family or business ties, during their tenure or for one year thereafter.
    (b) The appropriate HUD Field Office may grant an exception to the 
exclusion in paragraph (a) of the section on a case-by-case basis when 
it determines that such an exception will serve to further the purposes 
of the Rental Rehabilitation Program and the effective and efficient 
administration of the local rental rehabilitation program or the 
project. An exception may be considered only after the grantee or State 
recipient has provided 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 an 
opinion of the grantee's or State recipient's attorney that the interest 
for which the exception is sought would not violate State or local laws. 
In determining whether to grant a requested exception, HUD shall 
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 local rental rehabilitation 
program or the project that would otherwise not be available;
    (2) Whether an opportunity was provided for open competitive bidding 
or negotiation;
    (3) Whether the person affected is a member of a group or class 
intended to be the beneficiaries of the rehabilitation 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;
    (4) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or the decisionmaking process, with 
respect to the specific rehabilitation activity in question;
    (5) Whether the interest or benefit was present before the affected 
person was in a position as described in this paragraph;
    (6) Whether undue hardship will result either to the grantee, State 
recipient or the person affected when weighed against the public 
interest served by avoiding the prohibited conflict; and
    (7) Any other relevant considerations.



Sec.  511.13  Nondiscrimination, equal opportunity, and affirmative
marketing requirements.

    In addition to the nondiscrimination and equal opportunity 
requirements set forth in 24 CFR part 5, the following requirements 
apply:
    (a) Affirmative marketing. The grantee shall adopt appropriate 
procedures and requirements for affirmatively marketing units in 
rehabilitated rental rehabilitation projects through the provision of 
information regarding the availability of units that are vacant after 
rehabilitation or that later become vacant. Affirmative marketing steps 
consist of good faith efforts to provide information and otherwise to 
attract eligible persons from all racial, ethnic and gender groups in 
the housing market area to the available housing. (These affirmative 
marketing procedures will not apply to units rented to families with 
housing assistance provided by a PHA.) The grantee shall establish 
procedures, requirements and assessment criteria for marketing units in 
the Rental Rehabilitation Program that are appropriate to accomplish 
affirmative marketing objectives. The grantee shall annually assess the 
affirmative marketing program to determine: Good faith efforts that have 
been made to carry out such procedures and requirements; objectives that 
have been met; and corrective actions that are required.
    (1) For each grantee, the affirmative marketing requirements and 
procedures adopted must include:
    (i) Methods for how the grantee will inform the public, owners and 
potential tenants about Federal fair housing laws and the grantee's 
affirmative marketing policy (such as the use of the Equal Housing 
Opportunity logotype or

[[Page 18]]

slogan in press releases and solicitations for owners, and written 
communications to fair housing and other groups);
    (ii) Requirements and practices each owner (including the grantee or 
any other public owner) must adhere to in order to carry out the 
grantee's affirmative marketing procedures and requirements (e.g., use 
of commercial media, use of community contacts, use of the Equal Housing 
Opportunity logotype or slogan, display of fair housing poster);
    (iii) Procedures to be used by owners (including the grantee or any 
other public owner) to inform and solicit applications from persons in 
the housing market area who are not likely to apply for the housing 
without special outreach (e.g., use of community organizations, 
churches, employment centers, fair housing groups or housing counseling 
agencies);
    (iv) Records that will be kept describing efforts taken by the 
grantee and by the owners (including the grantee or any other public 
owner) to affirmatively market units and records to assess the results 
of these actions;
    (v) A description of how the grantee will assess the affirmative 
marketing efforts of owners (including the grantee or any other public 
owner), and the results of those efforts, and what corrective actions 
will be taken where an owner fails to follow these affirmative marketing 
requirements.
    (2) For States distributing rental rehabilitation grant amounts to 
units of general local government, the affirmative marketing procedures 
and requirements shall also set out the actions that State recipients 
must take to meet the objectives set out inSec. 511.13(b), the record 
keeping and reporting requirements such State will require of State 
recipients, and the procedures that such State will follow to determine 
what action has been taken by State recipients to assess the results of 
these affirmative marketing efforts.
    (3) The grantee or State recipient shall require compliance with the 
conditions of its affirmative marketing requirements and procedures 
adopted under paragraph (b) of this section by means of an agreement 
with the owner that shall be applicable for a period of ten years 
beginning on the date of completion of rehabilitation, as defined in 
Sec.  511.2.
    (b) [Reserved]

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]



Sec.  511.14  Tenant assistance, displacement, relocation, 
and acquisition.

    (a) General policies. The grantee and any State recipient shall:
    (1) Ensure that the rehabilitation will not cause the displacement 
of any very low income family by a family that is not a very low income 
family.
    (2) Consistent with the other goals and objectives of this part, 
minimize displacement. To the extent feasible, residential occupants 
shall be provided a reasonable opportunity to lease and occupy a 
suitable, decent, safe, sanitary and affordable dwelling unit in the 
project (see paragraph (g)(1)(iii) of this section).
    (3) Administer all phases of the RRP, including the selection of 
units to be rehabilitated and the provision of notices, counseling, 
referrals, other advisory services and relocation payments, in a manner 
that does not result in discrimination because of race, color, religion, 
sex, age, handicap, familial status or national origin.
    (4) Adopt and make public a written tenant assistance policy (TAP) 
that describes the assistance that will be provided to tenants who 
reside in the project and which includes a statement of 
nondiscrimination policy consistent with paragraph (a)(3) of this 
section. The TAP shall comply with the provisions of this section. Each 
tenant in the project shall be provided a copy of the TAP and advised of 
the impact of the project on him or her. For privately owned projects, 
such notice shall be given immediately after submission of the 
application by the owner of a property, or earlier. For publicly owned 
projects, such notice shall be given immediately after the commitment 
(defined inSec. 511.2), or earlier.
    (b) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (g) of this section) must be provided relocation 
assistance at the

[[Page 19]]

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). Tenants shall be advised of their 
rights under the Fair Housing Act (42 U.S.C. 3601-19) and of replacement 
housing opportunities in such a manner that, to the extent possible, 
tenants are provided a choice between relocating within their own 
neighborhoods and other neighborhoods consistent with the grantee's or 
State recipient's responsibility to affirmatively further fair housing. 
As permitted under 49 CFR 24.2(k), for purposes of making replacement 
housing payments, the term initiation of negotiations means:
    (1) For a privately owned project, execution of the legally binding 
agreement between the grantee or State recipient and the project owner 
under which the grantee or State recipient agrees to provide rental 
rehabilitation grant amounts for the project.
    (2) For a publicly owned project, the commitment as defined inSec. 
511.2 or such earlier notice as the grantee or State recipient 
determines to be appropriate.
    (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) Application of Community Development Block Grant (CDBG) 
requirements. If CDBG funds are used to pay any part of the cost of the 
rehabilitation activities, as described in 24 CFR 570.202(b) or similar 
eligible activities, the project is subject to the requirements of 
section 104(d) of the Housing and Community Development Act of 1974, as 
amended, and implementing regulations at 24 CFR 570.606(b) (Entitlement 
Program and HUD-administered Small Cities Program) and 24 CFR 
570.496a(b) (State CDBG Program).
    (e) Appeals. If a person disagrees with the grantee's or State 
recipient's determination concerning the person's eligibility for, or 
the amount of, relocation assistance, the person may file a written 
appeal (request for reconsideration) of that determination with the 
grantee or State recipient. The appeal procedures to be followed are 
described in 49 CFR 24.10. A low-income person that has been displaced 
from a dwelling may submit a further written request for review of the 
grantee's decision to the appropriate HUD Field Office. However, a low-
income person's request for review of a State recipient's decision shall 
be submitted to the State grantee.
    (f) Compliance responsibility. (1) The grantee and any State 
recipient are responsible for ensuring compliance with the URA, the 
regulations at 49 CFR part 24, and the requirements of this section, 
notwithstanding any third party's contractual obligation to the grantee 
or State recipient to comply with these provisions.
    (2) The cost of required assistance may be paid from local public 
funds, funds available under the rules of this part, or funds available 
from other sources.
    (3) The grantee or State recipient must maintain records in 
sufficient detail to demonstrate compliance with the provisions of this 
section.
    (g) Definition of a displaced person. (1) For purposes 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 and 
involuntarily as a direct result of rehabilitation, demolition or 
acquisition for a project assisted under this part. Permanent, 
involuntary moves for an assisted project include a permanent move from 
the project that is made:
    (i) After notice by the property owner, grantee, or State recipient 
to move permanently from the property, if the move occurs on or after 
the following date:
    (A) If the notice is provided by the property owner, the date that 
the owner (or person in control of the site) submits a request for 
assistance under this part that is later approved and funded.
    (B) If the notice is provided by the grantee or State recipient, the 
date of the commitment to a specific local project.

[[Page 20]]

    (ii) Before the date described in paragraph (g)(1)(i) of this 
section, if either the grantee or HUD determines that the displacement 
resulted directly from rehabilitation, acquisition or demolition for the 
project;
    (iii) By a tenant-occupant of a dwelling unit after the initiation 
of negotiations, if:
    (A) The tenant has not been provided a reasonable opportunity to 
lease and occupy a suitable, decent, safe and sanitary dwelling in the 
project following the completion of the project at a rent, including 
estimated average utility costs, that does not exceed the greater of:
    (1) The tenant's rent and estimated average utility costs before the 
commitment; or
    (2) The total tenant payment, as determined under 24 CFR 813.107, if 
the tenant is low-income, or 30 percent of gross household income if the 
tenant is not low-income; or
    (B) The tenant has been required to relocate temporarily, but:
    (1) 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 temporarily occupied 
housing and any increase in rent and utility costs, or other conditions 
of the temporary relocation are not reasonable, and
    (2) The tenant does not return to the project; or
    (C) The tenant is required to move to another unit within the 
project 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) A person does not qualify as a displaced person, if:
    (i) The person has been evicted for cause based upon a serious or 
repeated violation of material terms of the lease or occupancy 
agreement, and the grantee or State recipient determines that the 
eviction was not undertaken for the purpose of evading the obligation to 
provide relocation assistance; or
    (ii) The person moved into the property after the owner's submission 
of the request for assistance but, before commencing occupancy, received 
written notice of the owner's intent to terminate the person's occupancy 
for the project; or
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) The grantee or State recipient determines that the person was 
not displaced as a direct result of rehabilitation, acquisition or 
demolition of the project, and the HUD Field Office concurs in that 
determination.
    (3) The grantee may, at any time, ask HUD to determine whether a 
specific displacement is or would be covered by these rules.



Sec.  511.15  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 title apply to activities under these programs.

[64 FR 50225, Sept. 15, 1999]



Sec.  511.16  Other Federal requirements.

    In addition to the Federal requirements set forth in 24 CFR part 5, 
Grantees and, where applicable, State recipients shall comply with the 
following requirements:
    (a) Labor standards. All laborers and mechanics (except laborers and 
mechanics employed by a State or local government acting as the 
principal contractor on the project) employed in the rehabilitation of a 
project assisted under the Rental Rehabilitation Program that contains 
12 or more dwelling units after rehabilitation shall be paid wages at 
rates not less than those prevailing on similar rehabilitation in the 
locality, if such a rate category exists, or other appropriate rate as 
determined by the Secretary of Labor in accordance with the Davis-Bacon 
Act (40 U.S.C. 276a--276a-5), and contracts involving their employment 
shall be subject to the provisions, as applicable, of the Contract Work 
Hours and Safety Standards Act (40 U.S.C. 327-333). (If CDBG funds are 
used to finance certain costs for projects of 8 or more units, these 
labor standards may apply (see 24 CFR 570.603).) If a project is subject 
to Federal labor standards requirements,

[[Page 21]]

individuals are not permitted to perform work thereon which is covered 
by such requirements without compensation in accordance with such 
requirements, except that persons who own a project in their own name 
may personally perform uncompensated work on their own projects. 
Grantees, State recipients, owners, contractors and subcontractors shall 
comply with applicable implementing regulations in 29 CFR parts 1, 3, 
and 5.
    (b) Environment and historic preservation. Section 104(g) of the 
Housing and Community Development Act of 1974 and 24 CFR part 58, which 
prescribe procedures for compliance with the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321-4361), and the additional laws and 
authorities listed at 24 CFR 58.5.
    (c) Pet ownership in housing for the elderly or handicapped. The 
provisions of 24 CFR part 243 apply to any project assisted under this 
part for which preference in tenant selection is given for all units in 
the project to elderly or handicapped persons or elderly or handicapped 
families, as defined in 24 CFR 812.2.
    (d) Flood insurance. (1) Under the Flood Disaster Protection Act of 
1973 (42 U.S.C. 4001-4128), a grantee may not approve the commitment of 
rental rehabilitation grant amounts to a project located in an area 
identified by the Federal Emergency Management Agency (FEMA) as having 
special flood hazards, unless:
    (i) The community in which the area is situated is participating in 
the National Flood Insurance Program (see 44 CFR parts 59 through 79), 
or less than a year has passed since FEMA notification regarding such 
hazards; and
    (ii) Flood insurance is obtained as a condition of approval of the 
commitment.
    (2) Grantees with projects located in an area identified by FEMA as 
having special flood hazards are responsible for assuring that flood 
insurance under the National Flood Insurance Program is obtained and 
maintained.
    (3) This paragraphSec. 511.16(g) does not apply in the case of 
allocations administered by a State underSec. 511.51(a).

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]

Subpart C [Reserved]



             Subpart D_Allocation Formula and Reallocations



Sec.Sec. 511.30-511.31  [Reserved]



Sec.  511.33  Deobligation of rental rehabilitation grant amounts.

    (a) Before deobligating grant amounts, HUD will consult with the 
affected grantee and take into account factors such as timing of the 
grantee's program year; the timing of State distributions to State 
recipients, if applicable; the timing of expected project approvals for 
projects in the grantee's pipeline; climatic or other considerations 
affecting rehabilitation work schedules; and other relevant 
considerations. In addition to any remedial deobligation underSec. 
511.82, HUD may deobligate any rental rehabilitation grant amounts that 
are not:
    (1) Committed to specific local projects within 3 years of the date 
of obligation of the grant underSec. 511.21(d) (4 years in the case of 
a State that distributes rental rehabilitation grant amounts to State 
recipients); or
    (2) Expended for eligible costs within 5 years of such date of 
obligation (6 years in the case of a State that distributes rental 
rehabilitation grant amounts to State recipients).
    (b) After such consultation, the HUD field office may direct the 
grantee to proceed with program closeout and may deobligate remaining 
unexpended grant amounts if the field office determines that any 
uncommitted funds will not be committed within a reasonable time, only 
small amounts of funds remain unexpended, or completion of uncompleted 
projects appears infeasible within a reasonable time. None of the time 
periods referred to in this section are extended by any suspensions of

[[Page 22]]

project set-ups or other remedial action imposed by HUD under this part.

[61 FR 7062, Feb. 23, 1996]



Sec.  511.34  [Reserved]

Subpart E [Reserved]



                         Subpart F_State Program



Sec.  511.50  State election to administer a rental rehabilitation 
program.

    (a) State allocations may be used to carry out eligible 
rehabilitation activities in accordance with the requirements of this 
part in units of general local government that do not receive 
allocations under subpart D and in cities and urban counties whose 
allocations are below the minimum amount specified inSec. 511.31, but 
may not be used in areas that are eligible for assistance under title V 
of the Housing Act of 1949, except as specified in paragraph (b) of this 
section.
    (b) For Fiscal Years 1988 through 1991, uncommitted prior year funds 
may be used by State grantees, by units of general local government 
receiving funds from State grantees and by units of general local 
government participating in a HUD-administered State Program in areas 
eligible for assistance under title V of the Housing Act of 1949. This 
authority to enter into commitments with owners for projects in title V-
eligible areas expires on September 30, 1991.

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61 
FR 7062, Feb. 23, 1996]



Sec.  511.51  State-administered program.

    (a) Type of program. A State may, in its discretion, use all or part 
of its rental rehabilitation grant amounts either:
    (1) To carry out its own Rental Rehabilitation Program without the 
active participation of units of general local government;
    (2) To distribute grant amounts to State recipients which 
independently select, enter into commitments with owners for, and manage 
projects; or
    (3) To carry out mixed programs in which both the State and all or 
some units of general local government each perform specified program 
functions.
    (b) Sharing grant amounts for administration. In programs under 
paragraphs (a)(2) and (a)(3) of this section, a State must share its 
grant amounts which are available for administrative costs with units of 
general local government administering the program with the State, under 
a written agreement as required bySec. 511.71.
    (c) State Program requirements. State grantees shall be responsible 
for administering their rental rehabilitation grant amounts in 
accordance with all requirements of this part and other applicable laws, 
notwithstanding their use of units of general local governments to 
perform program functions under paragraph (a)(2) or (a)(3) of this 
section. In addition, States that use units of general local government 
to perform program functions shall:
    (1) Ensure that units of general local government carry out their 
Rental Rehabilitation Program in accordance with requirements of this 
part and other applicable laws. States shall include in their agreements 
with their units of general local government such additional provisions 
as may be appropriate to ensure such compliance and to enable the State 
to carry out its responsibilities under this part, including the 
withdrawal and reallocation of rental rehabilitation grant amounts based 
on unit of general local government noncompliance (including State 
recipient failure to meet the schedule submitted by the State under 
Sec.  511.20(b)(8)); and
    (2) Conduct such reviews and audits of their units of general local 
government as may be appropriate to determine whether units of general 
local government, including State recipients, have carried out their 
programs in accordance with the requirements of this part, whether they 
have done so in a timely manner, and whether they have a continuing 
capacity to do so in a timely manner.

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]

[[Page 23]]



Sec.  511.52  [Reserved]

Subpart G [Reserved]



                     Subpart H_Grant Administration



Sec.  511.70  Responsibility for grant administration.

    Grantees are responsible for ensuring that rental rehabilitation 
grants are administered in accordance with the requirements of this part 
and other applicable laws. A grantee may enter into a written agreement 
with another unit of State or local government or with a non-
governmental entity to administer specified functions under its Rental 
Rehabilitation Program to the extent not prohibited by HUD. If the 
grantee is contracting with a non-governmental entity to administer its 
program or to provide other services, such as cash management 
responsibilities, the grantee shall follow the procurement standards of 
24 CFR 85.36. The use of other governmental units or private contractors 
does not relieve the grantee of its responsibility for ensuring 
compliance with this part and other applicable laws.



Sec.  511.71  Administrative costs.

    (a) Maximum amount. Any grantee may use not to exceed 10 percent of 
the grant amount initially obligated to the grantee for Federal Fiscal 
Year 1988 and later fiscal years for administrative costs eligible under 
paragraphs (b) and (c) of this section. Eligible grantees may draw down 
funds to pay for eligible administrative costs through HUD's C/MI 
System.
    (b) Eligibility. Eligible administrative costs are reasonable and 
necessary costs, as described in OMB Circular A-87, incurred by the 
grantee itself, or by a unit of general local government pursuant to a 
written cost-sharing agreement with a State grantee (seeSec. 
511.51(b)), in carrying out the Rental Rehabilitation Program in 
accordance with this part. Administrative costs do not include costs of 
rehabilitation which are incurred by and charged to project owners as 
eligible project costs underSec. 511.10(f)(2).
    (c) Written cost-sharing agreement. A State grantee shall determine 
the amount of its rental rehabilitation grant that it will permit to be 
used for administrative expenses, not to exceed the maximum permitted by 
this section. The State grantee shall share the amount of its rental 
rehabilitation grant designated for administrative expenses with units 
of general local government that incur eligible administrative costs in 
carrying out the Rental Rehabilitation Program, whether the unit of 
general local government receives a distribution of funds from the State 
or selects and manages projects independently as a State recipient or 
whether it performs less comprehensive functions by agreement with the 
State. Before any eligible administrative expenses are incurred by a 
unit of general local government under a State's grant, the cost-sharing 
arrangement shall be specified in a written agreement between the State 
grantee and each unit of general local government that receives payment 
from the State for administrative expenses under this part. This 
agreement shall describe (whether very generally or more specifically) 
the functions that the unit of general local government shall perform 
and the terms and conditions under which the unit of general local 
government participates in the program, including the procedures by 
which the unit of general local government's compensation for its 
administrative expenses incurred in performing the authorized functions 
is to be calculated and paid. HUD will not review the relative sharing 
of administrative expenses between the State and affected units of 
general local government, but pursuant to Sec.Sec. 511.74 and 511.80, 
it will review and audit the State's program on the eligibility of 
administrative expenses paid with program funds.
    (d) Allocation of benefit. Rental rehabilitation grant amounts used 
for program administration will be deemed to meet program requirements 
imposed on a percentage of the annual grant basis, such as lower income 
benefit and use of rental rehabilitation grants for housing for families 
with children, in the same proportion as the grant amounts for a grant 
year which are used for eligible project costs meet the grant 
requirements. For example, if 70 percent of the grant amounts used for

[[Page 24]]

project costs for Fiscal Year 1989 benefit low-income families, then 70 
percent of the Fiscal Year 1989 grant amounts spent for administrative 
costs will be deemed to benefit low-income persons.



Sec.  511.72  Applicability of uniform Federal administrative
requirements.

    Grantees, State recipients and their contractors shall comply with 
the requirements and standards of OMB Circular No. A-87, ``Principles 
for Determining Costs Applicable to Grants and Contracts with State, 
Local and Federally recognized Indian Tribal Governments,'' \1\ OMB 
Circular A-128, ``Audits of State and Local Governments'' (implemented 
at 24 CFR part 44), and with 24 CFR part 85, ``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments,'' except for: Sec.Sec. 85.10, 85.11, 85.25, 85.31, 
85.40(b), 85.41, and 85.50. In lieu of Sec.Sec. 85.25 and 85.50, HUD 
has adoptedSec. 511.76 andSec. 511.77, respectively, of this part.
---------------------------------------------------------------------------

    \1\ OMB Circular No. A-87 is available from HUD Field Offices.
---------------------------------------------------------------------------



Sec.  511.73  Grantee records.

    (a) Records to be maintained. Each grantee shall maintain records as 
specified by HUD that clearly document its performance under each 
requirement of this part. States distributing rental rehabilitation 
grant amounts to State recipients shall also ensure that their 
recipients maintain such records to document each recipient's 
performance. The records required by this section shall, at a minimum, 
include the following:
    (1) Records required to comply withSec. 511.75;
    (2) Data on the racial, ethnic, gender, and income level 
characteristics of
    (i) Tenants occupying units before rehabilitation;
    (ii) Tenants moving from and (initially after rehabilitation) into 
projects assisted under this part;
    (iii) Applicants for tenancy within 90 days following completion of 
rehabilitation assisted under this part; and
    (iv) Owners of the projects rehabilitated; and
    (3) Data indicating the race and ethnicity of households displaced 
as a result of program activities, and, if available, the address and 
census tract of the housing units to which each displaced household 
relocated.
    (b) Retention of records. Records required to be maintained under 
paragraph (a) of this section shall be retained for a period of three 
years from the date of final closeout of the rental rehabilitation 
grant.
    (c) Public disclosure. Documents relevant to a grantee's Program 
Description shall be made available for public review upon request at 
the grantee's office during normal working hours.
    (d) Federal access to records. The Secretary, the Inspector General 
of HUD, the Comptroller General of the United States, or any of their 
duly authorized representatives, shall have access to all books, 
accounts, reports, files, and other papers or property of grantees, 
State recipients, and their contractors pertaining to rental 
rehabilitation grant amounts for the purpose of making surveys, audits, 
examinations, excerpts, and transcripts. Grantees or, where applicable, 
State recipients shall ensure that their agreements with owners require 
the owners to provide similar access to their records pertaining to the 
use of rental rehabilitation grant amounts.

(Approved by the Office of Management and Budget under control number 
2506-0080)



Sec.  511.74  Audit.

    The financial management systems used by grantees and, where 
applicable, State recipients shall provide for audits in accordance with 
24 CFR part 44.



Sec.  511.75  Disbursement of rental rehabilitation grant amounts:
Cash and Management Information System.

    (a) General. Rental Rehabilitation grants are managed through HUD's 
C/MI System for the Rental Rehabilitation Program. The C/MI System is a 
computerized system which manages program funds, disburses grant 
amounts, and collects and reports data on properties and tenants 
assisted under the Program.
    (b) Project set-up. (1) After the grantee executes the Grant 
Agreement, complies with the requirements under part

[[Page 25]]

58 of this title for release of funds, and submits the appropriate 
security documents, the grantee may identify (set-up) specific local 
projects in the C/MI System. State recipients are also granted access to 
the C/MI System for projects upon designation by the State and 
submission of the appropriate security documents. Within 12 calendar 
days of project set-up, grantees and State recipients are required to 
submit a Pre-Rehabilitation Report to HUD for each project set-up in the 
C/MI System. Until an acceptable Pre-Rehabilitation Report is received 
and entered in the C/MI System, grant amounts for the project are not 
considered ``committed,'' as defined inSec. 511.2, and, therefore, are 
subject to deobligation to the extent authorized by 24 CFR 511.33(c).
    (2) Beginning in Fiscal Year 1991, if Pre-Rehabilitation Reports are 
not received within 20 days of the project set-up call, the project will 
be cancelled automatically by the C/MI System. In addition, projects 
which have been committed in the C/MI System for 6 months without an 
initial disbursement of funds will be automatically cancelled by the C/
MI System.
    (c) Disbursement of rental rehabilitation grant amounts. After an 
acceptable Pre-Rehabilitation Report is entered into the C/MI System, 
obligated grant amounts may be drawn down for the project by the grantee 
or State recipient by electronic funds transfer to the designated 
depository institution of the grantee or State recipient within 48 to 72 
hours of the disbursement request. Grant amounts for eligible 
administrative costs may be similarly drawn down by grantees by 
electronic funds transfer to their designated depository institutions, 
but State recipients are not permitted to draw down State grant amounts 
for administrative expenses. Any drawdown is conditioned upon the 
submission of satisfactory information by the grantee or State recipient 
about the project or the administrative expenses and compliance with 
other procedures specified by HUD in HUD's forms and issuances 
concerning the Rental Rehabilitation Program Cash and Management 
Information System. Copies of these forms and issuances may be obtained 
from HUD Field Offices. Drawdowns shall be requested by the grantee or 
State recipient as closely as possible to the time they are needed by a 
grantee or State recipient and the owner to pay eligible project costs 
or by a grantee to pay eligible administrative costs. Drawdowns for 
project costs shall be requested only for work or services that have 
been satisfactorily performed, or materials that are acceptable. After 
receipt in the grantee or State recipient's depository account, grant 
amounts for project costs shall immediately be disbursed by the grantee 
or State recipient and the owner in payment for eligible project costs 
and shall not be disbursed at any time, relative to a project's matching 
funds, in any greater proportion than the proportion of rental 
rehabilitation grant amounts to matching funds for the project.
    (d) Payment vouchers. As post-documentation of each drawdown, a 
grantee or State recipient must submit to HUD a payment voucher, for 
each drawdown made by HUD, in the form required for the C/MI System. If 
the drawdown was for eligible project costs and the payment voucher is 
not received within ten calendar days of the drawdown, the grantee or 
State recipient will be suspended from setting up new projects until the 
required payment voucher is received by HUD. If the drawdown was for 
administrative costs and the payment voucher is not received within ten 
calendar days of the drawdown, the grantee will not be allowed to make 
another drawdown for administrative costs until the payment voucher is 
received.
    (e) Submission of project completion reports. After the final draw 
for a project, a Project Completion Report must be submitted to HUD 
within 90 days of the drawdown request. However, for projects 
rehabilitated pursuant toSec. 511.11(c)(2) (publicly owned project at 
the time of commitment), the Project Completion Report must be submitted 
within 90 days of the final draw, but not later than 2 years and 90 days 
after the date of commitment. If a satisfactory Project Completion 
Report is not submitted by the due date, HUD will suspend further 
project set-ups for the grantee or State recipient. Project set-

[[Page 26]]

ups will remain suspended until a satisfactory Project Completion Report 
is received and entered into the C/MI System.

(Approved by the Office of Management and Budget under control number 
2506-0080)



Sec.  511.76  Program income.

    (a) General. Grantees and State recipients are neither encouraged to 
earn nor discouraged from earning program income in using rental 
rehabilitation grant amounts under this part.
    (b) Definition of program income. Program income means gross income 
received by the grantee or State recipient (or by another party at the 
direction of the grantee or State recipient) which is directly generated 
from the use of rental rehabilitation grant amounts. Primarily, it 
includes but is not limited to, the following:
    (1) Repayments of principal (whether in installments or a lump-sum) 
and any interest or penalty assessment, under the terms of the loan 
commitment or other project assistance agreement between the owner and 
the grantee or State recipient, including repayments, pursuant toSec. 
511.11(d)(3), of the rental rehabilitation grant assistance by the owner 
after completion of rehabilitation; and
    (2) Interest earned on program income pending its disposition. 
Grantees or State recipients are not authorized to deduct costs incident 
to the generation or management of income from gross income for purposes 
of determining program income. Governmental fees and taxes, including 
income taxes, property taxes, special assessments, transfer taxes, 
recording fees and other normal governmental revenues, do not constitute 
program income if they are imposed by generally applicable law, 
regulation, or ordinance and are not imposed in consideration of the 
project's receipt of assistance under this part. Program income also 
does not include grant amounts required to be returned to HUD as a 
result of cancellation of a project before completion, or interest on 
those grant amounts, or any interest earned by the grantee or State 
recipient or grant funds after drawdown and before disbursement for 
eligible costs. (For disposition of such interest, see 24 CFR 85.21(i).)
    (c) Eligible uses. Program income may be used only as prescribed in 
paragraphs (c)(1) and (c)(2) of this section.
    (1) Program income may be used for any activity which is eligible 
under this part, except that program income may not be used to pay for 
administrative costs, as described atSec. 511.71. In particular, the 
total of rental rehabilitation grant amounts and Rental Rehabilitation 
Program income used for any project (except underSec. 511.76(c)(2)) 
may not exceed the amount per unit allowed underSec. 511.11(e)(2) or 
50 percent of the total eligible project costs (except as noted inSec. 
511.11(e)(1)).
    (2) Program income may also be used to provide rental assistance to 
lower income tenants in properties rehabilitated through the RRP. This 
includes the use of program income to pay for administrative costs 
associated with the provision of rental assistance but not to exceed the 
amount allowed for administrative fees in the Housing Voucher Program 
authorized under section 8(o) of the United States Housing Act of 1937, 
42 U.S.C. 1437f. In order to use program income for rental assistance, 
the grantee or State recipient must--
    (i) Use the funds to assist low-income tenants who initially occupy 
properties rehabilitated with rental rehabilitation grant amounts or 
rental rehabilitation program income;
    (ii) Have a written policy which is available to the public stating 
that program income will be so used and specifying who is eligible to 
receive such assistance; and
    (iii) Have an agreement with the PHA stating that the PHA will 
utilize the program income to provide rental assistance in accordance 
with the written policy.
    (d) Timing the use of program income. Grantees and State recipients 
shall not commit available rental rehabilitation grant amounts to 
specific local projects if sufficient program income is on hand and 
available to fund the project, or a substantial portion of the project. 
In order to avoid possible over commitment of funds, grantees and State 
recipients shall not anticipate the receipt of program income and

[[Page 27]]

enter into binding commitments with owners cumulatively exceeding the 
total amount of program income on hand plus uncommitted rental 
rehabilitation grant amounts.
    (e) Accounting for and reporting program income. Program income 
shall be accounted for and reported in the grantee's Annual Performance 
Report underSec. 511.81(b) and in the Cash and Management Information 
System underSec. 511.75, in the manner prescribed by HUD.
    (f) Authority of State grantees. States administering rental 
rehabilitation grants have discretion to choose whether program income 
is to be earned at all or is to be paid to or retained by the State or 
paid to or retained by the State recipient. The State's determination 
should be contained in a written agreement between the State and its 
State recipients. However, once earned, program income must be used and 
accounted for in accordance with this section by the State or by the 
State recipient, as applicable.
    (g) Authority of urban counties. Because the configuration of an 
urban county may change from time to time, particularly at the time of 
requalification of an urban county in the Community Development Block 
Grant program, special provisions must be made for urban county program 
income. The urban county may determine whether program income generated 
by a project located in a unit of general local government which, for 
whatever reason, no longer participates in the urban county shall be 
retained by the urban county for its RRP or by the unit of general local 
government. However, urban county program income must otherwise be used 
and accounted for by the urban county and the unit of general local 
government in accordance with this section.
    (h) Program closeout and disposition of program income. Program 
income must be accounted for by the grantee when a Rental Rehabilitation 
Program is completely closed out for all years. Program ``closeout'' 
will occur when the following conditions have been met: All grant funds 
from all program years (excluding program income) have been expended; 
the grantee and, if applicable, its State recipients do not expect (or 
have elected not) to receive any additional rental rehabilitation grant 
amounts, and the annual performance report covering the last program 
year has been submitted to HUD. Program income shall be treated in the 
following manner before and after program closeout:
    (1) Before program closeout, program income shall be used for 
activities eligible underSec. 511.76(c); and
    (2) Program income on hand at the time of program closeout or earned 
after program closeout may be contributed to HOME or HOPE program 
grantees as a cash matching contribution in accordance with applicable 
HOME or HOPE program rules, or may be used for activities that would be 
eligible under other affordable housing activities, as determined by the 
recipient.

[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61 
FR 7062, Feb. 23, 1996]



Sec.  511.77  Grant closeout.

    (a) Each individual fiscal year rental rehabilitation grant will be 
closed out when all grant amounts for the grant to be closed out have 
been drawn down and expended for completed projects and/or 
administrative costs, or grant amounts not drawn down and expended have 
been deobligated by HUD.
    (b) Project Completion Reports for all projects utilizing grant 
amounts from the fiscal year grant(s) to be closed out have been 
submitted and entered into the C/MI System.
    (c) The required reviews and audits to determine whether grantees 
have satisfied the terms of their grant agreement have been made. 
Closeout is contingent upon the receipt of the grantee's most recent 
audit report and audit reports of State recipients, where applicable. 
For closeout of the grant to proceed, the most recent audit report(s) 
must be free of any outstanding findings related to the RRP grant to be 
closed. The audit(s) of the grantee and State recipients, where 
applicable, should cover all grant amounts from all fiscal years which 
are to be closed out except as noted in paragraph (c)(2) of this 
section.
    (1) The Single Audit Act prohibits requiring a grantee or State 
recipient to obtain an audit at its expense covering

[[Page 28]]

only the Rental Rehabilitation Program. (HUD still has the authority to 
conduct an audit or to contract with an independent public accountant to 
conduct an audit of the grant. However, HUD must pay for the audit.)
    (2) When the previous audit(s) fail to cover all grant amounts under 
the Grant Agreement, the program may still be closed out, provided the 
grantee agrees in writing to remit to HUD any costs questioned by a 
subsequent audit that are disallowed by HUD. This procedure is expected 
to be used in those cases when both the grantee and HUD want to proceed 
with the closeout before the next periodic single audit is conducted 
covering the remaining grant amounts not already audited.
    (d) With respect to monitoring the grantee, either:
    (1) The HUD Field Office has conducted an on-site monitoring of the 
grantee and has determined that the grantee's performance, with respect 
to any grant to be closed out, is satisfactory and is in compliance with 
Rental Rehabilitation program statutory and regulatory requirements, 
includingSec. 511.10(a) andSec. 511.10(b); or
    (2) A grant may be closed before on-site monitoring has been 
conducted, provided:
    (i) The Cash and Management Information reports indicate the 
grantee's performance is satisfactory and is in compliance with Rental 
Rehabilitation program statutory and regulatory requirements;
    (ii) There are no outstanding monitoring findings; and
    (iii) The grantee agrees in writing to pay back the amount of any 
costs that are later found by HUD to be ineligible based on a subsequent 
on-site monitoring review or audit.

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61 
FR 7062, Feb. 23, 1996]



   Subpart I_Grantee Performance: Review, Reporting and Corrective or 
                            Remedial Actions



Sec.  511.80  Performance review.

    (a) General. HUD will review the performance of grantees in carrying 
out their 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 grantee's and, as 
appropriate, the State recipient's records and reports, findings from 
on-site monitoring, audit reports, and information generated from the C/
MI System. Where applicable, HUD may also consider relevant information 
pertaining to a grantee's or State 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 grantee or State recipient. Comprehensive performance 
reviews under the standards inSec. 511.80(b) will be conducted after 
prior notice to the grantee.
    (b) Standards for comprehensive performance review. Grantee 
performance shall be comprehensively reviewed periodically, as 
prescribed by HUD, to determine:
    (1) For grantees that are units of general local government or 
States administering their own rental rehabilitation grant programs, 
whether the grantee:
    (i) Has carried out its activities in a timely manner, including the 
commitment of rental rehabilitation grant amounts to specific local 
projects in accordance with the schedule contained in its Program 
Description, as provided inSec. 511.20(b)(8), and the completion of 
projects in accordance withSec. 511.11(a);
    (ii) Has carried out its activities in accordance with the 
requirements of this part; and
    (iii) Has a continuing capacity to carry out its activities in 
accordance with this part and in a timely and cost-effective manner; or
    (2) For grantees that are States distributing rental rehabilitation 
grant

[[Page 29]]

amounts to State recipients, whether the State:
    (i) Has distributed these grant amounts in a timely manner and in 
accordance with the requirements of this part; and
    (ii) Has made such reviews and audits of its recipients as may be 
appropriate to determine whether they have satisfied the requirements of 
paragraph (b)(1)(i) through (b)(1)(iii) of this section.

[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]



Sec.  511.81  Grantee reports to HUD.

    (a) Management reports. Grantees shall submit management reports on 
their Rental Rehabilitation Program in such format and at such time as 
HUD may prescribe.
    (b) [Reserved]

(Approved by the Office of Management and Budget under control number 
2506-0080)

[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]



Sec.  511.82  Corrective and remedial actions.

    (a) General. HUD will use the procedures in this section in 
conducting the performance review as provided inSec. 511.80(a) and in 
taking corrective and remedial actions.
    (b) Performance review. (1) If HUD determines preliminarily that the 
grantee has not met the performance review standards inSec. 511.80, 
the grantee will be given 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 it has done so.
    (2) If the grantee fails to demonstrate to HUD's satisfaction that 
it has met the performance review standards inSec. 511.80, HUD will 
take appropriate corrective or remedial action in accordance with this 
section.
    (c) Corrective and remedial actions. In formulating appropriate 
corrective or remedial actions for performance deficiencies, HUD will 
take one or more of the actions specified in paragraphs (c)(1), (c)(2), 
and (c)(3) of this section. The action chosen will be designed to 
prevent a continuation of the deficiency; mitigate, to the extent 
possible, its adverse effects or consequences; and prevent its 
recurrence. In addition to these actions, HUD will take the action 
specified in paragraph (c)(4) of this section, when paragraph (c)(4) of 
this section is applicable.
    (1) HUD may request the grantee to submit and comply with proposals 
for action to correct, mitigate and prevent performance deficiencies, 
including:
    (i) Preparing and following a schedule of actions for carrying out 
the affected rental rehabilitation activities, consisting of 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) Cancelling or revising activities likely to be affected by a 
performance deficiency, before expending grant amounts for the 
activities;
    (iv) Reprogramming rental rehabilitation grant amounts that have not 
yet been expended from affected activities to other eligible activities; 
and
    (v) Suspending disbursement of grant amounts for affected activities 
for a period of not more than 60 days.
    (2) [Reserved]
    (3) When HUD determines that a grantee has failed to meet one or 
more of the requirements of this part, HUD may reduce or withdraw rental 
rehabilitation grant amounts, or take other action as appropriate, 
except that rental rehabilitation grant amounts already expended on 
eligible activities will not be recaptured from existing grant 
allocations or obligations or deducted from future grants made available 
to the grantee. For purposes of paragraph (c)(3) of this section--
    (i) Grant amounts already expended on eligible activities includes 
all grant amounts that have been disbursed under this part for eligible 
activities, and
    (ii) Other action as appropriate means any remedial action legally 
available, including, without limitation, affirmative litigation, such 
as suits for declaratory judgment, specific performance, temporary or 
permanent injunctions, and any other available remedies other than those 
for recovery of money.

[[Page 30]]

    (4) Where HUD makes a final determination that it has a judicially 
enforceable claim for money against the grantee in a situation where 
rental rehabilitation grant amounts have been disbursed to the grantee 
or State recipient for ineligible costs under this part, HUD will follow 
the procedures described in the Federal Claims Collection Standards (4 
CFR parts 101-105) in order to:
    (i) Demand in writing that the grantee or State recipient reimburse 
HUD in the amount of the ineligible costs, using funds from non-
federally derived sources; and
    (ii) Initiate affirmative litigation to recover the amount of the 
ineligible costs, if necessary for collection. HUD's final determination 
to seek recovery of grant amounts expended on ineligible costs under 
paragraph (c)(4) of this section shall constitute a claim within the 
meaning of 31 U.S.C. 3711, et seq., and interest shall be charged on 
delinquent claims as required by the Federal Claims Collection 
Standards.
    (d) Amounts recovered under paragraph (c)(4) of this section are not 
rental rehabilitation grant amounts and shall be deposited in the U.S. 
Treasury's miscellaneous receipts account.

[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]



                         SUBCHAPTER B [RESERVED]



[[Page 31]]



                    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 32]]

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 and cost principles.
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.

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.

                   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: 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);
    (2) Nonentitlement Funds: HUD-administered Small Cities and Insular 
Area programs (subpart F);

[[Page 33]]

    (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 inSec. 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 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.
    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, orSec. 
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 inSec. 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 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.

[[Page 34]]

    (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 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 ofSec. 570.208(a) shall use the 
same definition of income. The option to choose a definition does not 
apply to activities that qualify underSec. 570.208(a)(1) (Area benefit 
activities), except when the recipient carries out a survey underSec. 
570.208(a)(1)(vi). Activities qualifying underSec. 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 underSec. 
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;
    (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

[[Page 35]]

    (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.
    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 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

[[Page 36]]

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]



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 inSec. 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 ofSec. 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]



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]

[[Page 37]]



                      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 inSec. 
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 underSec. 570.208(a) or underSec. 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. SeeSec. 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 atSec. 570.420(d)(2). In determining 
the percentage of funds expended for such activities:
    (i) Cost of administration and planning eligible underSec. 570.205 
andSec. 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 toSec. 570.802(b) shall be excluded;
    (iii) Funds expended for the repayment of loans guaranteed under the 
provisions of subpart M shall also be excluded;
    (iv) Funds expended for the acquisition, new construction or 
rehabilitation of property for housing that qualifies underSec. 
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 be occupied by low and moderate 
income persons.
    (v) Funds expended for any other activities qualifying underSec. 
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

[[Page 38]]

with OMB Circulars A-87, ``Cost Principles for State, Local and Indian 
Tribal Governments''; A-122, ``Cost Principles for Non-profit 
Organizations''; or A-21, ``Cost Principles for Educational 
Institutions,'' as applicable. \1\ All items of cost listed in 
Attachment B of these Circulars 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 Attachment A 
of such circulars and are otherwise eligible under this subpart C, 
except for the following:
---------------------------------------------------------------------------

    \1\ These circulars are available from the American Communities 
Center by calling the following toll-free numbers: (800) 998-9999 or 
(800) 483-2209 (TDD).
---------------------------------------------------------------------------

    (i) Depreciation methods for fixed assets shall not be changed 
without HUD's specific approval or, if charged through a cost allocation 
plan, the Federal cognizant agency.
    (ii) Fines and penalties (including punitive damages) are 
unallowable costs to the CDBG program.
    (iii) 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 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

[[Page 39]]

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 inSec. 570.208(a)(1), (b), or (c); and
    (iii) The requirements ofSec. 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 24 CFR 85.36, 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 Sec.Sec. 
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 underSec. 
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 24 CFR 
85.36; or
    (ii) Through loans or grants under agreements with subrecipients, as 
defined atSec. 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 underSec. 570.204(a) may only be 
undertaken by entities specified in that section.
    (g) Limitation on planning and administrative costs. No more than 20 
percent of the sum of any grant, plus program income, shall be expended 
for planning and program administrative costs, as defined in Sec.Sec. 
570.205 and 507.206, respectively. Recipients of entitlement grants 
under subpart D of this part shall conform with this requirement by 
limiting the amount of CDBG funds obligated for planning plus 
administration during each program year to an amount no greater than 20 
percent of the sum of its entitlement 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.
    (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

[[Page 40]]

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 ofSec. 570.207, such other 
activities as the Secretary may determine to be consistent with the 
purposes of the Urban Development Action Grant program.
    (j) Faith-based activities. (1) Organizations that are religious or 
faith-based are eligible, on the same basis as any other organization, 
to participate in the CDBG program. Neither the Federal government nor a 
State or local government receiving funds under CDBG programs shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation.
    (2) Organizations that are directly funded under the CDBG program 
may not engage in inherently religious activities, such as worship, 
religious instruction, or proselytization, as part of the programs or 
services funded under this part. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (3) A religious organization that participates in the CDBG program 
will retain its independence from Federal, State, and local governments, 
and may continue to carry out its mission, including the definition, 
practice, and expression of its religious beliefs, provided that it does 
not use direct CDBG funds to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, faith-based organizations may use space in their 
facilities to provide CDBG-funded services, without removing religious 
art, icons, scriptures, or other religious symbols. In addition, a CDBG-
funded religious organization retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members

[[Page 41]]

on a religious basis, and include religious references in its 
organization's mission statements and other governing documents.
    (4) An organization that participates in the CDBG program shall not, 
in providing program assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of religion 
or religious belief.
    (5) CDBG funds may not be used for the acquisition, construction, or 
rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. CDBG funds may be used for the 
acquisition, construction, or rehabilitation of structures only to the 
extent that those structures are used for conducting eligible activities 
under this part. Where a structure is used for both eligible and 
inherently religious activities, CDBG funds may not exceed the cost of 
those portions of the acquisition, construction, or rehabilitation that 
are attributable to eligible activities in accordance with the cost 
accounting requirements applicable to CDBG funds in this part. 
Sanctuaries, chapels, or other rooms that a CDBG-funded religious 
congregation uses as its principal place of worship, however, are 
ineligible for CDBG-funded improvements. Disposition of real property 
after the term of the grant, or any change in use of the property during 
the term of the grant, is subject to government-wide regulations 
governing real property disposition (see 24 CFR parts 84 and 85).
    (6) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this section applies to all 
of the commingled funds.

[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]



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 ofSec. 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 inSec. 570.504.
    (c) Public facilities and improvements. Acquisition, construction, 
reconstruction, rehabilitation or installation of public facilities and 
improvements, except as provided inSec. 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 inSec. 
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 inSec. 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

[[Page 42]]

mentally retarded persons and temporary housing for disaster victims. In 
certain cases, nonprofit entities and subrecipients including those 
specified inSec. 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 
inSec. 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 underSec. 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 underSec. 
570.207(b)(4)), homebuyer downpayment assistance, or recreational needs. 
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 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, the amount shall not exceed 15 percent of 
the grant plus 15 percent of program income, as defined inSec. 
570.500(a). For entitlement grants under subpart D of this part, 
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 Federal fiscal 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:

[[Page 43]]

    (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 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 inSec. 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 ofSec. 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)).
    (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.

[[Page 44]]

    (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 underSec. 570.205.
    (q) Assistance to institutions of higher education. Provision of 
assistance by the recipient to institutions of higher education when the 
grantee determines 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]



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 underSec. 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;

[[Page 45]]

    (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 toSec. 570.605.
    (8) Costs of acquiring tools to be lent to owners, tenants, and 
others who will use such tools to carry out rehabilitation;
    (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 toSec. 570.608.

[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]



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 atSec. 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:

[[Page 46]]

    (a) The acquisition, construction, reconstruction, rehabilitation or 
installation of commercial or industrial buildings, structures, and 
other real property equipment and improvements, 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 inSec. 
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.
    (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 inSec. 
570.207(a);
    (2) Carrying out public services that do not meet the requirements 
ofSec. 570.201(e), except that:

[[Page 47]]

    (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 inSec. 570.201(e)(1) or (2), 
as applicable;
    (3) Providing assistance to activities that would otherwise be 
eligible underSec. 570.203 that do not meet the requirements ofSec. 
570.209; or
    (4) Carrying out an activity that would otherwise be eligible under 
Sec.  570.205 orSec. 570.206, but that would result in the recipient's 
exceeding the spending limitation inSec. 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, 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

[[Page 48]]

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]



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 Sec.Sec. 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 Sec.Sec. 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 
ofSec. 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) Analysis of impediments to fair housing choice.
    (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]



Sec.  570.206  Program administrative costs.

    Payment of reasonable 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 underSec. 570.201 throughSec. 
570.204, since those costs are eligible as part of such activities.

[[Page 49]]

    (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 (or the grant period 
for grants under subpart F). 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 OMB 
Circular A-21, A-87, or A-122 as applicable.
    (f) Submission of applications for federal programs. Preparation of 
documents required for submission to HUD to receive funds under the CDBG 
and 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

[[Page 50]]

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]



Sec.  570.207  Ineligible activities.

    The general rule is that any activity that is not authorized under 
the provisions of Sec.Sec. 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 atSec. 570.3(d) cannot be assisted with CDBG 
funds. This does not include, however, the removal of architectural 
barriers underSec. 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 inSec. 570.208.
    (2) General government expenses. Except as otherwise specifically 
authorized in this subpart or under OMB Circular A-87, expenses required 
to carry out the regular responsibilities of the unit of general local 
government are not eligible for assistance under this part.

[[Page 51]]

    (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 ofSec. 570.203 or as otherwise 
specifically noted herein or when carried out by an entity under the 
provisions ofSec. 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, depreciation, or use allowances pursuant to OMB Circulars A-21, 
A-87 or A-122 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 
underSec. 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 underSec. 
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 or use allowances (in 
accordance with OMB Circular A-21, A-87 or A-122, as applicable) 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 toSec. 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 underSec. 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 moderate income 
housing including clearance, site assemblage, provision of site 
improvements and provision of public improvements and certain housing 
pre-construction costs set forth inSec. 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 underSec. 570.201(m) or (n);

[[Page 52]]

    (iii) When carried out by an entity pursuant toSec. 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]



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 underSec. 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 underSec. 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.
    (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

[[Page 53]]

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 inSec. 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 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

[[Page 54]]

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 the provisions ofSec. 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

[[Page 55]]

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 paragraphSec. 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 
underSec. 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 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

[[Page 56]]

    (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 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 atSec. 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

[[Page 57]]

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 atSec. 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 atSec. 
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 atSec. 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

[[Page 58]]

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'' underSec. 570.505.
    (2) Where the assisted activity is relocation assistance that the 
recipient is required to provide, such relocation 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

[[Page 59]]

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 andSec. 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 ofSec. 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 atSec. 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 underSec. 570.203. 
These guidelines also apply to activities carried out under the 
authority ofSec. 570.204 that would otherwise be eligible underSec. 
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.
    (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

[[Page 60]]

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 underSec. 
570.201(c) of the regulations, which are undertaken for economic 
development purposes, are also subject to these standards, as specified 
inSec. 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 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

[[Page 61]]

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 ofSec. 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 ofSec. 
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 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.

[[Page 62]]

    (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) Sec.Sec. 570.201(a)-(d), 570.201(l), 570.203(a), orSec. 
570.204 when the grantee, subrecipient, or, in the case of an activity 
carried out pursuant toSec. 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

[[Page 63]]

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 toSec. 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);
    (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

[[Page 64]]

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.
    (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:

[[Page 65]]

    (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 underSec. 570.903, or has determined 
that there is evidence, not directly involving the grantee's past 
performance 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

[[Page 66]]

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 atSec. 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 paragraph (f) of this section and except as provided 
underSec. 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

[[Page 67]]

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 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

[[Page 68]]

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, 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 underSec. 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

[[Page 69]]

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 underSec. 
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 underSec. 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 inSec. 570.3 of 
this part, the following definitions apply to this section:
    (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,

[[Page 70]]

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;
    (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

[[Page 71]]

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;
    (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;

[[Page 72]]

    (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;
    (ii) Subpart E, Sec.Sec. 570.400(d), (e), (f), and (g);
    (iii) Subpart J, Sec.Sec. 570.500(c), 570.501, 570.502, 570.503, 
and 570.509;
    (iv) Subpart K, Sec.Sec. 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

[[Page 73]]

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). The section 810 program 
is the Urban Homesteading Program (24 CFR part 590).
    (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, OMB Circulars), 
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.
    (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.

[[Page 74]]

    (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 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

[[Page 75]]

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]



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, 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 Sec.Sec. 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 Sec.Sec. 570.200(g), grants 
under this section

[[Page 76]]

are not subject to the 20 percent limitation on planning and program 
administration costs, as defined in Sec.Sec. 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. 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.

[[Page 77]]

    (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.
    (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

[[Page 78]]

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 
appproval 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:
    (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.

[[Page 79]]



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 inSec. 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 
Sec.Sec. 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 federal fiscal 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 inSec. 570.201(e)(3), an amount equal to the 
amount of the Entitlement grant funds received for the same federal 
fiscal 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.
    (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.

[[Page 80]]

    (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]



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 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

[[Page 81]]

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 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.

[[Page 82]]

    (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 
Sec.Sec. 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 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.

[[Page 83]]

    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.
    (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

[[Page 84]]

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.
    (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

[[Page 85]]

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 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;

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    (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.
    (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.

[[Page 87]]

    (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 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

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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 OMB Circulars No. A-101 and A-110, 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]



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:

[[Page 89]]

    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 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

[[Page 90]]

``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:
    (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.

[[Page 91]]

    (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.
    (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.

[[Page 92]]

    (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 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

[[Page 93]]

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 OMB Circular No. A-
22, ``Cost Principles for Educational Institutions.'' Recipients that 
are private institutions of higher education shall comply with OMB 
Circular A-133, ``Non-Federal Audit Requirements for Institutions of 
Higher Education and Other Nonprofit Institutions,'' which is 
implemented at 24 CFR part 45. Recipients that are public institutions 
of higher education shall comply with OMB Circular A-128, ``Non-Federal 
Audit Requirements for State and Local Governments,'' which is 
implemented at 24 CFR part 44. Audits shall be conducted annually. In 
addition, all recipients under HSI-WSP shall comply with the provisions 
of OMB Circular A-110, ``Uniform Administrative Requirements for Grants 
and Agreements With Institutions of Higher Education, Hospitals and 
Other Non-Profit Organizations,'' which is implemented at 24 CFR part 
84. OMB Circular A-110 shall apply to recipients in its entirety.

[62 FR 17493, Apr. 9, 1997, as amended at 63 FR 9683, Feb. 25, 1998]



   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 
inSec. 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 atSec. 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 Sec.Sec. 570.421, 
570.426,

[[Page 94]]

570.427, and 570.431. Section 570.429 identifies special procedures 
applicable to Hawaii.
    (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 Sec.Sec. 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 inSec. 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 ofSec. 
570.208(a) or ofSec. 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 ofSec. 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 underSec. 570.208(a) or underSec. 570.208(d)(5) 
or (6). See alsoSec. 570.200(a)(3) for further discussion of the 
primary objective.

[[Page 95]]

    (e) Allocation of funds--The allocation of appropriated funds for 
insular areas under section 106 of the Act shall be governed by the 
policies and procedures described in section 106(a)(2) of the Act and 
Sec.Sec. 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 withSec. 570.425 and the applicable NOFA.
    (3) Imminent threats to public health and safety. The criteria for 
these grants are described inSec. 570.424.
    (4) Repayment of Section 108 loans. The criteria for these grants 
are described inSec. 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

[[Page 96]]

receive funding for a sewer system that is located in the same village 
as a rehabilitation project for which the village 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 inSec. 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.



Sec.Sec. 570.422-425  [Reserved]



Sec.  570.426  Program income.

    (a) The provisions ofSec. 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

[[Page 97]]

grants in a year after closeout, the entire amount of the program income 
is subject to the requirements of this part. This will be a subject of 
the closeout agreement described inSec. 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.

[[Page 98]]

    (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 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.

[[Page 99]]

    (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 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 inSec. 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 ofSec. 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 atSec. 
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 atSec. 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.

[[Page 100]]

    (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 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 underSec. 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 withSec. 
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 inSec. 570.301(b).
    (i) Program amendments. (1) The insular area jurisdiction's citizen 
participation plan (seeSec. 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 ofSec. 91.100 andSec. 91.105, except forSec. 
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 inSec. 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 
statement for assistance is submitted to HUD, and the jurisdiction must 
certify that it is following the plan. The plan must set

[[Page 101]]

forth the jurisdiction'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 jurisdiction's plans, consistent with the policies developed 
underSec. 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 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 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 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 jurisdiction 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 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 statement. (1) The insular area 
jurisdiction shall publish a proposed statement consisting of the 
proposed community development activities and community development 
objectives in order to afford affected citizens an opportunity to:
    (i) Examine the statement's contents to determine the degree to 
which they may be affected;
    (ii) Submit comments on the proposed statement; and
    (iii) Submit comments on the performance of the jurisdiction.
    (2) The requirement for publishing in paragraph (c)(1) of this 
section may be met by publishing a summary of the proposed statement in 
one or more newspapers of general circulation and by making copies of 
the proposed statement available at libraries, government offices, and 
public places. The summary must describe the contents and purpose of the 
proposed statement and must include a list of the locations where copies 
of the entire proposed statement may be examined.
    (d) Preparation of a final statement. An insular area jurisdiction 
must prepare a final statement. In the preparation of the final 
statement, the jurisdiction

[[Page 102]]

shall consider comments and views received relating to the proposed 
statement and may, if appropriate, modify the final statement. The final 
statement shall be made available to the public and 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, the insular area 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.
    (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 ofSec. 570.704.

[69 FR 32780, June 10, 2004]



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 
withSec. 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 withSec. 570.440 for that fiscal year.
    (d) Insular Area grantees receiving additional funds under this 
section will be evaluated for timeliness underSec. 570.902 based upon 
the original grant amount plus the additional funds received. 
Accordingly, references inSec. 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.

[[Page 103]]

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 inSec. 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.
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

[[Page 104]]

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:
    (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.

[[Page 105]]

    (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 ofSec. 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 carried out in accordance 
withSec. 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

[[Page 106]]

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 elect to receive Community Development Block Grant funds for 
distribution to units of general local government in the state's 
nonentitlement areas under the Housing and Community Development Act of 
1974. Other subparts of part 570 are not applicable to the State CDBG 
Program, except as expressly provided otherwise.
    (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 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 inSec. 570.200(j).

[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]

[[Page 107]]



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 and program income, and loans 
guaranteed under section 108 of the Act.
    (b) [Reserved]

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



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 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. (SeeSec. 570.483(b)(1), (c), and (d).)
    (iii) The requirements ofSec. 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

[[Page 108]]

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 ofSec. 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.
    (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 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 inSec. 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

[[Page 109]]

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 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;

[[Page 110]]

    (L) Provides services to the residents of an area pursuant to a 
strategy approved by the State under the provisions ofSec. 
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:
    (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

[[Page 111]]

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 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

[[Page 112]]

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
    (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]



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

[[Page 113]]

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 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

[[Page 114]]

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 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 underSec. 570.483(b)(1);
    (B) The rehabilitation of a privately owned nonresidential building 
or improvement that does not qualify underSec. 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 underSec. 570.483(b)(3).
    (iv) A microenterprise assistance activity (carried out in 
accordance with the provisions of section 105(a)(23) of the Act orSec. 
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

[[Page 115]]

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 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 ofSec. 
92.252 orSec. 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

[[Page 116]]

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
    (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 atSec. 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.

[[Page 117]]

    (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 (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 atSec. 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.

[[Page 118]]

    (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 atSec. 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 atSec. 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 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'' underSec. 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.

[[Page 119]]

    (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.
    (5) If the unit of general local government has elected to prepare a 
community revitalization strategy pursuant to the authority ofSec. 
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 atSec. 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 inSec. 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 inSec. 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

[[Page 120]]

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 underSec. 
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 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 toSec. 
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.

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



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 atSec. 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 citizens will be given reasonable and timely access 
to local meetings, 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;

[[Page 121]]

    (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 underSec. 570.488.
    (4) Provide technical assistance to groups representative of persons 
of low and moderate income that request assistance in developing 
proposals 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 citizens' 
views and responding to proposals and questions. Together the hearings 
must cover community development and housing needs, 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 
locations convenient to potential or actual beneficiaries, with 
accommodations for the handicapped. 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. CDBG-funded activities may serve 
beneficiaries outside the jurisdiction of the unit of general local 
government that receives the grant, provided the unit of general local 
government determines that the activity is meeting its needs in 
accordance with section 106(d)(2)(D) of the Act.

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



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 affirmatively further fair housing 
shall specifically require the State to assume the responsibility of 
fair housing planning by:
    (1) Conducting an analysis to identify impediments to fair housing 
choice within the State;
    (2) Taking appropriate actions to overcome the effects of any 
impediments identified through that analysis;
    (3) Maintaining records reflecting the analysis and actions in this 
regard; and
    (4) 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

[[Page 122]]

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]



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 
costs. (i) The state is responsible for the administration of all CDBG 
funds. The state shall pay from its own resources all administrative 
costs incurred by the state in carrying out its responsibilities under 
this subpart, except that the state may use CDBG funds to pay such costs 
in an amount not to exceed $100,000 plus 50 percent of such costs in 
excess of $100,000. States are therefore required to match such costs in 
excess of $100,000 on a dollar for dollar basis. The amount of CDBG 
funds used to pay such costs in excess of $100,000 shall not exceed 2 
percent of the aggregate of the state's annual grant, program income 
received by units of general local government (whether retained by the 
unit of general local government or paid to the State) and funds 
reallocated by HUD to the state.
    (ii) For determining the amount of CDBG funds available in past 
years for administrative costs incurred by the state, the following 
schedule applies:
    (A) $100,000 per annual grant beginning with FY 1984 allocations;
    (B) Two percent of program income returned by units of general local 
government to the State after August 21, 1985; and
    (C) Two percent of program income received by units of general local 
government after February 11, 1991.
    (iii) The state has the option of selecting its approach for 
demonstrating compliance with this requirement. Regardless of the 
approach selected by the state, the state will be required to pay its 50 
percent of administrative costs in excess of $100,000 in the same amount 
and at the same time at which it draws CDBG funds for such costs after 
the expenditure of the $100,000. Any state for which it is determined

[[Page 123]]

that matching costs contributions are in arrears on the use of CDBG 
funds for administrative costs will be required to bring matching cost 
expenditures up to the level of CDBG expenditures for such costs within 
one year of the effective date of this subpart. 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. Funds from any year's grant may be used to pay 
administrative costs associated with any other year's grant. The two 
approaches are:
    (A) Cumulative accounting of administrative costs incurred by the 
state since its assumption of the Program. Under this approach, the 
state will identify, for each grant it has received, the CDBG funds 
eligible to be used for administrative costs as well as the maximum 
amount of matching funds which the state is required to pay. 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 which was used for administrative costs as well as matching 
amounts paid by the state. These amounts will also be aggregated for all 
grants received. The state will be considered to be in compliance with 
the requirement if the aggregate of actual amounts spent for 
administrative costs does not exceed the maximum amount allowable and 
the amount which the state has paid in matching funds is at least equal 
to the amount of CDBG funds in excess of $100,000 (for each applicable 
allocation) drawn for administrative purposes. Any administrative 
amounts associated with a particular state grant shall be deducted from 
the aggregate totals upon closeout of that state grant.
    (B) An accounting process developed and implemented by the state 
which provides sufficient information to demonstrate that the 
requirements of this subsection are met.
    (2) The state may not charge fees of any entity for processing or 
considering any application for CDBG fund, or for carrying out its 
responsibilities under this subpart.
    (3) The state and its funded units of general local government shall 
not expend for planning, management and administrative costs more than 
20 percent of the aggregate amount of the annual grant, plus program 
income and funds reallocated by HUD to the State which are distributed 
during the time the final Statement for the annual grant is in effect. 
Administrative costs are those described atSec. 570.489(a)(1) for 
states, and for units of general local government those described at 
sections 105(a)(12) and (a)(13) of the Act.
    (b) Reimbursement of pre-agreement costs. The state may permit, in 
accordance with such procedures as the State may establish, a unit of 
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 subpart and 24 CFR part 58.
    (c) Federal grant payments--(1) Payments. The state shall be paid in 
advance in accordance with Treasury Circular 1075 (31 CFR part 205). The 
State shall 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. Units of general local government shall 
also use procedures to minimize the time elapsing between the transfer 
of funds by the State and disbursement for CDBG activities.
    (2) Interest on advances. Interest earned by units of general local 
government on grant funds before disbursement of the funds for 
activities is not program income and must be returned to the Treasury, 
except that the unit of general local government may keep interest 
amounts of up $100 per year for administrative expenses. However, the 
state shall not be held accountable for interest earned on grants for 
which payments are made in accordance with paragraph (c)(1) of this 
section pending 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

[[Page 124]]

received under this subpart. These requirements must be available for 
Federal inspection and must:
    (i) Be sufficiently specific to ensure that funds received under 
this subpart are used in compliance with all applicable statutory and 
regulatory provisions:
    (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 24 CFR part 85 ``Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments.''
    (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 subrecipient of a unit of general local 
government that was generated from the use of CDBG funds, 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 shall be prorated to reflect the percentage of CDBG funds used 
(e.g., a single loan supported by CDBG funds and other funds; 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;
    (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 a 
subrecipient of a 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 a subrecipient of a unit of 
general local government, 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;
    (vi) Proceeds from the sale of loans made with CDBG funds;
    (vii) Proceeds from the sale of obligations secured by loans made 
with CDBG funds;
    (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 
properties owned and occupied by households not of low and moderate 
income, where 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 
subrecipient from the ownership interest in a for-profit entity acquired 
in return for the provision of CDBG assistance.
    (2) ``Program income'' does not include the following:
    (i) The total amount of funds which is less than $25,000 received in 
a single year that is retained by a unit of general local government and 
its subrecipients;
    (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) 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 atSec. 570.482(f)(3)(v) or are 
carried out in conjunction with a grant under section 108(q) of the Act 
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

[[Page 125]]

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 of the Act 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. 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 atSec. 
570.705(b)(1).
    (3) The state may permit the unit of general local government which 
receives or will receive program income to retain the program income, 
subject to the requirements of paragraph (e)(3)(ii) of this section, or 
the state 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 the program 
income will be used to continue the activity from which the program 
income was derived. The state will determine when an activity will be 
considered to be continued.
    (i) Program income paid to the state. Program income that is paid to 
the state is treated as additional CDBG funds subject to the 
requirements of this subpart and must be distributed to units of general 
local government in accordance with the method of distribution in the 
state's final Statement. To the maximum extent feasible, program income 
shall be distributed before the state makes additional withdrawals from 
the Treasury, except as provided in paragraph (f) of this section.
    (ii) Program income retained by a unit of general local government. 
(A) Program income that is received and retained by the unit of general 
local government before closeout of the grant that generated the program 
income is treated as additional CDBG funds and is subject to all 
applicable requirements of this subpart.
    (B) Program income that is received and retained by the unit of 
general local government after closeout of the grant that generated the 
program income is not subject to the requirements of this subpart, 
except:
    (1) If the unit of general local government has another ongoing CDBG 
grant from the state at the time of closeout, the program income 
continues to be subject to the requirements of this subpart as long as 
there is an ongoing grant; and
    (2) If program income is used to continue the activity that 
generated the program income, the requirements of this subpart apply to 
the program income as long as the unit of general local government uses 
the program income to continue the activity;
    (3) The state may extend the period of applicability of the 
requirements of this subpart.
    (C) The state shall require units of general local government, to 
the maximum extent feasible, to disburse program income that is subject 
to the requirements of this subpart before requesting additional funds 
from the state for activities, except as provided in paragraph (f) of 
this section.
    (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 a revolving fund to distribute funds to 
units of general local government 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

[[Page 126]]

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 bySec. 
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.
    (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 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

[[Page 127]]

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.
    (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 (24 CFR 85.36, 
``Administrative Requirements for Grants and Cooperative Agreements to 
State, Local and Federally Recognized Indian Tribal Governments''). 
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

[[Page 128]]

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) Audits. Audits of the state and units of general local 
government shall be conducted in accordance with 24 CFR part 44 which 
implements the Single Audit Act (31 U.S.C. 7501-07). States shall 
develop and administer an audits management system to ensure that audits 
of units of general local government are conducted in accordance with 24 
CFR part 44.

[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]



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 underSec. 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 atSec. 570.493. For fair housing and equal opportunity 
purposes, and as applicable, such records shall include data on the 
racial, ethnic, and gender characteristics of persons who are applicants 
for, participants in, or beneficiaries of the program. The records shall 
also permit audit of the states in accordance with 24 CFR part 85.
    (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 ofSec. 570.490(c).
    (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 
Sec.Sec. 570.492 and 570.493. For fair housing and equal opportunity 
purposes, and as applicable, such records shall include data on the 
racial, ethnic, and gender characteristics of persons who are applicants 
for, participants in, or beneficiaries of the program.
    (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 inSec. 570.487 andSec. 570.488.

[57 FR 53397, Nov. 9, 1992, as amended at 71 FR 6971, Feb. 9, 2006]

[[Page 129]]



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 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 bySec. 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 withSec. 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 underSec. 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

[[Page 130]]

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;
    (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 inSec. 
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

[[Page 131]]

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:
    (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 isSec. 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.

[[Page 132]]

    (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. 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.

[[Page 133]]

    (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 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 inSec. 
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 inSec. 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 inSec. 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

[[Page 134]]

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 underSec. 
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 atSec. 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 toSec. 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 atSec. 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 
inSec. 570.503(b)(8) for subrecipient-controlled property, or inSec. 
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 ofSec. 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

[[Page 135]]

not include contractors providing supplies, equipment, construction, or 
services subject to the procurement requirements in 24 CFR 85.36 or 
84.40, as applicable.

[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]



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 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 inSec. 
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 underSec. 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) Recipients and subrecipients that are governmental entities 
(including public agencies) shall comply with the requirements and 
standards of OMB Circular No. A-87, ``Cost Principles for State, Local, 
and Indian Tribal Governments''; OMB Circular A-128, ``Audits of State 
and Local Governments'' (implemented at 24 CFR part 44); and with the 
following sections of 24 CFR part 85 ``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments'' or the related CDBG provision, as specified in this 
paragraph:
    (1) Section 85.3, ``Definitions'';
    (2) Section 85.6, ``Exceptions'';
    (3) Section 85.12, ``Special grant or subgrant conditions for `high-
risk' grantees'';
    (4) Section 85.20, ``Standards for financial management systems,'' 
except paragraph (a);
    (5) Section 85.21, ``Payment,'' except as modified bySec. 570.513;
    (6) Section 85.22, ``Allowable costs'';
    (7) Section 85.26, ``Non-federal audits'';
    (8) Section 85.32, ``Equipment,'' except in all cases in which the 
equipment is sold, the proceeds shall be program income;
    (9) Section 85.33, ``Supplies'';
    (10) Section 85.34, ``Copyrights'';
    (11) Section 85.35, ``Subawards to debarred and suspended parties'';
    (12) Section 85.36, ``Procurement,'' except paragraph (a);
    (13) Section 85.37, ``Subgrants'';
    (14) Section 85.40, ``Monitoring and reporting program 
performance,'' except paragraphs (b) through (d) and paragraph (f);
    (15) Section 85.41, ``Financial reporting,'' except paragraphs (a), 
(b), and (e);
    (16) Section 85.42, ``Retention and access requirements for 
records,'' except that the period shall be four years;
    (17) Section 85.43, ``Enforcement'';
    (18) Section 85.44, ``Termination for convenience'';
    (19) Section 85.51 ``Later disallowances and adjustments'' and
    (20) Section 85.52, ``Collection of amounts due.''
    (b) Subrecipients, except subrecipients that are governmental 
entities, shall comply with the requirements and standards of OMB 
Circular No. A-122, ``Cost Principles for Non-profit Organizations,'' or 
OMB Circular No. A-21, ``Cost Principles for Educational Institutions,'' 
as applicable, and OMB Circular A-133, ``Audits of Institutions

[[Page 136]]

of Higher Education and Other Nonprofit Institutions'' (as set forth in 
24 CFR part 45). Audits shall be conducted annually. Such subrecipients 
shall also comply with the following provisions of the Uniform 
Administrative requirements of OMB Circular A-110 (implemented at 24 CFR 
part 84, ``Uniform Administrative Requirements for Grants and Agreements 
With Institutions of Higher Education, Hospitals and Other Non-Profit 
Organizations'') or the related CDBG provision, as specified in this 
paragraph:
    (1) Subpart A--``General'';
    (2) Subpart B--``Pre-Award Requirements,'' except forSec. 84.12, 
``Forms for Applying for Federal Assistance'';
    (3) Subpart C--``Post-Award Requirements,'' except for:
    (i) Section 84.22, ``Payment Requirements.'' Grantees shall follow 
the standards of Sec.Sec. 85.20(b)(7) and 85.21 in making payments to 
subrecipients;
    (ii) Section 84.23, ``Cost Sharing and Matching'';
    (iii) Section 84.24, ``Program Income.'' In lieu ofSec. 84.24, 
CDBG subrecipients shall followSec. 570.504;
    (iv) Section 84.25, ``Revision of Budget and Program Plans'';
    (v) Section 84.32, ``Real Property.'' In lieu ofSec. 84.32, CDBG 
subrecipients shall followSec. 570.505;
    (vi) Section 84.34(g), ``Equipment.'' In lieu of the disposition 
provisions ofSec. 84.34(g), the following applies:
    (A) In all cases in which equipment is sold, the proceeds shall be 
program income (prorated to reflect the extent to which CDBG funds were 
used to acquire the equipment); and
    (B) 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;
    (vii) Section 84.51 (b), (c), (d), (e), (f), (g), and (h), 
``Monitoring and Reporting Program Performance'';
    (viii) Section 84.52, ``Financial Reporting'';
    (ix) Section 84.53(b), ``Retention and access requirements for 
records.'' Section 84.53(b) applies with the following exceptions:
    (A) The retention period referenced inSec. 84.53(b) pertaining to 
individual CDBG activities shall be four years; and
    (B) The retention period starts from the date of submission of the 
annual performance and evaluation report, as prescribed in 24 CFR 
91.520, in which the specific activity is reported on for the final time 
rather than from the date of submission of the final expenditure report 
for the award;
    (x) Section 84.61, ``Termination.'' In lieu of the provisions of 
Sec.  84.61, CDBG subrecipients shall comply withSec. 570.503(b)(7); 
and
    (4) Subpart D--``After-the-Award Requirements,'' except forSec. 
84.71, ``Closeout Procedures.''

[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 60 
FR 56915, Nov. 9, 1995]



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 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 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 inSec. 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

[[Page 137]]

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 administrative requirements. The agreement shall require 
the subrecipient to comply with applicable uniform administrative 
requirements, as described inSec. 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 atSec. 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 specify that, in 
accordance with 24 CFR 85.43, suspension or termination may occur if the 
subrecipient materially fails to comply with any term of the award, and 
that the award may be terminated for convenience in accordance with 24 
CFR 85.44.
    (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 inSec. 570.208 
(formerlySec. 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]



Sec.  570.504  Program income.

    (a) Recording program income. The receipt and expenditure of program 
income as defined inSec. 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 inSec. 570.500(b) shall be 
substantially disbursed from 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 inSec. 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 toSec. 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

[[Page 138]]

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 inSec. 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 bySec. 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 bySec. 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.

[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 56915, Nov. 9, 1995]



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 inSec. 570.208 (formerlySec. 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

[[Page 139]]

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 inSec. 
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 inSec. 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 moderate income household'' (as applicable) atSec. 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 withSec. 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 atSec. 
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.

[[Page 140]]

    (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 inSec. 
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 atSec. 570.208(a)(3)(i);
    (vii) For any homebuyer assistance activity qualifying underSec. 
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 underSec. 570.208(a), the size and income of each 
homebuyer's household; and
    (viii) For aSec. 570.201(k) housing services activity, 
identification of the 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

[[Page 141]]

    (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), 
(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 
inSec. 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 inSec. 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

[[Page 142]]

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) Records that demonstrate that the recipient has made the 
determinations required as a condition of eligibility of certain 
activities, as prescribed in Sec.Sec. 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.
    (d) Records which demonstrate compliance withSec. 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.
    (g) Fair housing and equal opportunity records containing:
    (1) Documentation of the analysis of impediments and the actions the 
recipient has carried out with its housing and community development and 
other resources to remedy or ameliorate any impediments to fair housing 
choice in the recipient's community.
    (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

[[Page 143]]

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 inSec. 570.502, including source documentation for 
entities not subject to parts 84 and 85 of this title. 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.
    (i) Agreements and other records related to lump sum disbursements 
to private financial institutions for financing rehabilitation as 
prescribed inSec. 570.513; and
    (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]



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 inSec. 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.

[[Page 144]]

    (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 24 CFR 85.42(f), 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.



Sec.  570.509  Grant closeout procedures.

    (a) Criteria for closeout. 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 have been incurred, 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) With respect to activities (such as rehabilitation of privately 
owned properties) which are financed by means of escrow accounts, loan 
guarantees, or similar mechanisms, the work to be assisted with CDBG 
funds (but excluding program income) has actually been completed.
    (3) 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) Within 90 days of the date it is 
determined that the criteria for closeout have been met, the recipient 
shall submit to HUD a copy of the final performance and evaluation 
report described in 24 CFR part 91. If an acceptable report is not 
submitted, an audit of the recipient's grant activities may be conducted 
by HUD.
    (2) 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.
    (3) 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.
    (4) 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 24 CFR part 44. 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;

[[Page 145]]

    (3) Identification of any program income on deposit in financial 
institutions at the time the closeout agreement is signed:
    (4) Description of the recipient's responsibility after closeout 
for:
    (i) Compliance with all program requirements, certifications and 
assurances in using program income on deposit at the time the closeout 
agreement is signed and in using any other 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 inSec. 570.505;
    (iii) Compliance with requirements governing program income received 
subsequent to grant closeout, as described inSec. 570.504(b)(4) and 
(5); and
    (iv) Ensuring that flood insurance coverage for affected property 
owners is maintained for the mandatory period;
    (5) 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 24 CFR 85.44. 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 24 CFR 
85.43(c) 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]



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

[[Page 146]]

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.
    (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 underSec. 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 inSec. 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 24 CFR 85.36. 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 
underSec. 570.206 or rehabilitation services costs underSec. 
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).

[[Page 147]]

    (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]



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 inSec. 570.200 and the 
specific provisions of eitherSec. 570.202, including the acquisition 
of properties for rehabilitation, orSec. 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

[[Page 148]]

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 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. 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 underSec. 570.910(b), 
Sec.  570.911,Sec. 570.912 orSec. 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;

[[Page 149]]

    (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 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.



                  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 inSec. 570.405 andSec. 570.440 with the 
exception ofSec. 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, seeSec. 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 community 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

[[Page 150]]

under subpart D of this part, the certification that the grantee will 
affirmatively further fair housing shall specifically require the 
grantee to assume the responsibility of fair housing planning by 
conducting an analysis to identify impediments to fair housing choice 
within its jurisdiction, taking appropriate actions to overcome the 
effects of any impediments identified through that analysis, and 
maintaining records reflecting the analysis and actions in this regard.
    (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]



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

[[Page 151]]

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 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

[[Page 152]]

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 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

[[Page 153]]

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]



Sec.  570.610  Uniform administrative requirements and cost principles.

    The recipient, its agencies or instrumentalities, and subrecipients 
shall comply with the policies, guidelines, and requirements of 24 CFR 
part 85 and OMB Circulars A-87, A-110 (implemented at 24 CFR part 84), 
A-122, A-133 (implemented at 24 CFR part 45), and A-128 \2\ (implemented 
at 24 CFR part 44), as applicable, as they relate to the acceptance and 
use of Federal funds under this part. The applicable sections of 24 CFR 
parts 84 and 85 are set forth atSec. 570.502.
---------------------------------------------------------------------------

    \2\ See footnote 1 atSec. 570.200(a)(5).

[60 FR 56916, Nov. 9, 1995]



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 24 CFR 85.36 and 24 CFR 84.42, 
respectively, shall apply.
    (2) In all cases not governed by 24 CFR 85.36 and 84.42, 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 toSec. 
570.202; or grants, loans, and other assistance to businesses, 
individuals, and other private entities pursuant toSec. 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

[[Page 154]]

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 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]



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 ofSec. 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

[[Page 155]]

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]



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]

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 inSec. 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.
    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.
    Public entity shall have the meaning provided for the term 
``Eligible public entity'' in section 108(o) of the Act.

[[Page 156]]

    State-assisted public entity means a unit of general local 
government in a nonentitlement area which is assisted by a State as 
required inSec. 570.704(b)(9) andSec. 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]



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 underSec. 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 ofSec. 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 ofSec. 570.606(b) or (c); or
    (2) Determined by the public entity to be appropriate under the 
provisions ofSec. 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 underSec. 
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 underSec. 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 underSec. 570.202.
    (i) The following economic development activities:
    (1) Activities eligible underSec. 570.203; and
    (2) Community economic development projects eligible underSec. 
570.204.
    (j) Construction of housing by nonprofit organizations for 
homeownership under section 17(d) of the United States Housing Act of 
1937 (Housing Development Grants Program, 24 CFR part 850) or title VI 
of the Housing and Community Development Act of 1987 (Nehemiah Housing 
Opportunity Grants Program, 24 CFR part 280).
    (k) A debt service reserve to be used in accordance with 
requirements specified in the contract entered into pursuant toSec. 
570.705(b)(1).
    (l) Acquisition, construction, reconstruction, rehabilitation or 
historic

[[Page 157]]

preservation, or installation of public 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 underSec. 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.

[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 
71 FR 30036, May 24, 2006]



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 ofSec. 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 underSec. 
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.
    (ii) Fulfill the applicable requirements in its citizen 
participation plan developed in accordance withSec. 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 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 underSec. 
570.705(b)(2). 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.

[[Page 158]]

    (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 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

[[Page 159]]

guaranteed loan funds meets one of the criteria inSec. 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 
underSec. 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 bySec. 570.705(b);
    (iii) Before submission of its application to HUD, the public entity 
has:
    (A) Furnished citizens with information required bySec. 
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 withSec. 
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 inSec. 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 atSec. 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 inSec. 570.606.
    (viii) It will comply with the requirements ofSec. 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 ofSec. 570.200(c)(2), and it must therefore 
assess properties owned and

[[Page 160]]

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 underSec. 
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 inSec. 
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) The HUD Office shall review the application for compliance with 
requirements specified in this subpart and forward the application 
together with its recommendation for approval or disapproval of the 
requested loan guarantee to HUD Headquarters.
    (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 toSec. 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 underSec. 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 underSec. 570.703.
    (vi) Activities to be undertaken with the guaranteed loan funds do 
not meet the criteria inSec. 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 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

[[Page 161]]

the citizen participation requirements for amendments inSec. 
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 inSec. 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]



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 underSec. 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 toSec. 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 underSec. 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 
underSec. 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 toSec. 570.429 orSec. 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
    (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

[[Page 162]]

(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 toSec. 570.705(b)(1). Examples of other security HUD may 
require are:
    (i) Program income as defined inSec. 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. 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. 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. Such costs are payable 
out of the guaranteed loan funds and shall be secured under paragraph 
(b) of this section.
    (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 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]

[[Page 163]]



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 toSec. 
570.705(b)(1) may result in the imposition of a sanction authorized 
pursuant toSec. 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 toSec. 570.705(b)(1) 
may result in an action authorized pursuant toSec. 570.495 orSec. 
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 inSec. 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 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

[[Page 164]]

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. NotwithstandingSec. 570.702 andSec. 
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 underSec. 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 ofSec. 570.703 
under which the activity is eligible and how the activity meets one of 
the criteria inSec. 570.208; or
    (ii) An indication of the type or types of activities to be 
assisted, the provisions ofSec. 570.703 under which such activities 
are eligible, and the criteria inSec. 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 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 
underSec. 570.703; and
    (2) The uses specified in paragraphs (c), (g), and (k) ofSec. 
570.703.
    (c) Certification of need. Prior to approving a nonentitlement 
public entity's application for assistance, the State shall obtain a 
certification from

[[Page 165]]

such public entity conforming toSec. 570.704(b)(4).
    (d) Local government citizen participation requirements. The 
presubmission and citizen participation requirements inSec. 570.704(a) 
and the third sentence ofSec. 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 ofSec. 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 withSec. 570.704(d) and (e).

[74 FR 36389, July 22, 2009]



                   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.



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 inSec. 570.901 and by 
applying the performance criteria described in Sec.Sec. 570.902 and 
570.903 relative to carrying out activities in a timely manner. The 
review criteria inSec. 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

[[Page 166]]

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 inSec. 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 orSec. 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 inSec. 570.910. HUD will consider the recipient's capacity 
as described inSec. 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 toSec. 
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]



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 atSec. 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 atSec. 570.200(a)(2) that each CDBG 
assisted activity meets the criteria for one or more of the national 
objectives described atSec. 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 atSec. 570.606;
    (e) For HUD-administered Small Cities grants in New York, the 
citizen participation requirements atSec. 570.431, the amendment 
requirements atSec. 570.427, and the displacement policy requirements 
ofSec. 570.606;
    (f) For Insular Areas Program grants only, the application and 
amendment requirements atSec. 570.440, the citizen participation 
requirements atSec. 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.

[[Page 167]]

    (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 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

[[Page 168]]

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.
    (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

[[Page 169]]

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
    (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 (seeSec. 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,

[[Page 170]]

together with complaints, performance reviews, and other information.
    (c) Fair housing review criteria. See the requirements in the Fair 
Housing Act (42 U.S.C. 3601-20), as well asSec. 570.601(a), which sets 
forth the grantee's responsibility to certify that it will 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 24 CFR 
85.36(e). In making this review, the Department will determine if the 
grantee has taken actions required underSec. 85.36(e) of this chapter, 
and will review the effectiveness of those actions in accomplishing the 
objectives ofSec. 85.36(e) of this chapter 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]



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 inSec. 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 atSec. 570.307(b)(2).



Sec.Sec. 570.907-570.909  [Reserved]



Sec.  570.910  Corrective and remedial actions.

    (a) General. Consistent with the procedures described inSec. 
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;

[[Page 171]]

    (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 failure of the 
recipient to undertake the actions specified in the condition may result 
in a reduction, pursuant toSec. 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 inSec. 
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 inSec. 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 inSec. 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 withSec. 570.602, the Secretary shall notify the governor of 
such State or chief executive officer of such unit of

[[Page 172]]

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 inSec. 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 ofSec. 
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 inSec. 
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;
    (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;

[[Page 173]]

    (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
    (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

[[Page 174]]

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 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;

[[Page 175]]

    (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 
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

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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.
    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 572_HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM 
(HOPE 3)--Table of Contents



                            Subpart A_General

Sec.
572.1 Overview of HOPE 3.
572.5 Definitions.
572.10 Section 8 assistance.

   Subpart B_Homeownership Program Requirements_Implementation Grants

572.100 Acquisition and rehabilitation of eligible properties; 
          rehabilitation standards.
572.105 Financing the purchase of properties by eligible families.
572.110 Identifying and selecting eligible families for homeownership.
572.115 Transfer of homeownership interests.
572.120 Affordability standards.
572.125 Replacement reserves.
572.130 Restrictions on resale by initial homeowners.
572.135 Use of proceeds from sales to eligible families, resale 
          proceeds, and program income.
572.140 Third party rights.
572.145 Displacement prohibited; protection of nonpurchasing residents.

                            Subpart C_Grants

572.200 Planning grants.
572.205 Planning grants--eligible activities.
572.210 Implementation grants.
572.215 Implementation grants--eligible activities.
572.220 Implementation grants--matching requirements.
572.225 Grant agreements; corrective and remedial actions.
572.230 Cash and Management Information (C/MI) System.
572.235 Amendments.

[[Page 177]]

                       Subpart D_Selection Process

572.300 Notices of funding availability (NOFAs); grant applications.
572.315 Rating criteria for planning grants.

                  Subpart E_Other Federal Requirements

572.400 Consolidated plan.
572.405 Nondiscrimination and equal opportunity requirements.
572.410 Environmental procedures and standards.
572.415 Conflict of interest.
572.420 Miscellaneous requirements.
572.425 Recordkeeping and reports; audit of recipients.

    Authority: 42 U.S.C. 3535(d) and 12891.

    Source: 58 FR 36526, July 7, 1993, unless otherwise noted.



                            Subpart A_General



Sec.  572.1  Overview of HOPE 3.

    The purpose of the HOPE for Homeownership of Single Family Homes 
program (HOPE 3) is to provide homeownership opportunities for eligible 
families to purchase Federal, State, and local government-owned single 
family properties. HOPE 3 provides grants to eligible applicants to plan 
and implement homeownership programs designed to meet the needs of low-
income first-time homebuyers.

[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]



Sec.  572.5  Definitions.

    The terms HUD, Indian Housing Authority (IHA), NAHA, 1937 Act, NOFA, 
and Public Housing Agency (PHA) are defined in 24 CFR part 5.
    Administrative costs means reasonable and necessary costs, as 
described and valued in accordance with OMB Circular No. A-87 or A-122 
\1\ as applicable, incurred by a recipient in carrying out a 
homeownership program under this part. For purposes of complying with 
the 15 percent limitation inSec. 572.215(o), administrative costs do 
not include the costs of activities that are separately eligible under 
Sec.  572.215.
---------------------------------------------------------------------------

    \1\ SeeSec. 572.420(a) concerning the availability of OMB 
Circulars.
---------------------------------------------------------------------------

    Applicant means a private nonprofit organization; a cooperative 
association; or a public body in cooperation with a private nonprofit 
organization that applies for a HOPE 3 grant under this part. A 
cooperative association is an eligible applicant only for eligible 
property it proposes to acquire and transfer ownership interests to 
eligible families under a homeownership program.
    Consolidated plan means the document that is submitted to HUD that 
serves as the planning document of the jurisdiction, in accordance with 
24 CFR part 91.
    Cooperating entity means a private nonprofit organization or public 
body that the lead applicant has designed in its application to carry 
out certain functions in the HOPE 3 program. The responsibilities of a 
cooperating entity must be specified in a memorandum of agreement signed 
by the lead applicant and the cooperating entity.
    Cooperative association means an association organized and existing 
under applicable State, local, territorial, or tribal law primarily for 
the purpose of acquiring, owning, and operating housing for its members 
or shareholders, as applicable.
    Displaced homemaker means as the term is defined in 42 U.S.C. 12704. 
The individual must not have worked full-time, full-year in the labor 
force for at least 2 years.
    Eligible family means a low-income family who is a first-time 
homebuyer.
    Eligible property means a single residential property, containing no 
more than four units, that is owned or held by HUD, the Secretary of 
Veterans Affairs, the Secretary of Agriculture, the Secretary of 
Defense, the Secretary of Transportation, the Resolution Trust 
Corporation, the Federal Deposit Insurance Corporation, the General 
Services Administration, or any other Federal agency; a State or local 
government (including any in rem property); or a PHA/IHA (excluding 
public or Indian housing under the 1937 Act). This definition includes 
individual condominium units located in multifamily structures owned or 
held by an eligible source and properties held by institutions within 
the jurisdiction of the Resolution Trust Corporation. All cooperative 
units acquired under HOPE 3 must be located in properties containing no 
more than four units to

[[Page 178]]

qualify as eligible property under this part. In the case of two- to 
four-unit property, only property that may be divided so each unit may 
be acquired by an eligible family is eligible, except as provided in 
Sec.  572.115(c). For purposes of this definition, the term State or 
local government means any entity included in the first sentence of the 
definition of public body.
    First-time homebuyer means as the term is defined in 42 U.S.C. 
12704.
    Homeownership program means a program for homeownership meeting the 
requirements under this part. The program must provide for acquisition 
by eligible families of ownership interests in the units in an eligible 
property under an ownership arrangement approved by HUD under this part. 
All eligible properties assisted under the program must be initially 
acquired by eligible families.
    Lead applicant means an eligible applicant designated in a HOPE 3 
application to assume legal responsibility as the recipient and execute 
the grant agreement.
    Lease-purchase means
    (1) An agreement, enforceable under State (or territorial) and local 
law, between the recipient or its designee and an eligible family under 
which the family:
    (i) Obtains the right to occupy a unit in an eligible property, 
subject to the payment of rent and other reasonable lease conditions, 
for a period of not more than two years, except as provided inSec. 
572.115(a)(2); and
    (ii) At the end of such two years has the right to purchase the unit 
under the terms stated in the lease-purchase agreement, including the 
completion of any additional rehabilitation required during the lease-
purchase period.
    (2) A lease-purchase agreement qualifies as a transfer of the unit 
to the eligible family for purposes of the deadline for transfer in 
Sec.  572.115(a), but it is not otherwise an ``ownership interest'' 
under this part. The interest that the family acquires at the end of the 
two-year lease-purchase period must be an ownership interest under this 
part, and the terms and conditions of the purchase of such interest must 
meet the affordability requirements of this part.
    Low-income family means a family or individual qualifying as a low-
income family under 24 CFR part 813 (where the recipient is not a PHA/
IHA), part 913 (where the recipient is a PHA), or part 905 (where the 
recipient is an Indian tribe or IHA). A low-income family is generally 
defined as a family whose annual income does not exceed 80 percent of 
median income for the area, as determined by HUD with adjustment for 
family size. HUD may establish income limits higher or lower than 80 
percent of median income for the area on the basis of its finding that 
such variations are necessary because of prevailing construction costs 
or unusually high or low family incomes.
    Ownership interest means ownership by an eligible family by fee 
simple title to a unit in an eligible property (including a condominium 
unit), ownership of shares of or membership in a cooperative, or another 
form of ownership proposed and justified by the applicant and approved 
by HUD pursuant toSec. 572.115(b).
    Private nonprofit organization means any nonprofit organization that
    (1) Is organized and exists under applicable Federal, State, 
territorial, local, or tribal law;
    (2) Has no part of its net earnings inuring to the benefit of any 
individual, corporation, or other entity;
    (3) Has a voluntary board;
    (4) Has an accounting system or has designated a fiscal agent in 
accordance with requirements established by HUD;
    (5) Practices nondiscrimination in the provision of assistance;
    (6) Is a tax exempt entity under section 501(c) of the Internal 
Revenue Code of 1986 (26 U.S.C. 501(c)), or for a private nonprofit 
organization in the Commonwealth of Puerto Rico, is a tax-exempt entity 
under Puerto Rico law;
    (7) Is privately controlled and has a governing body that is 
controlled 51 percent or more by private individuals acting in a private 
capacity. An individual is considered to be acting in a private capacity 
if the individual is not an employee of a public body, is not appointed 
by or acting as the representative of a public body (including the 
applicant or recipient), and is not being

[[Page 179]]

paid by a public body (including the applicant or recipient) while 
performing functions in connection with the nonprofit organization.
    Program income means income earned from the program as described in 
parts 84 and 85 of this title, as applicable, except that program income 
does not include proceeds from the sale and resale of properties. Such 
sale and resale proceeds, and interest earned by the recipient or its 
designee on those proceeds, are governed bySec. 572.135(a) through 
(c).
    Public body means any State of the United States; any city, county, 
town, township, parish, village, or other general purpose political 
subdivision of a State; the Commonwealth of Puerto Rico, the District of 
Columbia, Guam, the Northern Mariana Islands, the Virgin Islands, 
American Samoa, or a general purpose political subdivision thereof; any 
Indian tribe, as defined in title I of the Housing and Community 
Development Act of 1974; any public agency or instrumentality of any of 
the foregoing jurisdictions that is created by or pursuant to State, 
territorial, local, or tribal law, including a State or local Housing 
Finance Agency; and any PHA or IHA. For purposes of this definition, an 
organization that meets the requirements of paragraphs (1) and (2) of 
the definition of private nonprofit organization, but is controlled 51 
percent or more by public officials acting in their official capacities, 
may qualify as a public body.
    Recipient means the lead applicant that is approved by HUD to 
receive a HOPE 3 grant and is legally responsible for the grant.
    Single parent means as the term is defined in 42 U.S.C. 12896.

[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61 
FR 5209, Feb. 9, 1996; 61 FR 48797, Sept. 16, 1996; 62 FR 34145, June 
24, 1997]



Sec.  572.10  Section 8 assistance.

    Assistance under section 8 of the 1937 Act and other rental 
assistance to the homebuyer will be terminated not later than the date 
an eligible family acquires an ownership interest in an eligible 
property or executes a lease-purchase agreement for the property.



   Subpart B_Homeownership Program Requirements_Implementation Grants



Sec.  572.100  Acquisition and rehabilitation of eligible properties;
rehabilitation standards.

    (a) Minimum number of properties. (1) Each homeownership program 
must involve acquisition of at least ten units in eligible properties by 
eligible families.
    (2) A homeownership program may not result in appreciably reducing 
in the locality the number of affordable rental housing units of the 
type to be assisted that would be available to residents currently 
residing in the types of properties proposed for use under the program 
or to families who would be eligible to reside in the properties.
    (b) Maximum acquisition costs. The cost of acquiring an eligible 
property (by a recipient or other entity for transfer to eligible 
families or by an eligible family from a recipient or directly from an 
eligible source) may not exceed the as-is fair market value of the 
property, plus reasonable and customary closing costs charged for 
comparable transactions in the market area. The as-is fair market value 
of a property must be determined in accordance with a recent appraisal 
conducted under procedures consistent with appraisal standards published 
by The Appraisal Foundation in the current edition of ``Uniform 
Standards of Professional Appraisal Practice.''
    (c) Maximum cost of acquisition and rehabilitation. The cost of 
acquisition and rehabilitation paid for from grant funds or credited as 
match may not exceed 80 percent of the maximum amount that may be 
insured in the area under section 203(b) of the National Housing Act, 
plus reasonable and customary closing costs charged for comparable 
transactions in the market area.
    (d) Rehabilitation standards. (1) The recipient is responsible to 
assure that rehabilitation of eligible property meets local codes 
applicable to rehabilitation of work in the jurisdiction (but not less 
than the housing quality

[[Page 180]]

standards established under the Section 8 rental voucher program, 
described inSec. 982.401 of this title). Rehabilitation must also 
include work necessary to meet applicable federal requirements, 
including lead-based paint requirements set forth at part 35, subparts 
A, B, J, K, and R of this title.
    (2) The property must be rehabilitated to a level that makes it 
marketable for homeownership in the market area to families with incomes 
at or below 80 percent of the median for the area. Luxury items 
(fixtures, equipment, and landscaping of a type or quality that 
substantially exceeds that customarily used in the locality for 
properties of the same general type as that being rehabilitated) are not 
eligible expenses. HUD reserves the right to disapprove improvements or 
amenities to be paid for from nonprogram funds that it determines are 
unsuitable for the HOPE 3 program.
    (3) Rehabilitation costs must comply with the cost standards 
established by HUD (see paragraph (c) of this section for applicable 
cost limitations covering both acquisition and rehabilitation). If 
improvements are made to an eligible property beyond those that qualify 
as eligible costs, the applicant must assure that the entire cost of the 
excess improvements will be covered by funds other than the HOPE 3 grant 
and any amounts contributed toward the match, and that the affordability 
of the property will not be impaired.
    (4) Higher standards may be proposed by the applicant or required by 
lenders.
    (5) The applicant must adopt written rehabilitation standards.
    (e) Rehabilitation and transfer of units. (1) The unit must be free 
from any defects that pose a danger to life, health, or safety before 
transfer of an ownership interest in the unit to the family or occupancy 
of a unit by an eligible family under a lease-purchase agreement. The 
recipient must inspect, or ensure inspection of, each unit to determine 
that it does not pose an imminent threat to the life, health, or safety 
of residents and that the property has passed recent fire and other 
applicable safety inspections conducted by appropriate local officials.
    (2) The unit must, not later than 2 years after transfer of an 
ownership interest in the unit to an eligible family, or execution of a 
lease-purchase agreement for the unit, meet minimum rehabilitation 
standards under paragraph (d)(1) of this section. The recipient must 
inspect, or ensure inspection of, each unit to determine that it meets 
the rehabilitation standards required under paragraph (d)(1) of this 
section.

[58 FR 36526, July 7, 1993, as amended at 62 FR 34145, June 24, 1997; 64 
FR 50226, Sept. 15, 1999]



Sec.  572.105  Financing the purchase of properties by eligible families.

    (a) Types of financing. (1) Financing may include use of the 
implementation grant to permit transfer of an ownership interest in a 
unit to an eligible family for less than fair market value or with 
assisted financing; or other sources of financing (subject to 
requirements that apply to those sources), including, but not limited 
to, conventional mortgage loans, mortgage loans insured under title II 
of the National Housing Act, and mortgage loans under other available 
programs, such as Veterans Administration (VA), Farmers Home 
Administration (FmHA), and Resolution Trust Corporation (RTC) seller-
assisted financing.
    (2) FHA single family mortgage insurance requirements. All 
regulatory requirements and underwriting procedures established for FHA 
single family mortgage insurance apply to mortgages insured by FHA on 
properties assisted under the HOPE 3 program. Exceptions in the 
regulations specifically for homebuyers under the HOPE 3 program are:
    (i) The eligible family/mortgagor may obtain a loan for the down 
payment from a corporation or another person under conditions 
satisfactory to HUD (24 CFR 203.19(b) and 234.28(c));
    (ii) A second mortgage may be placed against the property even 
though the entity holding a second mortgage is not a Federal, State, or 
local government agency, if the entity is designated in the 
homeownership plan of an applicant for an implementation grant (24 CFR 
203.32(b) and 234.55(b)); and
    (iii) Certain restrictions on conveyance may be permissible. 
Property

[[Page 181]]

with restrictions that do not comply with FHA regulations will be 
ineligible for FHA mortgage insurance, notwithstanding HUD approval 
underSec. 572.130(e).
    (b) Financial assistance to homebuyers. Recipients may provide 
assistance to, or on behalf of, eligible families to make acquisition 
and rehabilitation of eligible properties affordable. This may include 
interest rate reductions (``interest rate buy-downs''), payment of all 
or a portion of closing costs, down payments, mortgage insurance 
premiums, and other expenses, and other forms of assistance approved by 
HUD. No mechanisms to financially assist homebuyers that would require 
grant recipients to make lump sum deposits of HOPE 3 grant funds will be 
permitted.



Sec.  572.110  Identifying and selecting eligible families for 
homeownership.

    (a) Selection procedures. (1) Recipients must establish written 
equitable procedures for identifying and selecting eligible families to 
participate in the homeownership program, consistent with the 
affordability standards inSec. 572.120. Except for Indian tribes and 
IHAs as described inSec. 572.405(a)(2), the recipient must have a 
procedure to carry out its affirmative fair marketing responsibilities, 
described inSec. 572.405(e), that apply whenever homeownership 
opportunities are made available to other than current residents of the 
property. These procedures must include specific steps to inform 
potential applicants and solicit applications from eligible families in 
the housing market area who are least likely to apply for the program 
without special outreach.
    (2) The written selection procedures must provide for selection only 
of families that are creditworthy and have the financial capacity to 
handle the anticipated costs of homeownership. Any family determined not 
to have paid the appropriate amount of tenant contribution under a HUD 
housing assistance program must be required to resolve any deficiency 
before being selected for homeownership.
    (b) Preferences. (1) In making selections for the program, each 
recipient must give first preference to qualified residents who legally 
occupied units on the date the recipient's application for the 
implementation grant was submitted to HUD and to persons residing in the 
units at the time the properties are selected. If the unit occupied by a 
former resident on the date the implementation grant application was 
submitted to HUD is occupied by a different resident at the time of 
property selection, a vacant unit under this program must be offered to 
the former resident at the earliest possible time.
    (2) In the case of vacant properties for which the preferences in 
paragraph (b)(1) of this section do not apply, recipients must give a 
first preference to otherwise qualified eligible families who reside in 
public or Indian housing under the 1937 Act. Recipients must use 
whatever measures are considered appropriate to inform residents of 
public and Indian housing developments within the housing market area of 
the preference, such as informing resident councils, PHAs, and IHAs, or 
other appropriate measures.
    (3) Recipients must give a second preference to otherwise qualified 
eligible families who have completed participation in one of the 
following economic self-sufficiency programs: Project Self-Sufficiency, 
Operation Bootstrap, Family Self-Sufficiency, JOBS, and any other 
Federal, State, territorial, or local program approved by HUD as 
equivalent.
    (c) Responsibilities of selected families. (1) Each eligible family 
selected for homeownership must certify at the time it acquires an 
ownership interest in the unit (or enters into a lease-purchase 
agreement for the unit) that it intends to occupy the unit as its 
principal residence during the six-year period from the date it acquires 
ownership interest in the unit, unless the recipient determines that the 
family is required to move outside the market area due to a change in 
employment or an emergency situation or the family sells its ownership 
interest. The family may permit others to rent space (such as a basement 
area or a spare bedroom) in the unit occupied by the family as its 
principal residence. (SeeSec. 572.115(c) concerning the rental of 
units in a multi-unit property purchased by a homebuyer under this 
part.)

[[Page 182]]

    (2) Any homebuyer that violates the agreement made under paragraph 
(c)(1) of this section shall be subject to penalties as provided in the 
transfer documents, as prescribed by HUD.
    (3) Each eligible family selected for the program must participate 
in counseling and training of homebuyers and homeowners regarding the 
general rights and responsibilities of homeownership.
    (d) Social security numbers; wage and claims information. As a 
condition of eligibility for homeownership under this part, at the time 
a family applies for howeownership, the recipient (or other appropriate 
entity) must:
    (1) Require the family to meet the requirements for the disclosure 
and verification of social security numbers, as provided by part 5, 
subpart B, of this title; and
    (2) Require the family to sign and submit consent forms for the 
obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by part 5, subpart B, of this title.
    (e) Notification of rejected applicant families. Recipients or 
another appropriate entity must promptly notify in writing any rejected 
applicant family of the grounds for any rejection.

[58 FR 36526, July 7, 1993, as amended at 61 FR 11118, Mar. 18, 1996; 61 
FR 48797, Sept. 16, 1996]



Sec.  572.115  Transfer of homeownership interests.

    (a) Deadline for transfer. (1) All units in eligible properties 
(including in rem properties) must be transferred to eligible families 
within two years of the effective date of the implementation grant 
agreement, except as otherwise provided for multi-unit properties in 
paragraph (c) of this section. The transfer must involve either:
    (i) Acquisition by an eligible family of an ownership interest in a 
unit; or
    (ii) Execution of a lease-purchase agreement for a unit.
    (2) The HUD Field Office may approve a request for an extension of 
the deadline in paragraph (a)(1) of this section on a per-program or 
per-unit basis if the Field Office determines that all program 
activities will be completed in accordance with the timing requirements 
ofSec. 572.210(f) (including any extension granted underSec. 
572.210(f)).
    (b) Form of ownership. (1) Forms of ownership interests acquired by 
eligible families under this part may include fee simple ownership 
(including condominium ownership), cooperative ownership, or another 
form of ownership interest proposed and justified by the applicant and 
approved by HUD. HUD will not approve other forms of ownership that 
would substantially limit the ability of homeowners to realize financial 
appreciation in the value of their homes as determined by HUD. The type 
of ownership interest must be consistent with any applicable State (or 
territorial), local, or tribal law.
    (2) The ownership interest may be subject only to:
    (i) The restrictions on resale required or approved underSec. 
572.130;
    (ii) Mortgages, deeds of trust, or other liens or instruments 
securing the eligible family's purchase money financing as approved by 
the recipient; or
    (iii) Any other restrictions or encumbrances that do not impair the 
good and marketable nature of title to the ownership interest except as 
otherwise approved by the recipient. In approving the terms of an 
eligible family's purchase money financing or any other encumbrances on 
the property under paragraphs (b)(2)(ii) and (iii) of this section, the 
recipient shall not approve financing terms that do not comply with the 
affordability standards inSec. 572.120, or mortgage terms and 
conditions or other encumbrances that in effect constitute resale 
restrictions that would not be approved by HUD under this part.
    (3) Mutual housing is eligible only to the extent it provides for 
the transfer of ownership interests to eligible families.
    (c) Transfer of multi-unit properties. (1) In the case of a two-to-
four unit property, only property that may be divided so that an 
ownership interest in each unit may be acquired by an eligible family is 
eligible. HUD may grant an exception to this requirement on a program-
by-program basis when it determines that such an exception will

[[Page 183]]

serve to further the purposes of the HOPE 3 program.
    (2) HUD Headquarters will consider and may approve an exception 
under the following circumstances:
    (i) The reasonably projected net rental income will be included in 
the determination of the appraised value of the property at the time of 
the homebuyer's purchase;
    (ii) The rent charged by the owner will not exceed the Fair Market 
Rent established by HUD for the area;
    (iii) The recipient will provide the homebuyer with counseling and 
training in property management, and will approve the form of lease used 
by the homebuyer; and
    (iv) The recipient will include the family's potential net rental 
income in calculating the family's initial affordability in accordance 
withSec. 572.120 of this part.

[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]



Sec.  572.120  Affordability standards.

    (a) Initial affordability. (1) The monthly expenditure for 
principal, interest, taxes, and insurance by an eligible family that is 
required under the financing both for the acquisition and for the 
rehabilitation in accordance withSec. 572.100(d) of a unit (whether 
the required rehabilitation occurs before or after the family takes 
title) must be not less than 20 percent and not more than 30 percent of 
one-twelfth of the annual income of the family used for the purpose of 
determining eligibility underSec. 572.110(a). (For the purpose of 
determining affordability of the family, the recipient may, at its 
option, adjust downward the annual incomes of eligible families using 
reasonable standards and procedures consistently applied.) HUD may 
approve a justified request for a floor lower than 20 percent to avoid 
undue hardship to families, such as where the cost of utilities is high.
    (2) The 30 percent cap on monthly payments includes closing costs 
only if closing costs are included in the costs of principal and 
interest, or are otherwise required to be paid by the homeowner over 
time after acquisition.
    (3) Applicants are encouraged to consider the additional monthly 
costs of utilities and other monthly housing costs, such as condominium 
and cooperative fees, in determining whether the family can afford to 
purchase a unit.
    (b) Continued affordability. The recipient must develop a plan 
demonstrating reasonable efforts to ensure continued affordability by 
homeowners in the eligible property. Financing that would impair the 
continued affordability of the property for homebuyers, such as a 
mortgage that is not fully amortizing (e.g., a ``balloon'' mortgage) may 
not be used. The plan should take into account such program features as 
long-term financing at reasonable terms, energy conservation, and 
improvements that will entail low-cost maintenance.

[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995]



Sec.  572.125  Replacement reserves.

    (a) Purpose. A single replacement reserve may be established for the 
homeownership program only if HUD determines it is necessary to prevent 
severe financial hardship to families caused by the failure of a major 
system or component of the property that would render the unit 
substandard. Initially, the reserve must be justified by the applicant 
and approved by HUD as part of the program budget in the application or 
an amended application.
    (b) Need for reserve account. In determining the need for a 
replacement reserve, the applicant or recipient must demonstrate that 
the financial status of eligible families is insufficient to meet the 
needs for which the reserve is established, and that the amount proposed 
for the reserve is reasonable, taking into account the following 
factors:
    (1) The size of the implementation grant and the amount of matching 
contributions;
    (2) The availability of insurance, and the home maintenance and 
repair capabilities of the families; and
    (3) The condition and age of the properties and each of their major 
systems and components (including at least the heating, plumbing, and 
electrical systems, the roof, foundation, windows, exterior walls, and 
common area, if any).

[[Page 184]]

    (c) Drawdown of reserve funds. Replacement reserve funds may only be 
drawn down under the Cash and Management Information System when 
specifically needed to assist a homeowner. At time of program closeout, 
all funds approved for a replacement reserve may be drawn down to fund a 
reserve account. The account may not exceed six years estimated 
replacement cost needs for the properties transferred under the 
homeownership program.
    (d) Administration of the reserve account. The recipient must 
identify the entity that will administer the replacement reserve account 
at time of program closeout. The entity responsible for administering 
the account must be bonded and approved by HUD. The account must be 
interest bearing, if possible, and interest earned thereon must be used 
for the purposes for which the account is established. Unused funds at 
the end of the term of the account must be treated as program income in 
accordance withSec. 572.135(d).



Sec.  572.130  Restrictions on resale by initial homeowners.

    (a) Right to transfer. A homeowner may transfer the homeowner's 
ownership interest in the unit, subject only to the right to purchase 
under paragraph (b) of this section; the requirement for the purchaser 
to execute a promissory note, if required under paragraph (d) of this 
section; and the limitation on the amount of sales proceeds a family may 
retain upon sale within the first six years, as required under paragraph 
(c) of this section.
    (b) Right to purchase. (1) Where a cooperative has jurisdiction over 
the unit, it has the prior right to purchase the ownership interest in 
the unit from the initial homeowner for the amount and on the terms 
specified in a firm contract between the homeowner and a prospective 
buyer. The cooperative association has 10 days after receiving notice of 
the firm contract to decide whether to exercise its right and 60 
additional days to complete closing of the purchase.
    (2) If no cooperative has jurisdiction over the unit and if the 
prospective buyer is not a low-income family, the recipient or a PHA/IHA 
with jurisdiction for the area in which the unit is located, whichever 
is specified in the documents under which the initial family acquires an 
ownership interest in the unit, has the prior right to purchase the 
ownership interest in the unit for the amount and on the terms specified 
in a firm contract between the homeowner and a prospective buyer. The 
recipient or PHA/IHA has 10 days after receiving notice of the firm 
contract to decide whether to exercise its right and 60 additional days 
to complete closing of the purchase.
    (3) Where a recipient, cooperative, or PHA/IHA exercises a right to 
purchase, it must resell the unit to an eligible family promptly.
    (4) Unless otherwise provided in the property transfer documents, 
none of the provisions of paragraph (b) of this section apply in the 
case of liquidation of a security interest in the property. If FHA has 
insured a mortgage on the property, the provisions of paragraph (b) of 
this section shall not apply upon occurrence of an event requiring 
termination under 24 CFR 203.41(c)(2) or 234.66(c)(2).
    (c) Limitation on equity interest an initial homeowner may retain 
from sale during first six years. (1) The HOPE program is designed to 
assure that an initial or subsequent homeowner does not receive any 
undue profit from acquiring a unit under the program and that, to the 
extent the sales price is sufficient, an initial homeowner recovers the 
equity interest in the property. With respect to any sale by an initial 
homeowner during the first six years after acquisition, the family may 
retain only the amount computed under this paragraph. Any excess must be 
distributed as provided inSec. 572.135(b). The amount of equity an 
initial homeowner has in the property is determined by computing the sum 
of the following:
    (i) The contribution to equity paid by the family (such as any 
downpayment (in the form of cash or the value of sweat equity) and any 
amount paid towards principal on a mortgage loan during the period of 
ownership);
    (ii) The value of any improvements (not including normal or routine 
maintenance) installed at the expense of the family during the family's 
tenure as owner (including improvements made

[[Page 185]]

through sweat equity), as determined by the recipient or other entity 
specified in the approved application based on evidence of amounts spent 
on the improvements, including the cost of material and labor (or the 
value of the sweat equity); and
    (iii) The appreciated value, determined by applying the Consumer 
Price Index (Urban Consumers) or other HUD approved index against the 
contribution to equity under paragraphs (d)(i) and (ii) of this section.
    (2) The recipient (or other entity) may, at the time of initial 
sale, enter into an agreement with the family to set a maximum amount 
which this appreciation may not exceed.
    (3) Amounts that count towards a family's equity may not also count 
towards the match.
    (d) Promissory note. (1) If the purchase price of the unit 
(adjusted, if applicable as described in this paragraph) paid by the 
initial homebuyer is less than the fair market value of the property 
(based on an appraisal of the value of the unit after rehabilitation to 
applicable program standards conducted in accordance with the appraisal 
requirements inSec. 572.100(b)), the initial homeowner must, at 
closing, execute a nonamortizing, nonrecourse, noninterest-bearing 
promissory note, in a form acceptable to HUD, equal to the difference 
between such fair market value of the unit and the adjusted purchase 
price, together with a security instrument securing the obligation of 
the note and recorded in local land records or other applicable system 
of recordation appropriate to the type of security interest being 
recorded. The note must be payable to the recipient or other entity 
designated in the approved homeownership plan. In determining the amount 
of the promissory note and for that purpose only, the purchase price 
must be adjusted by deducting all substantial amounts of financial 
assistance with respect to the family's acquisition or rehabilitation of 
the unit that would result in an undue profit to the family if it were 
to sell the unit at the beginning of the 7th year of homeownership. (See 
paragraph (c) of this section for an additional restriction on return to 
the homeowner on reasales during the first six years.) For this purpose, 
``substantial financial assistance'' includes all forms of assistance or 
subsidy from HOPE 3 resources that reduce the cash return (sales 
proceeds) received by the recipient for the unit below its appraised 
after-rehabilitation fair market value by more than a total of $4,000, 
including (without limitation) discounted purchase prices, downpayment 
assistance, and rehabilitation or purchase money grants or loans that 
are not repayable on an amortizing basis. Financing to homeowners 
provided from HOPE 3 resources may not be assumed by subsequent 
homebuyers.
    (2) With respect to a sale by an initial homeowner, the note must 
require payment upon sale by the initial homeowner, to the extent 
proceeds of the sale remain after paying off other outstanding debt 
secured by the property that was incurred for the purpose of acquisition 
or property improvement, paying any other amounts due in connection with 
the sale (such as closing costs and transfer taxes), and paying the 
family the amount of its equity in the property, computed in accordance 
with paragraph (c) of this section.
    (3) With respect to a sale by an initial homeowner after the first 
six years after acquisition, through the 20th year, the amount payable 
under the note must be reduced by \1/168\ of the original principal 
amount of the note for each full month of ownership by the family after 
the end of the sixth year. The homeowner may retain all other proceeds 
of the sale.
    (4) Where a subsequent purchaser during the 20-year period, measured 
by the term of the initial promissory note, purchases the property for 
less than the then current fair market value (determined in accordance 
with the appraisal requirements inSec. 572.100(b)), the purchaser must 
also execute at closing a promissory note and mortgage (to be recorded 
as stated in paragraph (d)(1) of this section) payable to the recipient 
or its designee, for the amount of the discount (but no more than the 
amount payable at the time of the sale on the promissory note by the 
seller). The term of the promissory note must be the period remaining of 
the original 20-year period. The note must require payment upon sale by 
the subsequent homeowner, to the extent proceeds of

[[Page 186]]

the sale remain after covering costs of the sale, paying off other 
outstanding debt secured by the property that was incurred for the 
purpose of acquisition or property improvement, and paying any other 
amounts due in connection with the sale. The amount payable on the note 
must be reduced by a percentage of the original principal amount of the 
note for each full month of ownership by the subsequent homeowner. The 
percentage must be computed by determining the percentage of the term of 
the promissory note the homeowner has owned the property. The remainder 
may be retained by the subsequent homeowner selling the property.
    (e) Additional restrictions. Notwithstanding paragraph (a) of this 
section, an applicant may propose in its application, and HUD may 
approve, additional reasonable restrictions on the resale of units under 
the program. HUD does not encourage additional restrictions, but HUD 
approval will be based on a review of the individual circumstances. 
However, HUD will not approve restrictions that it determines will 
substantially limit the ability of homeowners to realize financial 
appreciation in the value of their homes.

[58 FR 36526, July 7, 1993, as amended at 61 FR 48798, Sept. 16, 1996]



Sec.  572.135  Use of proceeds from sales to eligible families, 
resale proceeds, and program income.

    (a) Proceeds from sales. The recipient or another entity approved by 
HUD must use the proceeds, if any, from the initial sale for costs of 
their HOPE 3 program, including additional homeownership opportunities 
eligible under the HOPE 3 program, improvements to properties under the 
HOPE 3 program, business opportunities for low-income families 
participating in the HOPE 3 program, supportive services related to the 
HOPE 3 program, and other activities approved by HUD, either as part of 
the approved application or later on request. Such proceeds include the 
full consideration received by the recipient or other entity for the 
property, including principal and interest on purchase money loans from 
HOPE 3 funds or match.
    (b) Resale proceeds. Fifty percent of any portion of the net sales 
proceeds that may not be retained by the homeowner underSec. 
572.130(c), (d), and (e) must be paid to the recipient, or another 
entity approved by HUD, for use for additional homeownership 
opportunities eligible under the HOPE 3 program, improvements to 
properties under the HOPE 3 program, business opportunities for 
homeowners under the HOPE 3 program, supportive services related to the 
HOPE 3 program, and other activities approved by HUD in the approved 
homeownership program or later on request. The remaining 50 percent must 
be collected by the recipient and returned to HUD within 15 days of the 
sale for use under the HOPE 3 program, subject to any limitations 
contained in appropriations Acts.
    (c) Requirements for use of sale and resale proceeds. Sale and 
resale proceeds must be committed for approved activities within one 
year of receipt. All sale and resale proceeds must be accounted for by 
the recipient, and 50 percent of all resale proceeds received by the 
recipient must be returned to HUD, as described in paragraph (b) of this 
section. Recipients may use up to 15 percent of their sale and resale 
proceeds for administrative expenses to expand their HOPE 3 program and 
provide additional homeownership opportunities. Recipients must retain 
records on the use of these funds to the same level of detail as 
required of grant funds under the HOPE 3 system or whatever records HUD 
otherwise prescribes. The recipient, and any other entity approved by 
HUD to administer the sale and resale proceeds, remain responsible to 
comply with the requirements of this part, or such other requirements as 
HUD may prescribe (consistent with then applicable law) in closeout 
procedures or agreements.
    (d) Program income. Any program income, as defined inSec. 572.5, 
received by the recipient may be added to the funds committed to the 
grant agreement by HUD and the recipient, in accordance with the 
requirements of parts 84 and 85 of this title, as applicable.

[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 62 
FR 34145, June 24, 1997]

[[Page 187]]



Sec.  572.140  Third party rights.

    The rights of third parties are governed by 42 U.S.C. 12895(d) and 
apply to the requirements of this part.

[61 FR 48798, Sept. 16, 1996]



Sec.  572.145  Displacement prohibited; protection of nonpurchasing
residents.

    (a) Displacement prohibited. (1) No person may be displaced from his 
or her dwelling as a direct result of a homeownership program under this 
part. This does not preclude terminations of tenancy for violation of 
the terms of occupancy of the unit. Each resident of an eligible 
property on the date the application for an implementation grant was 
submitted to HUD and each resident at the time the property is selected 
must be given an opportunity to become a homeowner under this program if 
the resident qualifies as an eligible family and meets other program 
requirements. If the resident does not qualify or does not elect to 
move, the property is not eligible. The protections provided to 
residents under this section do not apply to the former owner of the 
property if the property is acquired from him or her as a result of a 
tax or mortgage foreclosure.
    (2) In addition to any applicable sanctions under the grant 
agreement, a violation of paragraph (a)(1) of this section may trigger a 
requirement to provide relocation assistance in accordance with the 
Uniform Relocation Assistance and Real Property Acquisition Policies Act 
of 1970 and governmentwide implementing regulations at 49 CFR part 24.
    (b) Relocation assistance for residents who elect to move. The 
recipient must offer each nonpurchasing resident who elects to move 
relocation assistance in accordance with the approved homeownership 
program. The program must provide, at least, the following assistance:
    (1) Advisory services, including timely information, counseling 
(including the provision of information on a resident's rights under the 
Fair Housing Act), and referrals to suitable, affordable, decent, safe, 
and sanitary alternative housing;
    (2) Payment for actual, reasonable moving expenses; and
    (3) Financial assistance sufficient to permit relocation to 
suitable, affordable, decent, safe, and sanitary housing. This 
requirement is met if the family is provided the opportunity to relocate 
to suitable, decent, safe, and sanitary housing for which the monthly 
rent and estimated average utility costs do not exceed the greater of 30 
percent of the person's income or the person's monthly rent before 
relocation and the estimated average monthly utility costs. The 
homeownership program must specify the period for which replacement 
housing assistance will be provided to persons who do not receive 
assistance through a Section 8 rental certificate or voucher or other 
housing program subsidy.
    (c) Temporary relocation. The recipient must provide each resident 
of an eligible property, who is required to relocate temporarily to 
permit work to be carried out, with suitable, decent, safe, and sanitary 
housing for the temporary period and must reimburse the resident for all 
reasonable out-of-pocket expenses incurred in connection with the 
temporary relocation, including the costs of moving to and from the 
temporarily occupied housing and any increase in monthly costs of rent 
and utilities.
    (d) Notice of relocation assistance. As soon as feasible, each 
recipient must give each resident of an eligible property a written 
description of the applicable provisions of this section.



                            Subpart C_Grants



Sec.  572.200  Planning grants.

    Any planning grants made by HUD under the HOPE 3 program will 
continue to be governed by the provisions in this section in effect 
immediately before October 16, 1996. When or before HUD announces the 
availability of funds for planning grants under this part, these 
provisions will be recodified.

[61 FR 48798, Sept. 16, 1996]

[[Page 188]]



Sec.  572.205  Planning grants--eligible activities.

    Any planning grants made by HUD under the HOPE 3 program will 
continue to be governed by the provisions in this section in effect 
immediately before October 16, 1996. When or before HUD announces the 
availability of funds for planning grants under this part, these 
provisions will be recodified.

[61 FR 48798, Sept. 16, 1996]



Sec.  572.210  Implementation grants.

    (a) General authority. Any implementation grants for the purpose of 
carrying out homeownership programs approved under this part will be 
awarded using a selection process and selection criteria to be published 
in a NOFA.
    (b) Deadline for completion. A recipient must spend all 
implementation grant amounts within 4 years from the effective date of 
the grant agreement. The appropriate HUD field office may approve a 
request to extend the deadline when it determines that an extension is 
warranted. A previously approved grant amount may not be amended to 
increase the grant amount.
    (c) Program closeout. Recipients will comply with closeout 
procedures as issued by HUD.

[62 FR 34145, June 24, 1997]



Sec.  572.215  Implementation grants--eligible activities.

    Implementation grants may be used for the reasonable costs of 
eligible activities necessary to carry out a homeownership program under 
this part. Only costs incurred on or after the effective date of an 
implementation grant agreement qualify for funding under this part. 
Eligible activities include:
    (a) Acquisition of eligible properties by the recipient. Acquisition 
of eligible properties for the purpose of transferring ownership 
interests to eligible families in a homeownership program under this 
part, in accordance withSec. 572.100. (Where the applicant owns the 
eligible property or where HUD otherwise determines that an ``arms 
length'' relationship for acquisition does not exist, program funds may 
not be used for acquisition of the property for the program. However, if 
the property is owned by an eligible source, it may be donated as match 
in accordance withSec. 572.220(b)(4).)
    (b) Recipient closing costs. Customary and reasonable closing costs 
of the buyer associated with the purchase of eligible properties under 
the program.
    (c) Financial assistance to homebuyers. Provision of assistance to 
families to make acquisition and rehabilitation of eligible properties 
affordable, in accordance withSec. 572.105(b).
    (d) Rehabilitation. Rehabilitation of the eligible property covered 
by the homeownership program, in accordance with standards and cost 
limitations established by HUD inSec. 572.100.
    (e) Architectural and engineering work. Architectural and 
engineering work, and related professional services required to prepare 
architectural plans or drawings, write-ups, specifications or 
inspections, including lead-based paint evaluation.
    (f) Relocation. Relocation of residents in eligible properties who 
elect to move, in accordance withSec. 572.145(b).
    (g) Temporary relocation of homebuyers. Temporary relocation of 
residents during rehabilitation, in accordance withSec. 572.145(c).
    (h) Legal fees. Customary and reasonable costs of professional legal 
services.
    (i) Replacement reserves. A single replacement reserve for the 
properties under the program if necessary, in accordance withSec. 
572.125.
    (j) Homebuyer outreach and selection. Reasonable and necessary costs 
of marketing the program to potential homebuyers and of identifying and 
selecting homebuyers under the program. These costs may include costs 
related to implementing the affirmative fair housing marketing strategy 
required underSec. 572.110.
    (k) Counseling and training. Counseling and training of only those 
homebuyers (and their alternates) and homeowners selected under the 
homeownership program. This may include such subjects as personal 
financial management, home maintenance, home repair, construction skills 
(especially where the eligible family will do some of the 
rehabilitation), property management for owners of multi-unit

[[Page 189]]

properties, and the general rights and responsibilities of 
homeownership.
    (l) Property management and holding costs. Reasonable and necessary 
costs related to properly maintaining and securing eligible properties 
after acquisition or donation and before sale to an eligible homebuyer. 
These costs may include property insurance expenses, security costs, 
property taxes, utility charges, and other costs related to sound 
property management of recipient-owned properties before sale under the 
program. These costs may not be charged relative to eligible properties 
donated to the program by the recipient or another entity that HUD 
determines does not have an ``arm's length'' relationship with the 
recipient.
    (m) Recipient training needs. Defraying costs for ongoing training 
needs of the recipient for courses of instruction that are directly 
related to developing and carrying out the homeownership program.
    (n) Economic development. Economic development activities that 
promote economic self-sufficiency of homebuyers and homeowners under the 
homeownership program. The economic development activities must be 
directly related to the homeownership program, and may only benefit 
families and individuals who are homeowners or who have been selected as 
homebuyers under the program. These costs are limited to job training or 
retraining and day care costs of those participating in job training and 
retraining activities approved under the HOPE 3 program. The recipient 
must enter into written agreements with the providers of economic 
development services specifying the services to be provided, including 
estimates of the numbers of homebuyers and homeowners to be assisted. 
The aggregate amount of planning and implementation grants that may be 
used for economic development activities related to any one program may 
not exceed $250,000.
    (o) Administrative costs. Reasonable and necessary costs, as 
described and valued in accordance with the OMB Circular Nos. A-87 or A-
122, as applicable, incurred by a recipient in carrying out the HOPE 3 
program. The total amount that may be spent on administrative activities 
from the implementation grant and any contribution toward the match may 
not exceed 15 percent of the amount of the grant. For purposes of 
complying with the 15 percent limitation, administrative costs do not 
include the cost of activities that are separately eligible under this 
section.
    (p) Other activities. Other activities proposed by the applicant, to 
the extent the applicant justifies them as necessary for the proposed 
homeownership program and HUD approves them.

[58 FR 36526, July 7, 1993, as amended at 64 FR 50226, Sept. 15, 1999]



Sec.  572.220  Implementation grants--matching requirements.

    (a) General requirements. (1) Except as provided in paragraph (a)(3) 
of this section, each recipient must assure that matching contributions 
equal to not less than 33 percent (or 25 percent for grants awarded 
after April 11, 1994) of the amount of the implementation grant shall be 
provided from non-Federal sources to carry out the homeownership 
program. Amounts contributed to the match must be used for eligible 
activities or in accordance with the requirements of this section.
    (2) All contributions toward eligible activities to be counted 
toward the match must be provided no later than the deadline for 
completion of program activities established in accordance withSec. 
572.210(f), except as permitted under paragraphs (b)(1)(iv) and (b)(3) 
of this section.
    (3) When the recipient is an IHA, and the IHA (acting in that 
capacity) has not received, and will not receive, amounts under title I 
of the Housing and Community Development Act of 1974 for the fiscal year 
in which HUD obligates HOPE grant funds, the match requirements under 
this section will not apply.
    (b) Form. Contributions may only be in the form of:
    (1) Cash contributions. (i) Cash contributions from non-Federal 
resources contributed permanently for uses under the HOPE 3 program by 
the applicant, non-Federal public entities, private entities, or 
individuals, except that a cash contribution in the form of a down 
payment made by an eligible family may not count as a matching

[[Page 190]]

contribution. Funds will be considered permanently contributed if all 
principal, interest, and any other return on the contribution are used 
for eligible activities in accordance with program requirements.
    (ii) Non-Federal resources may include:
    (A) Contribution of trust funds held by Federal agencies for Indian 
tribes;
    (B) PHA section 8 operating reserve funds, where approved by HUD;
    (C) Income from a Federal grant earned after the end of the award 
period, if no Federal programmatic requirements govern the disposition 
of the program income.
    (D) Amounts, determined in accordance with paragraph (b)(1)(iv)(B) 
of this section, that have been requested by the applicant in an 
application submitted to the Federal Housing Finance Board for 
assistance under its affordable housing program, so long as the 
application is approved within 30 days of HUD's conditional approval of 
the HOPE 3 application.
    (iii) Non-Federal resources may not include:
    (A) Funds from a Community Development Block Grant under section 
106(b) or section 106(d), respectively, of the Housing and Community 
Development Act of 1974, except to the extent permitted for 
administrative expenses under paragraph (b)(2) of this section;
    (B) Federal tax expenditures, including low-income housing tax 
credits.
    (iv) The grant equivalent of a below-market interest rate loan to 
the homebuyer from non-Federal resources, where all repayments, 
interest, and other return will not be permanently contributed to the 
HOPE 3 program, may be counted as a cash contribution. The grant 
equivalent of a below market interest rate loan must be calculated in 
accordance with paragraphs (b)(1)(iv) (A) and (B) of this section--
    (A) If the loan is made from proceeds of obligations issued by or on 
behalf of a public body that are exempt from taxation by the United 
States, the contribution is the present discounted cash value of the 
difference between payments to be made on the borrowed funds and 
payments to be received on the loan to the homebuyer, based on a 
discount rate equal to the interest rate on the borrowed funds;
    (B) If the loan is made from funds other than under paragraph 
(b)(1)(iv)(A) of this section, the contribution is the present 
discounted cash value of the yield forgone, calculated based on a 
discount rate approved or prescribed by HUD. In determining the yield 
forgone, the recipient must use as a measure of a market yield one of 
the following, as appropriate:
    (1) With respect to housing financed with a fixed interest rate 
mortgage, a rate equal to the 10-year Treasury note rate plus 200 basis 
points; or
    (2) With respect to housing financed with an adjustable interest 
rate mortgage, a rate equal to the one-year Treasury bill rate plus 250 
basis points.
    (v) Cash contributions may also be made from sales proceeds from the 
Turnkey III Homeownership and Mutual Help programs, as approved by HUD, 
or an approved homeownership program under section 5(h) of the 1937 Act.
    (2) Administrative costs. (i) Contributions of eligible 
administrative services up to a value equal to 7 percent of the amount 
of the implementation grant. This limitation is in addition to the 15 
percent limitation on administrative costs (seeSec. 572.215(o)).
    (ii) If an applicant proposes to contribute administrative services, 
HUD will automatically approve an applicant's assurances for matching 
purposes that it will pay eligible administrative costs from non-Federal 
sources in an amount up to 7 percent of the implementation grant, and 
will not require further documentation of those expenditures for 
purposes of the HOPE 3 program. If a recipient uses more than 8 percent 
of its implementation grant to pay administrative costs, the amount 
credited toward the match will be reduced to less than 7 percent to stay 
within the 15 percent limitation.
    (iii) Non-Federal resources, for the purposes of counting 
contributions for administrative costs, may include funds from a 
Community Development Block Grant under section 106(b) or section 106(d) 
of the Housing and Community Development Act of 1974 and are subject to 
the recordkeeping and

[[Page 191]]

documentation requirements of that program.
    (3) Taxes, fees, and other charges. (i) The present value of taxes, 
fees, or other charges that are normally and customarily imposed but are 
waived, forgone, or deferred in a manner that facilitates the 
implementation of a homeownership program assisted under this part. Only 
amounts that would have been imposed after the date a property is 
acquired by a recipient or other entity for transfer to eligible 
families, the effective date of the implementation grant agreement if 
the recipient already owns the property, or the date after an eligible 
property is acquired directly from an eligible source by an eligible 
family, as applicable, may be counted towards the match.
    (ii) Amounts that would be waived, forgone, or deferred for longer 
than 20 years from the date a family acquires homeownership interests in 
the unit may not be counted towards the match.
    (iii) The present value of taxes, fees, or other charges waived, 
forgone, or deferred must be computed by discounting the estimated 
amount that would be otherwise payable over the time period (up to 20 
years) based on a discount rate approved or prescribed by HUD.
    (iv) Where the match includes amounts under paragraph (b)(3) of this 
section, the documents transferring the homeownership interest to the 
family must evidence the contribution, to the extent the contribution 
has not already been received.
    (4) Real property. Real property contributed for use under an 
approved homeownership program. To the extent properties were acquired 
with Federal resources or are donated directly to the program from 
Federal sources, their value is not an eligible match contribution.
    (i) The as-is fair market value of eligible property may be counted 
as a contribution toward the match, determined in accordance with a 
recent appraisal conducted under procedures established or approved by 
HUD. The maximum value contributed will be limited as provided inSec. 
572.100.
    (ii) When eligible real property is sold to the recipient or its 
designee from non-Federal sources at a price below fair market value, 
the differential between the fair market value and the discounted sales 
price may be counted toward the match.
    (iii) Vacant land from any non-Federal source located on existing 
streets with available utilities (which need not include laterals) may 
be contributed for use under the program, but only if a structure 
acquired or donated from an eligible HOPE 3 source will be moved onto 
it. The total amount of the contribution and any amount paid from HOPE 3 
funds for acquisition of the structure, moving, and rehabilitation costs 
must be within the limits provided inSec. 572.100.
    (5) Infrastructure. The fair market value of investment (as approved 
by HUD), not made with Federal resources, in on-site and off-site 
infrastructure that directly contributes to a homeownership program. The 
infrastructure investment may be counted toward the match only if it was 
completed no earlier than 12 months before the deadline date set by HUD 
in the NOFA for receipt of implementation grant applications. Investment 
in infrastructure may include such activities as new or repaired utility 
laterals connecting eligible property to the main line and new or 
rebuilt walkways, sidewalks, or curbs on or contiguous to the eligible 
property. If the investment in infrastructure also benefits other 
properties, only the share of the costs directly benefiting the eligible 
property under the homeownership program may be counted toward the 
match.
    (6) Donated labor. All donated labor, including sweat equity 
provided by a homebuyer or homeowner, to be valued at $10 an hour or at 
a rate promulgated by HUD in the NOFA, except for donated professional 
labor, as approved by HUD, including professional labor by homebuyers 
and homeowners. The donated professional labor will be valued at the 
fair market value of the work completed. Professional labor is work 
ordinarily performed by the donor for payment, such as work by 
attorneys, electricians, carpenters, and architects that is equivalent 
to work

[[Page 192]]

they do in their occupations. Sweat equity may be counted towards the 
match only if it is not also counted toward a family's equity.
    (7) Donated materials and supplies. Donated materials and supplies 
may be counted toward the match contribution at their fair market value. 
The recipient must maintain a written enumeration of what donated 
materials and supplies are being used in the program, as well as 
documentation of their cost or value.
    (8) Other in-kind contributions. The reasonable value of in-kind 
contributions proposed by the applicant in the application and approved 
by HUD. In reviewing proposed in-kind contributions, HUD will review to 
ensure:
    (i) The proposed contribution is to be used for an eligible activity 
under the proposed homeownership program;
    (ii) The application demonstrates that the proposed in-kind 
contribution will actually be provided; and
    (iii) The proposed value of the contribution is reasonable. In 
determining whether the value is reasonable, HUD will generally consider 
the amount such contribution would otherwise cost the program.

[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61 
FR 48798, Sept. 16, 1996]



Sec.  572.225  Grant agreements; corrective and remedial actions.

    (a) Terms and conditions. After HUD approves an application for a 
planning grant or an implementation grant under this part, it will enter 
into a grant agreement with the recipient setting forth the amount of 
the grant and applicable terms and conditions. The grant agreement will 
be effective for purposes of this part and funds may be disbursed under 
the Cash and Management Information (C/MI) System, described inSec. 
572.230, after the grant agreement has been executed by the authorized 
official of the recipient and HUD. Among other things, the grant 
agreement will provide that the recipient agrees:
    (1) To carry out the program in accordance with the provisions of 
this part, applicable law, the approved application, and all other 
applicable requirements; and
    (2) To comply with such other terms and conditions, including 
recordkeeping and reports, as HUD may establish for the purposes of 
administering, monitoring, and evaluating the program in an effective 
and efficient manner.
    (b) Corrective and remedial actions. (1) HUD may withhold, withdraw, 
or recapture any portion of a grant, terminate the grant agreement, or 
take other appropriate action authorized under the grant agreement, if 
HUD determines that the recipient is failing to carry out the approved 
homeownership program in accordance with the terms of the approved 
application and this part, including failure to provide the 
contributions toward the match. Corrective or remedial actions that HUD 
may instruct the recipient to undertake include;
    (i) Preparing and following a schedule of actions or a management 
plan for properly completing the approved activities;
    (ii) Cancelling or revising the affected activities before expending 
grant funds for them, revising the grant budget as necessary, and 
substituting other eligible activities;
    (iii) Discontinuing draws under the C/MI System, and not incurring 
further costs for the affected activities;
    (iv) Reimbursing its HOPE 3 program account in the amount not used 
in accordance with this part and the grant agreement; and
    (v) In the case of implementation grants, making additional matching 
contributions in substitution for contributions not in compliance with 
this part and the grant agreement or submitting to HUD acceptable 
evidence that matching contributions sufficient to meet the total match 
required under this part and the grant agreement will be made, before 
additional draws are made.
    (2) If HUD determines that the recipient is not complying with the 
corrective or remedial actions agreed upon with the recipient, or as 
otherwise authorized in the grant agreement, HUD may implement the 
following additional corrective and remedial actions:
    (i) Changing the method of payment under the C/MI System to a 
reimbursement basis;

[[Page 193]]

    (ii) Suspending the recipient's authority to make draws under the C/
MI System for affected activities;
    (iii) Reducing (deobligating) the grant in the amount affected by 
the performance deficiency, including, in the case of implementation 
grants, failure to furnish matching contributions in the required 
amount;
    (iv) Terminating the grant for all further activities and initiating 
close-out procedures;
    (v) Taking action against the recipient under 2 CFR part 2424 with 
respect to future HOPE 3, HUD, or federal grant awards; and
    (vi) Taking any other remedial action legally available.
    (3) If the amount of grant funds that has been disbursed under the 
C/MI System exceeds the amount finally determined by HUD to be 
authorized (including any authorized deobligation), the recipient must 
repay such excess amount to HUD, and will have no right to reclaim or 
reuse such excess amount.
    (c) Failure to complete and transfer a property to a homebuyer. If a 
property assisted under this part or credited as match is not completed 
and transferred to homebuyers as required under this part, whether 
voluntarily by the recipient or otherwise, grant expenditures on the 
property are considered ineligible, and HOPE 3 funds for acquisition and 
rehabilitation must be repaid to the program account. Preliminary costs 
(such as architectural and engineering, inspection, and appraisal fees) 
expended before acquisition are considered general program expenses and 
need not be repaid.
    (d) Failure to provide homeownership opportunities under an 
implementation grant. Failure to provide at least 70 percent of the 
number of homeownership opportunities proposed in the application for an 
implementation grant within the timeframe specified inSec. 572.210(f) 
may result in remedial actions, as described in paragraph (b) of this 
section, being taken by HUD, including requiring repayment of all or 
part of the grant.

[58 FR 36526, July 7, 1993, as amended at 72 FR 73496, Dec. 27, 2007]



Sec.  572.230  Cash and Management Information (C/MI) System.

    Disbursement of HOPE 3 grant funds is managed through HUD's Cash and 
Management Information (C/MI) System for the HOPE 3 program. Funds that 
may be disbursed through the C/MI System include funds awarded to the 
recipient and obligated through the grant approval letter issued by HUD. 
HOPE 3 funds are drawn down by the recipient or its authorized designee 
from a United States Treasury account for the program, using the 
Treasury Automated Clearinghouse (ACH) System. Any drawdown of HOPE 3 
funds from the United States Treasury account is conditioned upon the 
submission of satisfactory information about the program and compliance 
with other procedures specified by HUD in HUD's forms and issuances 
concerning the C/MI System.

[62 FR 34145, June 24, 1997]



Sec.  572.235  Amendments.

    Amendments to the approved program must be documented or approved by 
HUD in accordance with instructions provided by HUD.



                       Subpart D_Selection Process



Sec.  572.300  Notices of funding availability (NOFAs); 
grant applications.

    When funds are made available for planning grants or implementation 
grants under this part, HUD will publish a NOFA in the Federal Register, 
in accordance with the requirements of part 4 of this title, and will 
select applications for funding on a competitive basis as provided in 
the applicable NOFA.

[62 FR 34145, June 24, 1997]



Sec.  572.315  Rating criteria for planning grants.

    Any planning grants made by HUD under the HOPE 3 program will 
continue to be governed by the provisions in this section in effect 
immediately before October 16, 1996. When or before HUD announces the 
availability of funds for planning grants under this

[[Page 194]]

part, these provisions will be recodified.

[61 FR 48798, Sept. 16, 1996]



                  Subpart E_Other Federal Requirements



Sec.  572.400  Consolidated plan.

    Applicants must provide a certification of consistency with the 
approved consolidated plan, in accordance with 24 CFR 91.510.

[60 FR 36018, July 12, 1995]



Sec.  572.405  Nondiscrimination and equal opportunity requirements.

    In addition to the nondiscrimination and equal opportunity 
requirements set forth in 24 CFR part 5, the following requirements 
apply to homeownership programs under this part:
    (a) Modification of fair housing and nondiscrimination requirements 
for Indian tribes and IHAs. (1) The Indian Civil Rights Act (25 U.S.C. 
1301 et seq.) applies to tribes when they exercise their powers of self-
government. Thus, it is applicable in all cases when an IHA has been 
established by exercise of such powers. In the case of the IHA 
established pursuant to State law, the applicability of the Indian Civil 
Rights Act shall be determined on a case-by-case basis. Development 
subject to the Indian Civil Rights Act must be developed and operated in 
compliance with its provisions and all implementing HUD requirements, 
instead of title VI and the Fair Housing Act and their implementing 
regulations.
    (2) In the case of Indian tribes and IHAs, compliance with the 
requirements of this section shall be to the maximum extent consistent, 
but not in derogation of, the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)).
    (b) Affirmative fair housing marketing. The recipient must adopt a 
strategy for informing and soliciting applications from people who are 
least likely to apply, because of race, color, religion, sex, 
disability, familial status, or national origin, for the program without 
special outreach, consistent with the affirmative fair housing marketing 
requirements. (See 24 CFR 92.351 for an example of an affirmative 
strategy.) Paragraph (b) of this section does not apply to Indian tribes 
and IHAs, as described in paragraph (a)(1) of this section.
    (c) Authority for collection of racial, ethnic, and gender data. HUD 
requires submission of racial, ethnic, and gender data under this part 
under the authority of section 562 of the Housing and Community 
Development Act of 1987 and section 808(e)(6) of the Fair Housing Act.
    (d) Faith-based activities. (1) Organizations that are religious or 
faith-based are eligible, on the same basis as any other organization, 
to participate in the HOPE 3 program. Neither the Federal government nor 
a State or local government receiving funds under HOPE 3 programs shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation.
    (2) Organizations that are directly funded under the HOPE 3 program 
may not engage in inherently religious activities, such as worship, 
religious instruction, or proselytization, as part of the programs or 
services funded under this part. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (3) A religious organization that participates in the HOPE 3 program 
will retain its independence from Federal, State, and local governments, 
and may continue to carry out its mission, including the definition, 
practice, and expression of its religious beliefs, provided that it does 
not use direct HOPE 3 funds to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, faith-based organizations may use space in their 
facilities to provide HOPE 3-funded services, without removing religious 
art, icons, scriptures, or other religious symbols. In addition, a HOPE 
3-funded religious organization retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's

[[Page 195]]

mission statements and other governing documents.
    (4) An organization that participates in the HOPE 3 program shall 
not, in providing program assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of religion 
or religious belief.
    (5) HOPE 3 funds may not be used for the acquisition, construction, 
or rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. HOPE 3 funds may be used for 
the acquisition, construction, or rehabilitation of structures only to 
the extent that those structures are used for conducting eligible 
activities under this part. Where a structure is used for both eligible 
and inherently religious activities, HOPE 3 funds may not exceed the 
cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities in 
accordance with the cost accounting requirements applicable to HOPE 3 
funds in this part. Sanctuaries, chapels, or other rooms that a HOPE 3-
funded religious congregation uses as its principal place of worship, 
however, are ineligible for HOPE 3-funded improvements. Disposition of 
real property after the term of the grant, or any change in use of the 
property during the term of the grant, is subject to government-wide 
regulations governing real property disposition (see 24 CFR parts 84 and 
85).
    (6) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this section applies to all 
of the commingled funds.

[58 FR 36526, July 7, 1993, as amended at 59 FR 33894, June 30, 1994; 61 
FR 5209, Feb. 9, 1996; 68 FR 56405, Sept. 30, 2003]



Sec.  572.410  Environmental procedures and standards.

    (a) Planning grants. HUD has determined that its approval of 
applications for planning grants under this part is categorically 
excluded from environmental review and compliance requirements of the 
National Environmental Policy Act of 1969 (NEPA) and that other Federal 
environmental laws and authorities listed in 24 CFR 50.4 are not 
applicable.
    (b) Implementation grants. (1) Recipients of implementation grants 
must comply with the applicable environmental laws and authorities at 24 
CFR 50.4 and must:
    (i) Supply HUD with information necessary for it to perform any 
necessary environmental review of the property (or neighborhood);
    (ii) Carry out mitigating measures required by HUD or select 
alternate eligible property; and
    (iii) Not acquire or otherwise carry out program activities with 
respect to any eligible property until HUD approval for the property (or 
neighborhood) is received.
    (2) Before any amounts under this part are used to acquire or 
rehabilitate an eligible property, HUD must determine whether the 
proposed activities trigger applicability thresholds for the applicable 
Federal environmental laws and authorities. These may apply when the 
property is:
    (i) Located within designated coastal barriers;
    (ii) Listed on, or eligible for listing on, the National Register of 
Historic Places; or is located within, or adjacent to, an historic 
district;
    (iii) Located near hazardous operations handling fuels or chemicals 
of an explosive or flammable nature;
    (iv) Contaminated by toxic chemicals or radioactive materials;
    (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) Located within a special flood hazard area or within a location 
requiring flood insurance protection.
    (3) A recipient may choose to make the threshold reviews itself or 
with assistance from State or local governments or qualified persons or 
to refer the property to HUD for threshold review. Where the recipient 
makes the threshold review itself, it must submit the result to HUD.
    (4) If a recipient chooses not to make the threshold reviews, it 
must submit information to HUD to permit HUD to make the review.

[[Page 196]]

    (5) If HUD determines on the basis of the recipient's threshold 
review or HUD's threshold review that one or more of the thresholds are 
exceeded, HUD will conduct an environmental review of that issue and, if 
appropriate, establish mitigating measures that the recipient must carry 
out for the property unless it decides to select an alternate property.



Sec.  572.415  Conflict of interest.

    (a) Conflict of interest. In addition to the conflict of interest 
requirements in OMB Circular A-110 \1\ and 24 CFR part 85, no person who 
is an employee, agent, consultant, officer, or elected or appointed 
official of the recipient or cooperating entity named in the application 
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, 
except that a resident of an eligible property may acquire an ownership 
interest.
---------------------------------------------------------------------------

    \1\ SeeSec. 572.425(b) concerning availability of OMB Circulars.
---------------------------------------------------------------------------

    (b) Exception. HUD may grant an exception to the exclusion in 
paragraph (a) of this section on a case-by-case basis when it determines 
that such an exception will serve to further the purposes of the HOPE 3 
program and the effective and efficient administration of the local 
homeownership program. An exception may be considered only after the 
applicant or recipient has provided a disclosure of the nature of the 
conflict, accompanied by an assurance that there has been public 
disclosure of the conflict, a description of how the public disclosure 
was made, and an opinion of the applicant's or recipient's attorney that 
the interest for which the exception is sought would not violate State 
or local law. In determining whether to grant a requested exception, 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 local homeownership program 
that would otherwise not be available;
    (2) Whether an opportunity was provided for open competitive bidding 
or negotiation;
    (3) Whether the person affected is a member of a group or class 
intended to be the beneficiaries of the 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;
    (4) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or the decisionmaking process, with 
respect to the specific activity in question;
    (5) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (b) of this section;
    (6) Whether undue hardship will result either to the applicant, 
recipient, or the person affected when weighed against the public 
interest served by avoiding the prohibited conflict; and
    (7) Any other relevant considerations.



Sec.  572.420  Miscellaneous requirements.

    (a) Application of OMB Circulars. (1) The policies, guidelines, and 
requirements of OMB Circular Nos. A-87 (Cost Principles Applicable to 
Grants, Contracts and Other Agreements with State and Local Governments) 
and 24 CFR part 85 (Administrative Requirements for Grants and 
Cooperative Agreements to State, Local and Federally Recognized Indian 
Tribal Governments) apply to the award, acceptance, and use of 
assistance under this part by applicable entities, and to the remedies 
for non-compliance, except where inconsistent with the provisions of 
NAHA, other Federal statutes, or this part. Part 84 of this title 
(Grants and Agreements with Institutions of Higher Education, Hospitals, 
and Other Nonprofit Organizations) and OMB Circular Nos. A-122 (Cost 
Principles Applicable to Grants, Contract and Other Agreements with 
Nonprofit Institutions)

[[Page 197]]

and, as applicable, A-21 (Cost Principles for Educational Institutions) 
apply to the acceptance and use of assistance under this part by covered 
organizations, except where inconsistent with the provisions of Federal 
statutes or this part. Recipients are also subject to the audit 
requirements of OMB Circular A-128 (Audits of State and Local 
Governments) implemented at 24 CFR part 44, and OMB Circular A-133 
(Audits of Institutions of Higher Learning and Other Nonprofit 
Institutions), implemented at 24 CFR part 45, as applicable.
    (2) Copies of OMB Circulars may be obtained from E.O.P. 
Publications, room 2200, New Executive Office Building, Washington, DC 
20503, telephone (202) 395-7332 (this is not a toll-free number). There 
is a limit of two free copies.
    (b) Requirements in 24 CFR part 5. The Disclosure requirements; 
provisions on Debarred, suspended or ineligible contractors; and Drug-
Free Workplace requirements, as identified inSec. 5.105 (b), (c), and 
(d) of this title, apply to this program.
    (c)-(d) [Reserved]
    (e) Labor standards. If other Federal programs are used in 
connection with the HOPE 3 homeownership program, labor standards 
requirements apply to the extent required by such other Federal 
programs.
    (f) Flood insurance. Pursuant to the Flood Disaster Protection Act 
of 1973 (42 U.S.C. 4001-4128), the recipient may not provide financial 
assistance for acquisition or rehabilitation of properties located in an 
area identified by the Federal Emergency Management Agency (FEMA) as 
having special flood hazards, unless:
    (1) The community in which the area is situated is participating in 
the National Flood Insurance program (see 44 CFR parts 59 through 79), 
or less than one year has passed since FEMA notification regarding such 
hazards; and
    (2) Flood insurance is obtained as a condition of the acquisition or 
rehabilitation of the property.
    (g) Coastal Barrier Resources Act. Pursuant to the Coastal Barrier 
Resources Act (16 U.S.C. 3601), HUD will not approve use of properties 
in the Coastal Barrier Resources System.
    (h) Lead-based paint activities. 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 apply to 
activities under these programs.

[58 FR 36526, July 7, 1993, as amended at 59 FR 2738, Jan. 19, 1994; 61 
FR 48798, Sept. 16, 1996; 62 FR 34145, June 24, 1997; 64 FR 50226, Sept. 
15, 1999]



Sec.  572.425  Recordkeeping and reports; audit of recipients.

    (a) General records. Each recipient must keep records that will 
facilitate an effective audit to determine compliance with program 
requirements and that fully disclose:
    (1) The amount and disposition by the recipient of the planning and 
implementation grants received under this part, including sufficient 
records that document the reasonableness and necessity of each 
expenditure;
    (2) The amount and disposition of proceeds from financing obtained 
in connection with the program, sales to eligible families, and any 
funds recaptured upon sale by the homeowner;
    (3) The total cost of the homeownership program;
    (4) The amount and nature of any other assistance, including cash, 
property, services, or other items contributed as a condition of 
receiving an implementation grant;
    (5) The cost or other value of all in-kind contributions towards the 
match required bySec. 572.220; and
    (6) Any other proceeds received for, or otherwise used in connection 
with, the homeownership program under this part.
    (b) Family size and income; racial, ethnic, and gender data. The 
recipient must maintain records on the family size and income, and 
racial, ethnic, and gender characteristics of families who apply for 
homeownership and families who become homeowners.
    (c) Selection procedures. The recipient must maintain a copy of its 
procedures for identifying and selecting eligible families in accordance 
withSec. 572.110,

[[Page 198]]

and records documenting the eligibility of each family selected for 
homeownership.
    (d) Rehabilitation standards. The recipient must maintain written 
rehabilitation standards required bySec. 572.100(d)(5).
    (e) Cooperative and condominium agreements. The recipient must 
maintain a copy of any condominium and cooperative association 
agreements for properties under a homeownership program approved under 
this part.
    (f) Amounts available for reuse. The recipient must keep and make 
available to HUD all records necessary to calculate accurately payments 
due to HUD underSec. 572.135(b) and (c).
    (g) Access by HUD and the Comptroller General. For purposes of 
audit, examination, monitoring, and evaluation, each recipient must give 
HUD (including any duly authorized representatives and the Inspector 
General) and the Comptroller General of the United States (and any duly 
authorized representatives) access to any books, documents, papers, and 
records of the recipient that are pertinent to assistance received under 
this part, including all records required to be kept under this section.
    (h) Reports. The recipient must submit reports required by HUD.

(Approved by the Office of Management and Budget, with respect to 
implementation grants, under control number 2506-0128)



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.

[[Page 199]]

    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 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 withSec. 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 withSec. 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

[[Page 200]]

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 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 atSec. 573.2.
    (b) A statement that the Borrower is eligible as defined atSec. 
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 bySec. 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 inSec. 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

[[Page 201]]

    (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.
    (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 underSec. 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

[[Page 202]]

(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., 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) 24 CFR part 84. The provisions of 24 CFR part 84 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]



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.

[[Page 203]]



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.



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.

   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.

                     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.
574.605 Applicability of OMB circulars.
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.

    Authority: 42 U.S.C. 3535(d) and 12901-12912.

    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 underSec. 574.100 or a State, unit of general local 
government, or a nonprofit organization applying for a competitive grant 
as described underSec. 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).

[[Page 204]]

    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 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 inSec. 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 inSec. 
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 24 CFR 85.36.
    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,

[[Page 205]]

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 
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]



                     Subpart B_Formula Entitlements



Sec.  574.100  Eligible applicants.

    (a) Eligible States and qualifying cities, as defined inSec. 
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 (seeSec. 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

[[Page 206]]

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 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 inSec. 
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 inSec. 574.100; may apply 
for grants for other projects as described inSec. 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,

[[Page 207]]

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 
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 
Sec.Sec. 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 bySec. 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 counseling for eligible persons who may encounter 
discrimination on the basis of race, color, religion, sex, age, national 
origin, familial status, or handicap;
    (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 program may use not more than 7 percent of the amounts received for 
administrative costs.

[[Page 208]]

    (11) For competitive grants only, any other activity proposed by the 
applicant and approved by HUD.
    (c) Faith-based activities. (1) Organizations that are religious or 
faith-based are eligible, on the same basis as any other organization, 
to participate in the HOPWA program. Neither the Federal government nor 
a State or local government receiving funds under HOPWA programs shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation.
    (2) Organizations that are directly funded under the HOPWA program 
may not engage in inherently religious activities, such as worship, 
religious instruction, or proselytization, as part of the programs or 
services funded under this part. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (3) An organization that participates in the HOPWA program will 
retain its independence from Federal, State, and local governments, and 
may continue to carry out its mission, including the definition, 
practice, and expression of its religious beliefs, provided that it does 
not use direct HOPWA funds to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, faith-based organizations may use space in their 
facilities to provide HOPWA-funded services, without removing religious 
art, icons, scriptures, or other religious symbols. In addition, a 
HOPWA-funded religious organization retains its authority over its 
internal governance, and it may retain religious terms in its 
organization's name, select its board members on a religious basis, and 
include religious references in its organization's mission statements 
and other governing documents.
    (4) An organization that participates in the HOPWA program shall 
not, in providing program assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of religion 
or religious belief.
    (5) HOPWA funds may not be used for the acquisition, construction, 
or rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. HOPWA funds may be used for 
the acquisition, construction, or rehabilitation of structures only to 
the extent that those structures are used for conducting eligible 
activities under this part. Where a structure is used for both eligible 
and inherently religious activities, HOPWA funds may not exceed the cost 
of those portions of the acquisition, construction, or rehabilitation 
that are attributable to eligible activities in accordance with the cost 
accounting requirements applicable to HOPWA funds in this part. 
Sanctuaries, chapels, or other rooms that a HOPWA-funded religious 
congregation uses as its principal place of worship, however, are 
ineligible for HOPWA-funded improvements. Disposition of real property 
after the term of the grant, or any change in use of the property during 
the term of the grant, is subject to government-wide regulations 
governing real property disposition (see 24 CFR parts 84 and 85).
    (6) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this section applies to all 
of the commingled funds.

[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994; 
68 FR 56405, Sept. 30, 2003]



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 inSec. 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

[[Page 209]]

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 underSec. 
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.
    (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 underSec. 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

[[Page 210]]

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. 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:
    (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]



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 underSec. 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

[[Page 211]]

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 underSec. 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 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

[[Page 212]]

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 bySec. 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 bySec. 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]



  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

[[Page 213]]

ensure proper accounting and disbursing of amounts received from a grant 
under this part.



                     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 24 CFR 85.43. A grantee 
will be provided an opportunity for informal consultation before HUD 
will exercise any remedies authorized in paragraph (a) of that section.



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 inSec. 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 withSec. 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, and any other 
information that HUD may require. Annual reports

[[Page 214]]

are required until all grant funds are expended.

[60 FR 1918, Jan. 5, 1995]



Sec.  574.530  Recordkeeping.

    Each grantee must ensure that records are maintained for a four-year 
period to document compliance with the provisions of this part. Grantees 
must maintain current and accurate data on the race and ethnicity of 
program participants.

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



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.  574.605  Applicability of OMB circulars.

    The policies, guidelines, and requirements of 24 CFR part 85 
(codified pursuant to OMB Circular No. A-102) and OMB Circular No. A-87 
apply with respect to the acceptance and use of funds under the program 
by States and units of general local government, including public 
agencies, and Circulars Nos. A-110 and A-122 apply with respect to the 
acceptance and use of funds under the program by private non-profit 
entities. (Copies of OMB Circulars may be obtained from E.O.P. 
Publications, room 2200, New Executive Office Building, Washington, DC 
20503, telephone (202) 395-7332. (This is not a toll-free number.) There 
is a limit of two free copies.



Sec.  574.625  Conflict of interest.

    (a) In addition to the conflict of interest requirements in OMB 
Circular A-102 and 24 CFR 85.36(b)(3), 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

[[Page 215]]

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
    (6) Any other relevant considerations.



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.

[[Page 216]]

    (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:
    (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

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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.

    The financial management system used by a State or unit of general 
local government that is a grantee must provide for audits in accordance 
with 24 CFR part 44. A nonprofit organization that is a grantee or a 
project sponsor is subject to the audit requirements set forth in 24 CFR 
part 45.



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]



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 Faith-based activities.
576.407 Other Federal requirements.

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576.408 Displacement, relocation, and acquisition.

                     Subpart F_Grant Administration

576.500 Recordkeeping and reporting requirements.
576.501 Enforcement.

    Authority: 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, 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;

[[Page 219]]

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 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

[[Page 220]]

    (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 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 24 CFR 85.25. 
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.



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 underSec. 
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:

[[Page 221]]

    (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 inSec. 576.101 throughSec. 576.107. Eligible 
administrative activities are set forth inSec. 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 OMB Circulars A-87 (2 CFR 225) 
and A-122 (2 CFR 230) 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.



Sec.  576.101  Street outreach component.

    (a) Eligible costs. Subject to the expenditure limit inSec. 
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 underSec. 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

[[Page 222]]

to meet the needs of the program participant. Eligible services and 
activities are as follows: using the centralized or coordinated 
assessment system as required underSec. 576.400(d); conducting the 
initial evaluation required underSec. 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 
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.

[[Page 223]]

    (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 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 inSec. 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 underSec. 576.400(d);
    (B) Conducting the initial evaluation required underSec. 
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;

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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 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.

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    (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.
    (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 underSec. 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

[[Page 226]]

``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.
    (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 
underSec. 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 inSec. 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 inSec. 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 inSec. 576.105, the 
short-term and medium-term rental assistance requirements inSec. 
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

[[Page 227]]

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 inSec. 
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 inSec. 576.105, the short- and 
medium-term rental assistance requirements inSec. 576.106, and the 
written standards and procedures established underSec. 576.400.



Sec.  576.105  Housing relocation and stabilization services.

    (a) Financial assistance costs. Subject to the general conditions 
underSec. 576.103 andSec. 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.
    (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.
    (b) Services costs. Subject to the general restrictions underSec. 
576.103 andSec. 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

[[Page 228]]

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 underSec. 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 underSec. 
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;
    (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 underSec. 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 inSec. 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.



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

    (a) General provisions. Subject to the general conditions under 
Sec.  576.103 andSec. 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

[[Page 229]]

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 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.
    (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 one year.
    (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

[[Page 230]]

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 inSec. 576.203 or commit 
funds for a 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.



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-

[[Page 231]]

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 
underSec. 576.101 throughSec. 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 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;

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    (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 underSec. 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 OMB Circular A-87 (2 CFR part 225), or A-122 (2 CFR part 
230), as applicable.
    (b) Allocation. Indirect costs may be allocated to each eligible 
activity underSec. 576.101 throughSec. 576.108, so long as that 
allocation is consistent with an indirect cost rate proposal developed 
in accordance with OMB Circular A-87 (2 CFR part 225), or A-122 (2 CFR 
part 230), as applicable.
    (c) Expenditure limits. The indirect costs charged to an activity 
subject to an expenditure limit underSec. 576.100 must be added to the 
direct costs charged for that activity when determining the total costs 
subject to the expenditure limit.



                    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 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 24 CFR 85.12, 
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.

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Sec.  576.201  Matching requirement.

    (a) Required amount of matching contributions. (1) Except as 
provided under paragraphs (a)(2) and (a)(3) of this section, the 
recipient must make matching contributions to supplement the recipient's 
ESG program in an amount that equals the amount of ESG funds provided by 
HUD.
    (2) If the recipient is a State, the first $100,000 of the fiscal 
year grant is not required to be matched. However, the recipient must 
transfer the benefit of this exception to its subrecipients that are 
least capable of providing the recipient with matching contributions.
    (3) This matching requirement does not apply if the recipient is a 
territory.
    (b) Eligible sources of matching contributions. (1) Subject to the 
requirement for States under paragraph (a)(2) of this section, the 
recipient may require its subrecipients to make matching contributions 
consistent with this section to help meet the recipient's matching 
requirement.
    (2) Matching contributions may be obtained from any source, 
including any Federal source other than the ESG program, as well as 
state, local, and private sources. However, the following requirements 
apply to matching contributions from a Federal source of funds:
    (i) The recipient must ensure the laws governing any funds to be 
used as matching contributions do not prohibit those funds from being 
used to match Emergency Solutions Grant (ESG) funds.
    (ii) If ESG funds are used to satisfy the matching requirements of 
another Federal program, then funding from that program may not be used 
to satisfy the matching requirements under this section.
    (c) Recognition of matching contributions. (1) In order to meet the 
matching requirement, the matching contributions must meet all 
requirements that apply to the ESG funds provided by HUD, except for the 
expenditure limits inSec. 576.100.
    (2) The matching contributions must be provided after the date that 
HUD signs the grant agreement.
    (3) To count toward the required match for the recipient's fiscal 
year grant, cash contributions must be expended within the expenditure 
deadline inSec. 576.203, and noncash contributions must be made within 
the expenditure deadline inSec. 576.203.
    (4) Contributions used to match a previous ESG grant may not be used 
to match a subsequent ESG grant.
    (5) Contributions that have been or will be counted as satisfying a 
matching requirement of another Federal grant or award may not count as 
satisfying the matching requirement of this section.
    (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 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.

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    (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.



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 inSec. 576.100 andSec. 
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 inSec. 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 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

[[Page 235]]

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 Sec.Sec. 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 underSec. 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 underSec. 576.3 because the amount they would have 
been allocated did not meet the minimum requirement underSec. 
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 underSec. 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 underSec. 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 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.

[[Page 236]]

    (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 underSec. 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 underSec. 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);
    (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

[[Page 237]]

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 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-

[[Page 238]]

housing assistance providers; other homeless assistance providers; and 
mainstream service and housing providers (seeSec. 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;
    (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.



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 
underSec. 576.400(d) and the written standards established underSec. 
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.
    (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

[[Page 239]]

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 inSec. 
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 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.

[[Page 240]]

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 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

[[Page 241]]

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 underSec. 576.401 or administer homelessness prevention 
assistance underSec. 576.103.
    (b) Individual conflicts of interest. For the procurement of goods 
and services, the recipient and its subrecipients must comply with the 
codes of conduct and conflict of interest requirements under 24 CFR 
85.36 (for governments) and 24 CFR 84.42 (for private nonprofit 
organizations). 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 
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

[[Page 242]]

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.



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.



Sec.  576.406  Faith-based activities.

    (a) Organizations that are religious or faith-based are eligible, on 
the same basis as any other organization, to receive ESG funds. Neither 
the Federal Government nor a State or local government receiving funds 
under ESG shall discriminate against an organization on the basis of the 
organization's religious character or affiliation.
    (b) Organizations that are directly funded under the ESG program may 
not engage in inherently religious activities, such as worship, 
religious instruction, or proselytization as part of the programs or 
services funded under ESG. If an organization conducts these activities, 
the activities must be offered separately, in time or location,

[[Page 243]]

from the programs or services funded under ESG, and participation must 
be voluntary for program participants.
    (c) Any religious organization that receives ESG funds retains its 
independence from Federal, State, and local governments, and may 
continue to carry out its mission, including the definition, practice, 
and expression of its religious beliefs, provided that the religious 
organization does not use direct ESG funds to support any inherently 
religious activities, such as worship, religious instruction, or 
proselytization. Among other things, faith-based organizations may use 
space in their facilities to provide ESG-funded services, without 
removing religious art, icons, scriptures, or other religious symbols. 
In addition, an ESG-funded religious organization retains its authority 
over its internal governance, and the organization may retain religious 
terms in its organization's name, select its board members on a 
religious basis, and include religious references in its organization's 
mission statements and other governing documents.
    (d) An organization that receives ESG funds shall not, in providing 
ESG assistance, discriminate against a program participant or 
prospective program participant on the basis of religion or religious 
belief.
    (e) ESG funds may not be used for the rehabilitation of structures 
to the extent that those structures are used for inherently religious 
activities. Solutions ESG funds may be used for the rehabilitation of 
structures only to the extent that those structures are used for 
conducting eligible activities under the ESG program. Where a structure 
is used for both eligible and inherently religious activities, ESG funds 
may not exceed the cost of those portions of the rehabilitation that are 
attributable to eligible activities in accordance with the cost 
accounting requirements applicable to ESG funds. Sanctuaries, chapels, 
or other rooms that an ESG-funded religious congregation uses as its 
principal place of worship, however, are ineligible for funded 
improvements under the program. Disposition of real property after the 
term of the grant, or any change in use of the property during the term 
of the grant, is subject to government-wide regulations governing real 
property disposition (see 24 CFR parts 84 and 85).
    (f) If the recipient or a subrecipient that is a local government 
voluntarily contributes its own funds to supplement federally funded 
activities, the recipient or subrecipient has the option to segregate 
the Federal funds or commingle them. However, if the funds are 
commingled, this section applies to all of the commingled funds.



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). 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 withSec. 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 Administrative Requirements. The requirements of 24 CFR 
part

[[Page 244]]

85 apply to the recipient and subrecipients that are units of general 
purpose local government, except that 24 CFR 85.24 and 85.42 do not 
apply, and program income is to be used as match under 24 CFR 85.25(g). 
The requirements of 24 CFR part 84 apply to subrecipients that are 
private nonprofit organizations, except that 24 CFR 84.23 and 84.53 do 
not apply, and program income is to be used as the nonfederal share 
under 24 CFR 84.24(b). These regulations include allowable costs and 
non-Federal audit requirements.
    (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 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.



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

[[Page 245]]

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 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,

[[Page 246]]

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.



                     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. 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 inSec. 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 inSec. 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 inSec. 576.2, because the 
individual or family will imminently lose their housing, the evidence 
must include:
    (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

[[Page 247]]

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 inSec. 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 inSec. 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 inSec. 
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 inSec. 
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 the intake worker may alternatively 
obtain a written certification from the individual or head of household 
seeking assistance that they were fleeing that

[[Page 248]]

situation and that they resided at that address; and
    (iv) For paragraph (3)(iv) of the homeless definition inSec. 
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 inSec. 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 inSec. 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'' inSec. 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, 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:

[[Page 249]]

    (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'' inSec. 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 inSec. 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 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

[[Page 250]]

    (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 atSec. 576.101 through 
Sec.  576.106, the provision on determining eligibility and amount and 
type of assistance atSec. 576.401(a) and (b), and the provision on 
using appropriate assistance and services atSec. 576.401(d) and (e); 
and
    (3) Where applicable, compliance with the termination of assistance 
requirement inSec. 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 ofSec. 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.
    (o) Matching. The recipient must keep records of the source and use 
of contributions made to satisfy the matching requirement inSec. 
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

[[Page 251]]

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 inSec. 576.404(a), a copy of the personal 
conflicts of interest policy or codes of conduct developed and 
implemented to comply with the requirements inSec. 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 underSec. 
576.405.
    (r) Faith-based activities. The recipient and its subrecipients must 
document their compliance with the faith-based activities requirements 
underSec. 576.406.
    (s) Other Federal requirements. The recipient and its subrecipients 
must document their compliance with the Federal requirements inSec. 
576.407, as applicable, including:
    (1) Records demonstrating compliance with the nondiscrimination and 
equal opportunity requirements underSec. 576.407(a), including 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 the affirmative outreach requirements inSec. 
576.407(b).
    (2) Records demonstrating compliance with the uniform administrative 
requirements in 24 CFR part 85 (for governments) and 24 CFR part 84 (for 
nonprofit organizations).
    (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.
    (t) Relocation. The records must include documentation of compliance 
with the displacement, relocation, and acquisition requirements inSec. 
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 underSec. 576.101-Sec.  
576.109 and the cost principles in OMB Circulars A-87 (2 CFR part 225) 
and A-122 (2 CFR part 230).
    (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 inSec. 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 
underSec. 576.501.
    (2) The recipient and its subrecipients must retain copies of all 
procurement contracts and documentation of compliance with the 
procurement requirements in 24 CFR 85.36 and 24 CFR 84.40-84.48.
    (3) The recipient must ensure that its subrecipients comply with the 
recordkeeping requirements specified by the 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;

[[Page 252]]

    (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 (w) of this section, HUD, the HUD Office of the Inspector 
General, and the Comptroller General of the United States, or any of 
their authorized representatives, must have the right of access to all 
books, documents, papers, or other records of the recipient and its 
subrecipients that are pertinent to the ESG grant, in order to make 
audits, examinations, excerpts, and transcripts. These rights of access 
are not limited to the required retention period but last as long as the 
records are retained.
    (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 24 CFR parts 85 and 
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.



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, 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.

[[Page 253]]

    (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 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

[[Page 254]]

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 inSec. 576.203.



PART 581_USE OF FEDERAL REAL PROPERTY TO ASSIST THE HOMELESS--
Table of Contents



Sec.
581.1 Definitions.
581.2 Applicability.
581.3 Collecting the information.
581.4 Suitability determination.
581.5 Real property reported excess to GSA.
581.6 Suitability criteria.
581.7 Determination of availability.
581.8 Public notice of determination.
581.9 Application process.
581.10 Action on approved applications.
581.11 Unsuitable properties.
581.12 No applications approved.
581.13 Waivers.

    Authority: 42 U.S.C. 11411 note; 42 U.S.C. 3535(d).

    Source: 56 FR 23794, 23795, May 24, 1991, unless otherwise noted.



Sec.  581.1  Definitions.

    Applicant means any representative of the homeless which has 
submitted an application to the Department of Health and Human Services 
to obtain use of a particular suitable property to assist the homeless.
    Checklist or property checklist means the form developed by HUD for 
use by landholding agencies to report the information to be used by HUD 
in making determinations of suitability.
    Classification means a property's designation as unutilized, 
underutilized, excess, or surplus.
    Day means one calendar day including weekends and holidays.
    Eligible organization means a State, unit of local government or a 
private non-profit organization which provides assistance to the 
homeless, and which is authorized by its charter or by State law to 
enter into an agreement with the Federal government for use of real 
property for the purposes of this subpart. Representatives of the 
homeless interested in receiving a deed for a particular piece of 
surplus Federal property must be section 501(c)(3) tax exempt.
    Excess property means any property under the control of any Federal 
executive agency that is not required for the agency's needs or the 
discharge of its responsibilities, as determined by the head of the 
agency pursuant to 40 U.S.C. 483.
    GSA means the General Services Administration.
    HHS means the Department of Health and Human Services.
    Homeless means:
    (1) An individual or family that lacks a fixed, regular, and 
adequate nighttime residence; and
    (2) An individual or family that has a primary nighttime residence 
that is:
    (i) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing for the mentally ill);
    (ii) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (iii) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings. This term does 
not include any individual imprisoned or otherwise detained under an Act 
of the Congress or a State law.
    HUD means the Department of Housing and Urban Development.
    ICH means the Interagency Council on the Homeless.
    Landholding agency means a Federal department or agency with 
statutory authority to control real property.
    Lease means an agreement between either the Department of Health and 
Human Services for surplus property, or landholding agencies in the case 
of non-excess properties or properties subject to the Base Closure and 
Realignment Act (Public Law 100-526; 10 U.S.C. 2687), and the applicant, 
giving rise to the relationship of lessor and lessee for the use of 
Federal real property for a term of at least one year under the 
conditions set forth in the lease document.
    Non-profit organization means an organization no part of the net 
earnings of which inures to the benefit of any member, founder, 
contributor, or individual; that has a voluntary board; that has an 
accounting system or has

[[Page 255]]

designated an entity that will maintain a functioning accounting system 
for the organization in accordance with generally accepted accounting 
procedures; and that practices nondiscrimination in the provision of 
assistance.
    Permit means a license granted by a landholding agency to use 
unutilized or underutilized property for a specific amount of time under 
terms and conditions determined by the landholding agency.
    Property means real property consisting of vacant land or buildings, 
or a portion thereof, that is excess, surplus, or designated as 
unutilized or underutilized in surveys by the heads of landholding 
agencies conducted pursuant to section 202(b)(2) of the Federal Property 
and Administrative Services Act of 1949 (40 U.S.C. 483(b)(2).)
    Regional homeless coordinator means a regional coordinator of the 
Interagency Council on the Homeless.
    Representative of the homeless means a State or local government 
agency, or private nonprofit organization which provides, or proposes to 
provide, services to the homeless.
    Screen means the process by which GSA surveys Federal agencies, or 
State, local and non-profit entities, to determine if any such entity 
has an interest in using excess Federal property to carry out a 
particular agency mission or a specific public use.
    State homeless coordinator means a state contact person designated 
by a state to receive and disseminate information and communications 
received from the Interagency Council on the Homeless in accordance with 
section 210(a) of the Stewart B. McKinney Act of 1987, as amended.
    Suitable property means that HUD has determined that a particular 
property satisfies the criteria listed inSec. 581.6.
    Surplus property means any excess real property not required by any 
Federal landholding agency for its needs or the discharge of its 
responsibilities, as determined by the Administrator of GSA.
    Underutilized means an entire property or portion thereof, with or 
without improvements which is used only at irregular periods or 
intermittently by the accountable landholding agency for current program 
purposes of that agency, or which is used for current program purposes 
that can be satisfied with only a portion of the property.
    Unsuitable property means that HUD has determined that a particular 
property does not satisfy the criteria inSec. 581.6.
    Unutilized property means an entire property or portion thereof, 
with or without improvements, not occupied for current program purposes 
for the accountable executive agency or occupied in caretaker status 
only.



Sec.  581.2  Applicability.

    (a) This part applies to Federal real property which has been 
designated by Federal landholding agencies as unutilized, underutilized, 
excess or surplus and is therefore subject to the provisions of title V 
of the McKinney Act (42 U.S.C. 11411).
    (b) The following categories of properties are not subject to this 
subpart (regardless of whether they may be unutilized or underutilized).
    (1) Machinery and equipment.
    (2) Government-owned, contractor-operated machinery, equipment, 
land, and other facilities reported excess for sale only to the using 
contractor and subject to a continuing military requirement.
    (3) Properties subject to special legislation directing a particular 
action.
    (4) Properties subject to a court order.
    (5) Property not subject to survey requirements of Executive Order 
12512 (April 29, 1985).
    (6) Mineral rights interests.
    (7) Air space interests.
    (8) Indian Reservation land subject to section 202(a)(2) of the 
Federal Property and Administrative Service Act of 1949, as amended.
    (9) Property interests subject to reversion.
    (10) Easements.
    (11) Property purchased in whole or in part with Federal funds if 
title to the property is not held by a Federal landholding agency as 
defined in this part.



Sec.  581.3  Collecting the information.

    (a) Canvass of landholding agencies. On a quarterly basis, HUD will 
canvass

[[Page 256]]

landholding agencies to collect information about property described as 
unutilized, underutilized, excess, or surplus, in surveys conducted by 
the agencies under section 202 of the Federal Property and 
Administrative Services Act (40 U.S.C. 483), Executive Order 12512, and 
41 CFR part 101-47.800. Each canvass will collect information on 
properties not previously reported and about property reported 
previously the status or classification of which has changed or for 
which any of the information reported on the property checklist has 
changed.
    (1) HUD will request descriptive information on properties 
sufficient to make a reasonable determination, under the criteria 
described below, of the suitability of a property for use as a facility 
to assist the homeless.
    (2) HUD will direct landholding agencies to respond to requests for 
information within 25 days of receipt of such requests.
    (b) Agency annual report. By December 31 of each year, each 
landholding agency must notify HUD regarding the current availability 
status and classification of each property controlled by the agency 
that:
    (1) Was included in a list of suitable properties published that 
year by HUD, and
    (2) Remains available for application for use to assist the 
homeless, or has become available for application during that year.
    (c) GSA inventory. HUD will collect information, in the same manner 
as described in paragraph (a) of this section, from GSA regarding 
property that is in GSA's current inventory of excess or surplus 
property.
    (d) Change in status. If the information provided on the property 
checklist changes subsequent to HUD's determination of suitability, and 
the property remains unutilized, underutilized, excess or surplus, the 
landholding agency shall submit a revised property checklist in response 
to the next quarterly canvass. HUD will make a new determination of 
suitability and, if it differs from the previous determination, 
republish the property information in the Federal Register. For example, 
property determined unsuitable for national security concerns may no 
longer be subject to security restrictions, or property determined 
suitable may subsequently be found to be contaminated.

    Effective Date Note: At 56 FR 23794, 23795, May 24, 1991, part 581 
was added, effective on May 24, 1991, except forSec. 581.3 which will 
not become effective until approved by the District Court for the 
District of Columbia, pending further proceedings.



Sec.  581.4  Suitability determination.

    (a) Suitability determination. Within 30 days after the receipt of 
information from landholding agencies regarding properties which were 
reported pursuant to the canvass described inSec. 581.3(a), HUD will 
determine, under criteria set forth inSec. 581.6, which properties are 
suitable for use as facilities to assist the homeless and report its 
determination to the landholding agency. Properties that are under 
lease, contract, license, or agreement by which a Federal agency retains 
a real property interest or which are scheduled to become unutilized or 
underutilized will be reviewed for suitability no earlier than six 
months prior to the expected date when the property will become 
unutilized or underutilized, except that properties subject to the Base 
Closure and Realignment Act may be reviewed up to eighteen months prior 
to the expected date when the property will become unutilized or 
underutilized.
    (b) Scope of suitability. HUD will determine the suitability of a 
property for use as a facility to assist the homeless without regard to 
any particular use.
    (c) Environmental information. HUD will evaluate the environmental 
information contained in property checklists forwarded to HUD by the 
landholding agencies solely for the purpose of determining suitability 
of properties under the criteria inSec. 581.6.
    (d) Written record of suitability determination. HUD will assign an 
identification number to each property reviewed for suitability. HUD 
will maintain a written public record of the following:
    (1) The suitability determination for a particular piece of 
property, and the reasons for that determination; and

[[Page 257]]

    (2) The landholding agency's response to the determination pursuant 
to the requirements ofSec. 581.7(a).
    (e) Property determined unsuitable. Property that is reviewed by HUD 
under this section and that is determined unsuitable for use to assist 
the homeless may not be made available for any other purpose for 20 days 
after publication in the Federal Register of a Notice of unsuitability 
to allow for review of the determination at the request of a 
representative of the homeless.
    (f) Procedures for appealing unsuitability determinations. (1) To 
request review of a determination of unsuitability, a representative of 
the homeless must contact HUD within 20 days of publication of notice in 
the Federal Register that a property is unsuitable. Requests may be 
submitted to HUD in writing or by calling 1-800-927-7588 (Toll Free). 
Written requests must be received no later than 20 days after notice of 
unsuitability is published in the Federal Register.
    (2) Requests for review of a determination of unsuitability may be 
made only by representatives of the homeless, as defined inSec. 581.1.
    (3) The request for review must specify the grounds on which it is 
based, i.e., that HUD has improperly applied the criteria or that HUD 
has relied on incorrect or incomplete information in making the 
determination (e.g., that property is in a floodplain but not in a 
floodway).
    (4) Upon receipt of a request to review a determination of 
unsuitability, HUD will notify the landholding agency that such a 
request has been made, request that the agency respond with any 
information pertinent to the review, and advise the agency that it 
should refrain from initiating disposal procedures until HUD has 
completed its reconsideration regarding unsuitability.
    (i) HUD will act on all requests for review within 30 days of 
receipt of the landholding agency's response and will notify the 
representative of the homeless and the landholding agency in writing of 
its decision.
    (ii) If a property is determined suitable as a result of the review, 
HUD will request the landholding agency's determination of availability 
pursuant toSec. 581.7(a), upon receipt of which HUD will promptly 
publish the determination in the Federal Register. If the determination 
of unsuitability stands, HUD will inform the representative of the 
homeless of its decision.



Sec.  581.5  Real property reported excess to GSA.

    (a) Each landholding agency must submit a report to GSA of 
properties it determines excess. Each landholding agency must also 
provide a copy of HUD's suitability determination, if any, including 
HUD's identification number for the property.
    (b) If a landholding agency reports a property to GSA which has been 
reviewed by HUD for homeless assistance suitability and HUD determined 
the property suitable, GSA will screen the property pursuant toSec. 
581.5(g) and will advise HUD of the availability of the property for use 
by the homeless as provided inSec. 581.5(e). In lieu of the above, GSA 
may submit a new checklist to HUD and follow the procedures inSec. 
581.5(c) throughSec. 581.5(g).
    (c) If a landholding agency reports a property to GSA which has not 
been reviewed by HUD for homeless assistance suitability, GSA will 
complete a property checklist, based on information provided by the 
landholding agency, and will forward this checklist to HUD for a 
suitability determination. This checklist will reflect any change in 
classification, i.e., from unutilized or underutilized to excess.
    (d) Within 30 days after GSA's submission, HUD will advise GSA of 
the suitability determination.
    (e) When GSA receives a letter from HUD listing suitable excess 
properties in GSA's inventory, GSA will transmit to HUD within 45 days a 
response which includes the following for each identified property:
    (1) A statement that there is no other compelling Federal need for 
the property, and therefore, the property will be determined surplus; or
    (2) A statement that there is further and compelling Federal need 
for the property (including a full explanation of such need) and that, 
therefore, the property is not presently available for use to assist the 
homeless.

[[Page 258]]

    (f) When an excess property is determined suitable and available and 
notice is published in the Federal Register, GSA will concurrently 
notify HHS, HUD, State and local government units, known homeless 
assistance providers that have expressed interest in the particular 
property, and other organizations, as appropriate, concerning suitable 
properties.
    (g) Upon submission of a Report of Excess to GSA, GSA may screen the 
property for Federal use. In addition, GSA may screen State and local 
governmental units and eligible nonprofit organizations to determine 
interest in the property in accordance with current regulations. (See 41 
CFR 101-47.203-5, 101-47.204-1 and 101-47.303-2.)
    (h) The landholding agency will retain custody and accountability 
and will protect and maintain any property which is reported excess to 
GSA as provided in 41 CFR 101-47.402.



Sec.  581.6  Suitability criteria.

    (a) All properties, buildings and land will be determined suitable 
unless a property's characteristics include one or more of the following 
conditions:
    (1) National security concerns. A property located in an area to 
which the general public is denied access in the interest of national 
security (e.g., where a special pass or security clearance is a 
condition of entry to the property) will be determined unsuitable. Where 
alternative access can be provided for the public without compromising 
national security, the property will not be determined unsuitable on 
this basis.
    (2) Property containing flammable or explosive materials. A property 
located within 2000 feet of an industrial, commercial or Federal 
facility handling flammable or explosive material (excluding underground 
storage) will be determined unsuitable. Above ground containers with a 
capacity of 100 gallons or less, or larger containers which provide the 
heating or power source for the property, and which meet local safety, 
operation, and permitting standards, will not affect whether a 
particular property is determined suitable or unsuitable. Underground 
storage, gasoline stations and tank trucks are not included in this 
category and their presence will not be the basis of an unsuitability 
determination unless there is evidence of a threat to personal safety as 
provided in paragraph (a)(5) of this section.
    (3) Runway clear zone and military airfield clear zone. A property 
located within an airport runway clear zone or military airfield clear 
zone will be determined unsuitable.
    (4) Floodway. A property located in the floodway of a 100 year 
floodplain will be determined unsuitable. If the floodway has been 
contained or corrected, or if only an incidental portion of the property 
not affecting the use of the remainder of the property is in the 
floodway, the property will not be determined unsuitable.
    (5) Documented deficiencies. A property with a documented and 
extensive condition(s) that represents a clear threat to personal 
physical safety will be determined unsuitable. Such conditions may 
include, but are not limited to, contamination, structural damage or 
extensive deterioration, friable asbestos, PCB's, or natural hazardous 
substances such as radon, periodic flooding, sinkholes or earth slides.
    (6) Inaccessible. A property that is inaccessible will be determined 
unsuitable. An inaccessible property is one that is not accessible by 
road (including property on small off-shore islands) or is land locked 
(e.g., can be reached only by crossing private property and there is no 
established right or means of entry).



Sec.  581.7  Determination of availability.

    (a) Within 45 days after receipt of a letter from HUD pursuant to 
Sec.  581.4(a), each landholding agency must transmit to HUD a statement 
of one of the following:
    (1) In the case of unutilized or underutilized property:
    (i) An intention to declare the property excess,
    (ii) An intention to make the property available for use to assist 
the homeless, or
    (iii) The reasons why the property cannot be declared excess or made 
available for use to assist the homeless. The reasons given must be 
different than those listed as suitability criteria inSec. 581.6.

[[Page 259]]

    (2) In the case of excess property which had previously been 
reported to GSA:
    (i) A statement that there is no compelling Federal need for the 
property, and that, therefore, the property will be determined surplus; 
or
    (ii) A statement that there is a further and compelling Federal need 
for the property (including a full explanation of such need) and that, 
therefore, the property is not presently available for use to assist the 
homeless.



Sec.  581.8  Public notice of determination.

    (a) No later than 15 days after the last 45 day period has elapsed 
for receiving responses from the landholding agencies regarding 
availability, HUD will publish in the Federal Register a list of all 
properties reviewed, including a description of the property, its 
address, and classification. The following designations will be made:
    (1) Properties that are suitable and available.
    (2) Properties that are suitable and unavailable.
    (3) Properties that are suitable and to be declared excess.
    (4) Properties that are unsuitable.
    (b) Information about specific properties can be obtained by 
contacting HUD at the following toll free number, 1-800-927-7588.
    (c) HUD will transmit to the ICH a copy of the list of all 
properties published in the Federal Register. The ICH will immediately 
distribute to all state and regional homeless coordinators area-relevant 
portions of the list. The ICH will encourage the state and regional 
homeless coordinators to disseminate this information widely.
    (d) No later than February 15 of each year, HUD shall publish in the 
Federal Register a list of all properties reported pursuant toSec. 
581.3(b).
    (e) HUD shall publish an annual list of properties determined 
suitable but which agencies reported unavailable including the reasons 
such properties are not available.
    (f) Copies of the lists published in the Federal Register will be 
available for review by the public in the HUD headquarters building 
library (room 8141); area-relevant portions of the lists will be 
available in the HUD regional offices and in major field offices.



Sec.  581.9  Application process.

(OMB approval number 09370191)
    (a) Holding period. (1) Properties published as available for 
application for use to assist the homeless shall not be available for 
any other purpose for a period of 60 days beginning on the date of 
publication. Any representative of the homeless interested in any 
underutilized, unutilized, excess or surplus Federal property for use as 
a facility to assist the homeless must send to HHS a written expression 
of interest in that property within 60 days after the property has been 
published in the Federal Register.
    (2) If a written expression of interest to apply for suitable 
property for use to assist the homeless is received by HHS within the 60 
day holding period, such property may not be made available for any 
other purpose until the date HHS or the appropriate landholding agency 
has completed action on the application submitted pursuant to that 
expression of interest.
    (3) The expression of interest should identify the specific 
property, briefly describe the proposed use, include the name of the 
organization, and indicate whether it is a public body or a private non-
profit organization. The expression of interest must be sent to the 
Division of Health Facilities Planning (DHFP) of the Department of 
Health and Human Services at the following address:

Director, Division of Health Facilities Planning, Public Health Service, 
room 17A-10, Parklawn Building, 5600 Fishers Lane, Rockville, Maryland 
20857.


HHS will notify the landholding agency (for unutilized and underutilized 
properties) or GSA (for excess and surplus properties) when an 
expression of interest has been received for a particular property.
    (4) An expression of interest may be sent to HHS any time after the 
60 day holding period has expired. In such a case, an application 
submitted pursuant to this expression of interest may be approved for 
use by the homeless if:
    (i) No application or written expression of interest has been made 
under

[[Page 260]]

any law for use of the property for any purpose; and
    (ii) In the case of excess or surplus property, GSA has not received 
a bona fide offer to purchase that property or advertised for the sale 
of the property by public auction.
    (b) Application requirements. Upon receipt of an expression of 
interest, DHFP will send an application packet to the interested entity. 
The application packet requires the applicant to provide certain 
information, including the following--
    (1) Description of the applicant organization. The applicant must 
document that it satisfies the definition of a ``representative of the 
homeless,'' as specified inSec. 581.1 of this subpart. The applicant 
must document its authority to hold real property. Private non-profit 
organizations applying for deeds must document that they are section 
501(c)(3) tax-exempt.
    (2) Description of the property desired. The applicant must describe 
the property desired and indicate that any modifications made to the 
property will conform to local use restrictions except for local zoning 
regulations.
    (3) Description of the proposed program. The applicant must fully 
describe the proposed program and demonstrate how the program will 
address the needs of the homeless population to be assisted. The 
applicant must fully describe what modifications will be made to the 
property before the program becomes operational.
    (4) Ability to finance and operate the proposed program. The 
applicant must specifically describe all anticipated costs and sources 
of funding for the proposed program. The applicant must indicate that it 
can assume care, custody, and maintenance of the property and that it 
has the necessary funds or the ability to obtain such funds to carry out 
the approved program of use for the property.
    (5) Compliance with non-discrimination requirements. Each applicant 
and lessee under this part must certify in writing that it will comply 
with the requirements of the Fair Housing Act (42 U.S.C. 3601-3619) and 
implementing regulations; and as applicable, Executive Order 11063 
(Equal Opportunity in Housing) and implementing regulations; title VI of 
the Civil Rights Act of 1964 (42 U.S.C. 2000d to d-4) (Nondiscrimination 
in Federally Assisted Programs) and implementing regulations; the 
prohibitions against discrimination on the basis of age under the Age 
Discrimination Act of 1975 (42 U.S.C. 6101-6107) and implementing 
regulations; and the prohibitions against otherwise qualified 
individuals with handicaps under section 504 of the Rehabilitation Act 
of 1973 (29 U.S.C. 794) and implementing regulations. The applicant must 
state that it will not discriminate on the basis of race, color, 
national origin, religion, sex, age, familial status, or handicap in the 
use of the property, and will maintain the required records to 
demonstrate compliance with Federal laws.
    (6) Insurance. The applicant must certify that it will insure the 
property against loss, damage, or destruction in accordance with the 
requirements of 45 CFR 12.9.
    (7) Historic preservation. Where applicable, the applicant must 
provide information that will enable HHS to comply with Federal historic 
preservation requirements.
    (8) Environmental information. The applicant must provide sufficient 
information to allow HHS to analyze the potential impact of the 
applicant's proposal on the environment, in accordance with the 
instructions provided with the application packet. HHS will assist 
applicants in obtaining any pertinent environmental information in the 
possession of HUD, GSA, or the landholding agency.
    (9) Local government notification. The applicant must indicate that 
it has informed the applicable unit of general local government 
responsible for providing sewer, water, police, and fire services, in 
writing of its proposed program.
    (10) Zoning and local use restrictions. The applicant must indicate 
that it will comply with all local use restrictions, including local 
building code requirements. Any applicant which applies for a lease or 
permit for a particular property is not required to comply with local 
zoning requirements. Any applicant applying for a deed of a particular 
property, pursuant toSec. 581.9(b)(3), must comply with local

[[Page 261]]

zoning requirements, as specified in 45 CFR part 12.
    (c) Scope of evaluations. Due to the short time frame imposed for 
evaluating applications, HHS' evaluation will, generally, be limited to 
the information contained in the application.
    (d) Deadline. Completed applications must be received by DHFP, at 
the above address, within 90 days after an expression of interest is 
received from a particular applicant for that property. Upon written 
request from the applicant, HHS may grant extensions, provided that the 
appropriate landholding agency concurs with the extension. Because each 
applicant will have a different deadline based on the date the applicant 
submitted an expression of interest, applicants should contact the 
individual landholding agency to confirm that a particular property 
remains available prior to submitting an application.
    (e) Evaluations. (1) Upon receipt of an application, HHS will review 
it for completeness, and, if incomplete, may return it or ask the 
applicant to furnish any missing or additional required information 
prior to final evaluation of the application.
    (2) HHS will evaluate each completed application within 25 days of 
receipt and will promptly advise the applicant of its decision. 
Applications are evaluated on a first-come, first-serve basis. HHS will 
notify all organizations which have submitted expressions of interest 
for a particular property regarding whether the first application 
received for that property has been approved or disapproved. All 
applications will be reviewed on the basis of the following elements, 
which are listed in descending order of priority, except that paragraphs 
(e)(2)(iv) and (e)(2)(v) of this section are of equal importance.
    (i) Services offered. The extent and range of proposed services, 
such as meals, shelter, job training, and counseling.
    (ii) Need. The demand for the program and the degree to which the 
available property will be fully utilized.
    (iii) Implementation time. The amount of time necessary for the 
proposed program to become operational.
    (iv) Experience. Demonstrated prior success in operating similar 
programs and recommendations attesting to that fact by Federal, State, 
and local authorities.
    (v) Financial ability. The adequacy of funding that will likely be 
available to run the program fully and properly and to operate the 
facility.
    (3) Additional evaluation factors may be added as deemed necessary 
by HHS. If additional factors are added, the application packet will be 
revised to include a description of these additional factors.
    (4) If HHS receives one or more competing applications for a 
property within 5 days of the first application HHS will evaluate all 
completed applications simultaneously. HHS will rank approved 
applications based on the elements listed inSec. 581.8(e)(2), and 
notify the landholding agency, or GSA, as appropriate, of the relative 
ranks.



Sec.  581.10  Action on approved applications.

    (a) Unutilized and underutilized properties. (1) When HHS approves 
an application, it will so notify the applicant and forward a copy of 
the application to the landholding agency. The landholding agency will 
execute the lease, or permit document, as appropriate, in consultation 
with the applicant.
    (2) The landholding agency maintains the discretion to decide the 
following:
    (i) The length of time the property will be available. (Leases and 
permits will be for a period of at least one year unless the applicant 
requests a shorter term.)
    (ii) Whether to grant use of the property via a lease or permit;
    (iii) The terms and conditions of the lease or permit document.
    (b) Excess and surplus properties. (1) When HHS approves an 
application, it will so notify the applicant and request that GSA assign 
the property to HHS for leasing. Upon receipt of the assignment, HHS 
will execute a lease in accordance with the procedures and requirements 
set out in 45 CFR part 12. In accordance with 41 CFR 101-47.402, custody 
and accountability of the property will remain throughout the lease term 
with the agency which initially reported the property as excess.

[[Page 262]]

    (2) Prior to assignment to HHS, GSA may consider other Federal uses 
and other important national needs; however, in deciding the disposition 
of surplus real property, GSA will generally give priority of 
consideration to uses to assist the homeless. GSA may consider any 
competing request for the property made under section 203(k) of the 
Federal Property and Administrative Services Act of 1949 (40 U.S.C. 
484(k)) that is so meritorious and compelling that it outweighs the 
needs of the homeless, and HHS may likewise consider any competing 
request made under subsection 203(k)(1) of that law.
    (3) Whenever GSA or HHS decides in favor of a competing request over 
a request for property for homeless assistance use as provided in 
paragraph (b)(2) of this section, the agency making the decision will 
transmit to the appropriate committees of the Congress an explanatory 
statement which details the need satisfied by conveyance of the surplus 
property, and the reasons for determining that such need was so 
meritorious and compelling as to outweigh the needs of the homeless.
    (4) Deeds. Surplus property may be conveyed to representatives of 
the homeless pursuant to section 203(k) of the Federal Property and 
Administrative Services Act of 1949 (40 U.S.C. 484(k)(1), and section 
501(f) of the McKinney Act as amended, 42 U.S.C. 11411. Representatives 
of the homeless must complete the application packet pursuant to the 
requirements ofSec. 581.9 of this part and in accordance with the 
requirements of 45 CFR part 12.
    (c) Completion of lease term and reversion of title. Lessees and 
grantees will be responsible for the protection and maintenance of the 
property during the time that they possess the property. Upon 
termination of the lease term or reversion of title to the Federal 
government, the lessee or grantee will be responsible for removing any 
improvements made to the property and will be responsible for 
restoration of the property. If such improvements are not removed, they 
will become the property of the Federal government. GSA or the 
landholding agency, as appropriate, will assume responsibility for 
protection and maintenance of a property when the lease terminates or 
title reverts.



Sec.  581.11  Unsuitable properties.

    The landholding agency will defer, for 20 days after the date that 
notice of a property is published in the Federal Register, action to 
dispose of properties determined unsuitable for homeless assistance. HUD 
will inform landholding agencies or GSA if appeal of an unsuitability 
determination is filed by a representative of the homeless pursuant to 
Sec.  581.4(f)(4). HUD will advise the agency that it should refrain 
from initiating disposal procedures until HUD has completed its 
reconsideration process regarding unsuitability. Thereafter, or if no 
appeal has been filed after 20 days, GSA or the appropriate landholding 
agency may proceed with disposal action in accordance with applicable 
law.



Sec.  581.12  No applications approved.

    (a) At the end of the 60 day holding period described inSec. 
581.9(a), HHS will notify GSA, or the landholding agency, as 
appropriate, if an expression of interest has been received for a 
particular property. Where there is no expression of interest, GSA or 
the landholding agency, as appropriate, will proceed with disposal in 
accordance with applicable law.
    (b) Upon advice from HHS that all applications have been 
disapproved, or if no completed applications or requests for extensions 
have been received by HHS within 90 days from the date of the last 
expression of interest, disposal may proceed in accordance with 
applicable law.



Sec.  581.13  Waivers.

    The Secretary may waive any requirement of this part that is not 
required by law, whenever it is determined that undue hardship would 
result from applying the requirement, or where application of the 
requirement would adversely affect the purposes of the program. Each 
waiver will be in writing and will be supported by documentation of the 
pertinent facts and grounds. The Secretary periodically will publish 
notice of granted waivers in the Federal Register.

[[Page 263]]



PART 582_SHELTER PLUS CARE--Table of Contents



                            Subpart A_General

Sec.
582.1 Purpose and scope.
582.5 Definitions.

                      Subpart B_Assistance Provided

582.100 Program component descriptions.
582.105 Rental assistance amounts and payments.
582.110 Matching requirements.
582.115 Limitations on assistance.
582.120 Consolidated plan.

                  Subpart C_Application and Grant Award

582.200 Application and grant award.
582.230 Environmental review.

                     Subpart D_Program Requirements

582.300 General operation.
582.301 Recordkeeping.
582.305 Housing quality standards; rent reasonableness.
582.310 Resident rent.
582.315 Occupancy agreements.
582.320 Termination of assistance to participants.
582.325 Outreach activities.
582.330 Nondiscrimination and equal opportunity requirements.
582.335 Displacement, relocation, and real property acquisition.
582.340 Other Federal requirements.

                        Subpart E_Administration

582.400 Grant agreement.
582.405 Program changes.
582.410 Obligation and deobligation of funds.

    Authority: 42 U.S.C. 3535(d) and 11403-11407b.

    Source: 58 FR 13892, Mar. 15, 1993, unless otherwise noted.



                            Subpart A_General



Sec.  582.1  Purpose and scope.

    (a) General. The Shelter Plus Care program (S+C) is authorized by 
title IV, subtitle F, of the Stewart B. McKinney Homeless Assistance Act 
(the McKinney Act) (42 U.S.C. 11403-11407b). S+C is designed to link 
rental assistance to supportive services for hard-to-serve homeless 
persons with disabilities (primarily those who are seriously mentally 
ill; have chronic problems with alcohol, drugs, or both; or have 
acquired immunodeficiency syndrome (AIDS) and related diseases) and 
their families. The program provides grants to be used for rental 
assistance for permanent housing for homeless persons with disabilities. 
Rental assistance grants must be matched in the aggregate by supportive 
services that are equal in value to the amount of rental assistance and 
appropriate to the needs of the population to be served. Recipients are 
chosen on a competitive basis nationwide.
    (b) Components. Rental assistance is provided through four 
components described inSec. 582.100. Applicants may apply for 
assistance under any one of the four components, or a combination.

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 51169, Sept. 30, 1996]



Sec.  582.5  Definitions.

    The terms Fair Market Rent (FMR), HUD, Public Housing Agency (PHA), 
Indian Housing Authority (IHA), and Secretary are defined in 24 CFR part 
5.
    As used in this part:
    Acquired immunodeficiency syndrome (AIDS) and related diseases has 
the meaning given in section 853 of the AIDS Housing Opportunity Act (42 
U.S.C. 12902).
    Applicant has the meaning given in section 462 of the McKinney Act 
(42 U.S.C. 11403g).
    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; and

[[Page 264]]

    (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 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 those criteria later in life.
    Eligible person means a homeless person with disabilities (primarily 
persons who are seriously mentally ill; have chronic problems with 
alcohol, drugs, or both; or have AIDS and related diseases) and, if also 
homeless, the family of such a person. To be eligible for assistance, 
persons must be very low income, except that low-income individuals may 
be assisted under the SRO component in accordance with 24 CFR 
813.105(b).
    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

[[Page 265]]

    (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, and faith-based or other social networks, to obtain other 
permanent housing.
    Indian tribe has the meaning given in section 102 of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302).
    Low-income means an annual income not in excess of 80 percent of the 
median income for the area, as determined by HUD. HUD may establish 
income limits higher or lower than 80 percent of the median income for 
the area on the basis of its finding that such variations are necessary 
because of the prevailing levels of construction costs or unusually high 
or low family incomes.
    Nonprofit organization has the meaning given in section 104 of the 
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704). The 
term nonprofit organization also includes a community mental health 
center established as a public nonprofit organization.
    Participant means an eligible person who has been selected to 
participate in S+C.
    Person with disabilities means a household composed of one or more 
persons at least one of whom is an adult who has a disability.
    (1) A person shall be considered to have a disability if he or she 
has a disability that:
    (i) Is expected to be long-continuing or of indefinite duration;
    (ii) Substantially impedes the individual's ability to live 
independently;
    (iii) Could be improved by the provision of more suitable housing 
conditions; and
    (iv) Is a physical, mental, or emotional impairment, including an 
impairment caused by alcohol or drug abuse, post-traumatic stress 
disorder, or brain injury.
    (2) A person will also be considered to have a disability if he or 
she has a developmental disability, as defined in this section.
    (3) A person will also be considered to have a disability if he or 
she has acquired immunodeficiency syndrome (AIDS) or any conditions 
arising from the etiologic agent for acquired immunodeficiency syndrome, 
including infection with the human immunodeficiency virus (HIV).
    (4) Notwithstanding the preceding provisions of this definition, the 
term person with disabilities includes, except in the case of the SRO 
component, two or more persons with disabilities living together, one or 
more such persons living with another person who is determined to be 
important to their care or well-being, and the surviving member or 
members of any household described in the first sentence of this 
definition who were living, in a unit assisted under this part, with the 
deceased member of the household at the time of his or her death. (In 
any event, with respect to the surviving member or members of a 
household, the right to rental assistance under this part will terminate 
at the end of the grant period under which the deceased member was a 
participant.)
    Recipient means an applicant approved to receive a S+C grant.
    Seriously mentally ill has the meaning given in section 462 of the 
McKinney Act (42 U.S.C. 11403g).
    Single room occupancy (SRO) housing means a unit for occupancy by 
one person, which need not but may contain food preparation or sanitary 
facilities, or both.
    Sponsor means a nonprofit organization which owns or leases dwelling 
units and has contracts with a recipient to make such units available to 
eligible homeless persons and receives rental assistance payments under 
the SRA component.
    State has the meaning given in section 462 of the McKinney Act (42 
U.S.C. 11403g).
    Supportive service provider, or service provider, means a person or 
organization licensed or otherwise qualified to

[[Page 266]]

provide supportive services, either for profit or not for profit.
    Supportive services means assistance that--
    (1) Addresses the special needs of eligible persons; and
    (2) Provides appropriate services or assists such persons in 
obtaining appropriate services, including health care, mental health 
treatment, alcohol and other substance abuse services, child care 
services, case management services, counseling, supervision, education, 
job training, and other services essential for achieving and maintaining 
independent living.


(Inpatient acute hospital care does not qualify as a supportive 
service.).
    Unit of general local government has the meaning given in section 
102 of the Housing and Community Development Act of 1974 (42 U.S.C. 
5302).
    Very low-income means an annual income not in excess of 50 percent 
of the median income for the area, as determined by HUD, with 
adjustments for smaller and larger families. HUD may establish income 
limits higher or lower than 50 percent of the median income for the area 
on the basis of its finding that such variations are necessary because 
of unusually high or low family incomes.

[61 FR 51169, Sept. 30, 1996; 62 FR 13539, Mar. 21, 1997; 76 FR 76014, 
Dec. 5, 2011]



                      Subpart B_Assistance Provided



Sec.  582.100  Program component descriptions.

    (a) Tenant-based rental assistance (TRA). Tenant-based rental 
assistance provides grants for rental assistance which permit 
participants to choose housing of an appropriate size in which to 
reside. Participants retain the rental assistance if they move. Where 
necessary to facilitate the coordination of supportive services, grant 
recipients may require 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. Recipients may not define the area in a way that violates 
the Fair Housing Act or the Rehabilitation Act of 1973. The term of the 
grant between HUD and the grant recipient for TRA is five years.
    (b) Project-based rental assistance (PRA). Project-based rental 
assistance provides grants for rental assistance to the owner of an 
existing structure, where the owner agrees to lease the subsidized units 
to participants. Participants do not retain rental assistance if they 
move. Rental subsidies are provided to the owner for a period of either 
five or ten years. To qualify for ten years of rental subsidies, the 
owner must complete at least $3,000 of eligible rehabilitation for each 
unit (including the unit's prorated share of work to be accomplished on 
common areas or systems), to make the structure decent, safe and 
sanitary. This rehabilitation must be completed with in 12 months of the 
grant award.
    (c) Sponsor-based rental assistance (SRA). Sponsor-based rental 
assistance provides grants for rental assistance through contracts 
between the grant recipient and sponsor organizations. A sponsor may be 
a private, nonprofit organization or a community mental health agency 
established as a public nonprofit organization. Participants reside in 
housing owned or leased by the sponsor. The term of the grant between 
HUD and the grant recipient for SRA is five years.
    (d) Moderate rehabilitation for single room occupancy dwellings 
(SRO). (1) The SRO component provides grants for rental assistance in 
connection with the moderate rehabilitation of single room occupancy 
housing units. Resources to initially fund the cost of rehabilitating 
the dwellings must be obtained from other sources. However, the rental 
assistance covers operating expenses of the rehabilitated SRO units 
occupied by homeless persons, including debt service to retire the cost 
of the moderate rehabilitation over a ten-year period.
    (2) SRO housing must be in need of moderate rehabilitation and must 
meet the requirements of 24 CFR 882.803(a). Costs associated with 
rehabilitation of common areas may be included in the calculation of the 
cost for assisted units based on the proportion of the number of units 
to be assisted under this part to the total number of units.

[[Page 267]]

    (3) SRO assistance may also be used for efficiency units selected 
for rehabilitation under this program, but the gross rent (contract rent 
plus any utility allowance) for those units will be no higher than for 
SRO units (i.e., 75 percent of the 0-bedroom Moderate Rehabilitation 
Fair Market Rent).
    (4) The requirements regarding maintenance, operation, and 
inspections described in 24 CFR 882.806(b)(4) and 882.808(n) must be 
met.
    (5) Governing regulations. Except where there is a conflict with any 
requirement under this part or where specifically provided, the SRO 
component will be governed by the regulations set forth in 24 CFR part 
882, subpart H.



Sec.  582.105  Rental assistance amounts and payments.

    (a) Eligible activity. S+C grants may be used for providing rental 
assistance for housing occupied by participants in the program and 
administrative costs as provided for in paragraph (e) of this section, 
except that the housing may not be currently receiving Federal funding 
for rental assistance or operating costs under other HUD programs. 
Recipients may design a housing program that includes a range of housing 
types with differing levels of supportive services. Rental assistance 
may include security deposits on units in an amount up to one month's 
rent.
    (b) Amount of the grant. The amount of the grant is based on the 
number and size of units proposed by the applicant to be assisted over 
the grant period. The grant amount is calculated by multiplying the 
number of units proposed times the applicable Fair Market Rent (FMR) of 
each unit times the term of the grant.
    (c) Payment of grant. (1) The grant amount will be reserved for 
rental assistance over the grant period. An applicant's grant request is 
an estimate of the amount needed for rental assistance. Recipients will 
make draws from the reserved amount to pay the actual costs of rental 
assistance for program participants. For TRA, on demonstration of need, 
up to 25 percent of the total rental assistance awarded may be spent in 
any one of the five years, or a higher percentage if approved by HUD, 
where the applicant provides evidence satisfactory to HUD that it is 
financially committed to providing the housing assistance described in 
the application for the full five-year period.
    (2) A recipient must serve at least as many participants as shown in 
its application. Where the grant amount 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 factor as contract rents 
being lower than FMRs and participants are being able to pay a portion 
of the rent, recipients may use the remaining funds for the costs of 
administering the housing assistance, as described in paragraph (e) of 
this section, for damage to property, as described in paragraph (f) of 
this section, for covering the costs of rent increases, or for serving a 
great number of participants.
    (d) Vacancies. (1) If a unit assisted under this part is vacated 
before the expiration of the occupancy agreement described inSec. 
582.315 of this part, 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.
    (2) As used in this paragraph (d), the term ``vacate'' does not 
include brief periods of inpatient care, not to exceed 90 days for each 
occurrence.
    (e) Administrative costs. (1) Up to eight percent of the grant 
amount may be used to pay the costs of administering the housing 
assistance. Recipients may contract with another entity approved by HUD 
to administer the housing assistance.
    (2) Eligible administrative activities include processing rental 
payments to landlords, examining participant income and family 
composition, providing housing information and assistance, inspecting 
units for compliance with housing quality standards, and receiving into 
the program new participants. This administrative allowance does not 
include the cost of administering the supportive services or the grant 
(e.g., costs of preparing the application, reports or audits required by

[[Page 268]]

HUD), which are not eligible activities under a S+C grant.
    (f) Property damage. Recipients may use grant funds in an amount up 
to one month's rent to pay for any damage to housing due to the action 
of a participant.

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 51170, Sept. 30, 1996]



Sec.  582.110  Matching requirements.

    (a) Matching rental assistance with supportive services. (1) To 
qualify for rental assistance grants, an applicant must certify that it 
will provide or ensure the provision of supportive services, including 
funding the services itself if the planned resources do not become 
available for any reason, appropriate to the needs of the population 
being served, and at least equal in value to the aggregate amount of 
rental assistance funded by HUD. The supportive services may be newly 
created for the program or already in operation, and may be provided or 
funded by other Federal, State, local, or private programs in accordance 
with 42 U.S.C. 11403b. This statute provides that a recipient may use 
funds from any source, including any other Federal source (but excluding 
the specific statutory subtitle from which S+C funds are provided), as 
well as State, local, and private sources, provided that funds from the 
other source are not statutorily prohibited to be used as a match.
    (2) Only services that are provided after the execution of the grant 
agreement may count toward the match.
    (3) It is the responsibility of the recipient to ensure that any 
funds or services used to satisfy the matching requirements of this 
section are eligible under the laws governing the funds or services to 
be used as matching funds or services for a grant awarded under this 
program.
    (b) Availability to participants. Recipients must give reasonable 
assurances that supportive services will be available to participants 
for the entire term of the rental assistance. The value of the services 
provided to a participant, however, does not have to equal the amount of 
rental assistance provided that participant, nor does the value have to 
be equal to the amount of rental assistance on a year-to-year basis.
    (c) Calculating the value of supportive services. In calculating the 
amount of the matching supportive services, applicants may count:
    (1) Salaries paid to staff of the recipient to provide supportive 
services to S+C participants;
    (2) The value of supportive services provided by other persons or 
organizations to S+C participants;
    (3) The value of time and services contributed by volunteers at the 
rate of $10.00 an hour, except for donated professional services which 
may be counted at the customary charge for the service provided 
(professional services are services ordinarily performed by donors for 
payment, such as the services of health professionals, that are 
equivalent to the services they provide in their occupations);
    (4) The value of any lease on a building used for the provision of 
supportive services, provided the value included in the match is no more 
than the prorated share used for the program; and
    (5) The cost of outreach activities, as described inSec. 
582.325(a) of this part.

[58 FR 13892, Mar. 15, 1993, as amended at 73 FR 75325, Dec. 11, 2008]



Sec.  582.115  Limitations on assistance.

    (a) Current occupants. Current occupants of the real property are 
not eligible for assistance under this part. However, as described in 
Sec.  582.335, persons displaced as a direct result of acquisition, 
rehabilitation, or demolition for a project under the S+C program are 
eligible for and must be provided relocation assistance at Uniform 
Relocation Act levels.
    (b) Amount of assistance provided within a jurisdiction. HUD will 
limit the amount of assistance provided within the jurisdiction of any 
one unit of local government to no more than 10 percent of the amount 
available.
    (c) Faith-based activities. (1) Organizations that are religious or 
faith-based are eligible, on the same basis as any other organization, 
to participate in the S+C program. Neither the Federal government nor a 
State or local government receiving funds under S+C programs shall 
discriminate against an

[[Page 269]]

organization on the basis of the organization's religious character or 
affiliation.
    (2) Organizations that are directly funded under the S+C program may 
not engage in inherently religious activities, such as worship, 
religious instruction, or proselytization as part of the programs or 
services funded under this part. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (3) A religious organization that participates in the S+C program 
will retain its independence from Federal, State, and local governments, 
and may continue to carry out its mission, including the definition, 
practice and expression of its religious beliefs, provided that it does 
not use direct S+C funds to support any inherently religious activities, 
such as worship, religious instruction, or proselytization. Among other 
things, faith-based organizations may use space in their facilities to 
provide S+C-funded services, without removing religious art, icons, 
scriptures, or other religious symbols. In addition, an S+C-funded 
religious organization retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's mission statements and other 
governing documents.
    (4) An organization that participates in the S+C program shall not, 
in providing program assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of religion 
or religious belief.
    (5) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this section applies to all 
of the commingled funds.
    (d) Maintenance of effort. No assistance received under this part 
(or any State or local government funds used to supplement this 
assistance) may be used to replace funds provided under any State or 
local government assistance programs previously used, or designated for 
use, to assist persons with disabilities, homeless persons, or homeless 
persons with disabilities.

[58 FR 13892, Mar. 15, 1993, as amended at 68 FR 56407, Sept. 30, 2003]



Sec.  582.120  Consolidated plan.

    (a) Applicants that are States or units of general local government. 
The applicant must have a HUD-approved complete or abbreviated 
consolidated plan, in accordance with 24 CFR part 91, and must submit a 
certification that the application for funding is consistent with the 
HUD-approved consolidated plan. Funded applicants must certify in a 
grant agreement that they are following the HUD-approved consolidated 
plan. If the applicant is a State, and the project will be located in a 
unit of general local government that is required to have, or has, a 
complete consolidated plan, or that is applying for Shelter Plus Care 
assistance under the same Notice of Fund Availability (NOFA) and will 
have an abbreviated consolidated plan with respect to that application, 
the State also must submit a certification by the unit of general local 
government that the State's application is consistent with the unit of 
general local government's HUD-approved consolidated plan.
    (b) Applicants that are not States or units of general local 
government. The applicant must submit a certification by the 
jurisdiction in which the proposed project will be located that the 
jurisdiction is following its HUD-approved consolidated plan and 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 of the consolidated plan 
regulations, 24 CFR part 91, subpart F.
    (c) Indian tribes and the Insular Areas of Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands. These 
entities are not required to have a consolidated plan or to make 
consolidated plan certifications. An application by an Indian tribe or 
other

[[Page 270]]

applicant for a project that will be located on a reservation of an 
Indian tribe will not require a certification by the tribe or the State. 
However, where an Indian tribe is the applicant for a project that will 
not be located on a reservation, the requirement for a certification 
under paragraph (b) of this section will apply.
    (d) Timing of consolidated plan certification submissions. Unless 
otherwise set forth in the NOFA, 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.

[60 FR 16379, Mar. 30, 1995]



                  Subpart C_Application and Grant Award



Sec.  582.200  Application and grant award.

    (a) Review. When funds are made available for assistance, HUD will 
publish a notice of fund availability in the Federal Register in 
accordance with the requirements of 24 CFR part 4. Applications will be 
reviewed and screened in accordance with the guidelines, rating criteria 
and procedures published in the notice.
    (b) Rating criteria. HUD will award funds based on the criteria 
specified in section 455(a)(1) through (8) of the McKinney Act (42 
U.S.C. 11403d(1)--11403d(8)) and on the following criteria authorized by 
section 455(a)(9) of the McKinney Act (42 U.S.C. 11403d(9)):
    (1) The extent to which the applicant has demonstrated coordination 
with other Federal, State, local, private and other entities serving 
homeless persons in the planning and operation of the project, to the 
extent practicable;
    (2) Extent to which the project targets homeless persons living in 
emergency shelters, supportive housing for homeless persons, or in 
places not designed for, or ordinarily used as, a regular sleeping 
accommodation for human beings;
    (3) Quality of the project; and
    (4) Extent to which the program will serve homeless persons who are 
seriously mentally ill, have chronic alcohol and/or drug abuse problems, 
or have AIDS and related diseases.

(Approved by the Office of Management and Budget under control number 
2506-0118)

[61 FR 51170, Sept. 30, 1996]



Sec.  582.230  Environmental review.

    (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 prior to 
its approval of any conditionally selected applications from PHAs for 
Fiscal Year 2000 and prior years for other than the SRO component. For 
activities under a grant to a PHA that generally would be subject to 
review under part 58, HUD may make a finding in accordance withSec. 
58.11(d) and may itself perform the environmental review under the 
provisions of part 50 of this title if the recipient PHA 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. 
HUD may eliminate from consideration any application that would require 
an Environmental Impact Statement (EIS).
    (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 inSec. 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 under part 50 and the recipient has 
received HUD approval of the property. HUD

[[Page 271]]

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).

[68 FR 56130, Sept. 29, 2003]



                     Subpart D_Program Requirements



Sec.  582.300  General operation.

    (a) Participation of homeless individuals. (1) Each recipient must 
provide for the consultation and 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 housing assisted under this part or services for the 
participants. This requirement is waived if the applicant is unable to 
meet the requirement and presents a plan, which HUD approves, to 
otherwise consult with homeless or formerly homeless individuals in 
considering and making such policies and decisions. Participation by 
such an individual who also is a participant under the program does not 
constitute a conflict of interest underSec. 582.340(b) of this part.
    (2) To the maximum extent practicable, each recipient must involve 
homeless individuals and families, through employment, volunteer 
services, or otherwise, in constructing or rehabilitating housing 
assisted under this part and in providing supportive services required 
underSec. 582.215 of this part.
    (b) Ongoing assessment of housing and supportive services. Each 
recipient of assistance must conduct an ongoing assessment of the 
housing assistance and supportive services required by the participants, 
and make adjustments as appropriate.
    (c) Adequate supportive services. Each recipient must assure that 
adequate supportive services are available to participants in the 
program.
    (d) Records and reports. (1) Each recipient must keep any records 
and, within the timeframe required, make any reports (including those 
pertaining to race, ethnicity, gender, and disability status data) that 
HUD may require.
    (2) Each recipient must keep on file, and make available to the 
public on request, a description of the procedures used to select 
sponsors under the SRA component and buildings under the SRO, SRA, and 
PRA components.
    (3) Each recipient must develop, and make available to the public 
upon request, its procedures for managing the rental housing assistance 
funds provided by HUD. At a minimum, such procedures must describe how 
units will be identified and selected; how the responsibility for 
inspections will be handled; the process for deciding which unit a 
participant will occupy; how participants will be placed in, or assisted 
in finding appropriate housing; how rent calculations will be made and 
the amount of rental assistance payments determined; and what safeguards 
will be used to prevent the misuse of funds.

(Approved by the Office of Management and Budget under control number 
2506-0118)

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 51171, Sept. 30, 1996]



Sec.  582.301  Recordkeeping.

    (a) [Reserved]
    (b) Homeless status. The recipient must maintain and follow written 
intake procedures to ensure compliance with the homeless definition in 
Sec.  582.5. 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, as defined in 
section 401(32) of the McKinney-Vento Homeless Assistance Act, as 
amended by the HEARTH Act. Records contained in an HMIS or comparable 
database used by victim service or legal service providers are

[[Page 272]]

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 
entries are made.
    (1) If the individual or family qualifies as homeless under 
paragraph (1)(i) or (ii) of the homeless definition inSec. 582.5, 
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 inSec. 582.5, 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 inSec. 582.5, because the 
individual or family will imminently lose their housing, the evidence 
must include:
    (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 be 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 inSec. 582.5, 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

[[Page 273]]

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 inSec. 582.5, 
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 inSec. 
582.5, 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 inSec. 
582.5, 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 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 inSec. 
582.5, 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 the date of 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 inSec. 582.5, 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, as defined in section 401(32) of the McKinney-Vento-Homeless 
Assistance Act, as amended by the HEARTH Act, 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

[[Page 274]]

by a written observation by the intake worker or a written referral by a 
housing or service provider, social worker, 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) Disability.--Each recipient of assistance under this part must 
maintain and follow written intake procedures to ensure that the 
assistance benefits persons with disabilities, as defined inSec. 
582.5. In addition to the documentation required under paragraph (b), 
the procedures must require documentation at intake of the evidence 
relied upon to establish and verify the disability of the person 
applying for homeless assistance. The recipient must keep these records 
for 5 years after the end of the grant term. Acceptable evidence of the 
disability includes:
    (1) Written verification of the disability from a professional 
licensed by the state to diagnose and treat the disability and his or 
her certification that the disability is expected to be long-continuing 
or of indefinite duration and substantially impedes the individual's 
ability to live independently;
    (2) Written verification from the Social Security Administration;
    (3) The receipt of a disability check (e.g., Social Security 
Disability Insurance check or Veteran Disability Compensation);
    (4) Intake staff-recorded observation of disability that, no later 
than 45 days of the application for assistance, is confirmed and 
accompanied by evidence in paragraph (c)(1), (2), (3), or (4) of this 
section; or
    (5) Other documentation approved by HUD.

[76 FR 76015, Dec. 5, 2011]



Sec.  582.305  Housing quality standards; rent reasonableness.

    (a) Housing quality standards. Housing assisted under this part must 
meet the applicable housing quality standards (HQS) underSec. 982.401 
of this title--except thatSec. 982.401(j) of this title does not apply 
and instead part 35, subparts A, B, K and R of this title apply--and, 
for SRO underSec. 882.803(b) of this title. Before any assistance will 
be provided on behalf of a participant, the recipient, or another entity 
acting on behalf of the recipient (other than the owner of the housing), 
must physically inspect each unit to assure that the unit meets the HQS. 
Assistance will not be provided for units that fail to meet the HQS, 
unless the owner corrects any deficiencies within 30 days from the date 
of the lease agreement and the recipient verifies that all deficiencies 
have been corrected. Recipients must also inspect all units at least 
annually during the grant period to ensure that the units continue to 
meet the HQS.
    (b) Rent reasonableness. HUD will only provide assistance for a unit 
for which the rent is reasonable. For TRA, PRA, and SRA, it is the 
responsibility of the recipient to 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, as well as not in excess of rents 
currently being charged by the same owner for comparable unassisted 
units. For SRO, rents are calculated in accordance with 24 CFR 
882.805(g).

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 51171, Sept. 30, 1996; 
64 FR 50226, Sept. 15, 1999]



Sec.  582.310  Resident rent.

    (a) Amount of rent. Each participant must pay rent in accordance 
with section 3(a)(1) of the U.S. Housing Act of 1937 (42 U.S.C. 
1437a(a)(1)), except that in determining the rent of a person occupying 
an intermediate care facility assisted under title XIX of the Social 
Security Act, the gross income of this person is the same as if the 
person were being assisted under title XVI of the Social Security Act.

[[Page 275]]

    (b) Calculating income. (1) Income of participants must be 
calculated in accordance with 24 CFR 5.609 and 24 CFR 5.611(a).
    (2) Recipients must examine a participant's income initially, and at 
least annually thereafter, to determine the amount of rent payable by 
the participant. Adjustments to a participant's rental payment must be 
made as necessary.
    (3) As a condition of participation in the program, each participant 
must agree to supply the information or documentation necessary to 
verify the participant's income. Participants must provide the recipient 
information at any time regarding changes in income or other 
circumstances that may result in changes to a participant's rental 
payment.

[66 FR 6225, Jan. 19, 2001]



Sec.  582.315  Occupancy agreements.

    (a) Initial occupancy agreement. Participants must enter into an 
occupancy agreement for a term of at least one month. The occupancy 
agreement must be automatically renewable upon expiration, except on 
prior notice by either party.
    (b) Terms of agreement. In addition to standard lease provisions, 
the occupancy agreement may also include a provision requiring the 
participant to take part in the supportive services provided through the 
program as a condition of continued occupancy.



Sec.  582.320  Termination of assistance to participants.

    (a) Termination of assistance. The recipient may terminate 
assistance to a participant who violates program requirements or 
conditions of occupancy. Recipients must exercise judgment and examine 
all extenuating circumstances in determining when violations are serious 
enough to warrant termination, so that a participant's assistance is 
terminated only in the most severe cases. Recipients are not prohibited 
from resuming assistance to a participant whose assistance has been 
terminated.
    (b) Due process. In terminating assistance to a participant, the 
recipient must provide a formal process that recognizes the rights of 
individuals receiving assistance to due process of law. This process, at 
a minimum, must consist of:
    (1) Written notice to the participant containing a clear statement 
of the reasons for termination;
    (2) A review of the decision, in which the participant is given the 
opportunity to present written or oral objections before a person other 
than the person (or a subordinate of that person) who made or approved 
the termination decision; and
    (3) Prompt written notice of the final decision to the participant.



Sec.  582.325  Outreach activities.

    Recipients must use their best efforts to ensure that eligible hard-
to-reach persons are served by S+C. Recipients are expected to make 
sustained efforts to engage eligible persons so that they may be brought 
into the program. Outreach should be primarily directed toward eligible 
persons who have a nighttime residence that is an emergency shelter or a 
public or private place not designed for, or ordinarily used as, a 
regular sleeping accommodation for human beings (e.g., persons living in 
cars, streets, and parks). Outreach activities are considered to be a 
supportive service, and the value of such activities that occur after 
the execution of the grant agreement may be included in meeting the 
matching requirement.



Sec.  582.330  Nondiscrimination and equal opportunity requirements.

    (a) General. Recipients may establish a preference as part of their 
admissions procedures for one or more of the statutorily targeted 
populations (i.e., seriously mentally ill, alcohol or substance abusers, 
or persons with AIDS and related diseases). However, other eligible 
disabled homeless persons must be considered for housing designed for 
the target population unless the recipient can demonstrate that there is 
sufficient demand by the target population for the units, and other 
eligible disabled homeless persons would not benefit from the primary 
supportive services provided.
    (b) Compliance with requirements. (1) In addition to the 
nondiscrimination and equal opportunity requirements

[[Page 276]]

set forth in 24 CFR part 5, recipients serving a designated population 
of homeless persons must, within the designated population, comply with 
the prohibitions against discrimination against handicapped individuals 
under section 503 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and 
implementing regulations at 41 CFR chapter 60-741.
    (2) The nondiscrimination and equal opportunity requirements set 
forth at part 5 of this title are modified as follows:
    (i) The Indian Civil Rights Act (25 U.S.C. 1301 et seq.) applies to 
tribes when they exercise their powers of self-government, and to IHAs 
when established by the exercise of such powers. When an IHA is 
established under State law, the applicability of the Indian Civil 
Rights Act will be determined on a case-by-case basis. Projects subject 
to the Indian Civil Rights Act must be developed and operated in 
compliance with its provisions and all implementing HUD requirements, 
instead of title VI and the Fair Housing Act and their implementing 
regulations.
    (ii) [Reserved]
    (c) Affirmative outreach. (1) If the procedures that the recipient 
intends to use to make known the availability of the program are 
unlikely to reach persons of any particular race, color, religion, sex, 
age, national origin, familial status, or handicap who may qualify for 
assistance, the recipient must establish additional procedures that will 
ensure that interested persons can obtain information concerning the 
assistance.
    (2) The recipient must adopt procedures to make available 
information on the existence and locations of facilities and services 
that are accessible to persons with a handicap and maintain evidence of 
implementation of the procedures.
    (d) The accessibility requirements, reasonable modification, and 
accommodation requirements of the Fair Housing Act and of section 504 of 
the Rehabilitation Act of 1973, as amended.

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 5210, Feb. 9, 1996]



Sec.  582.335  Displacement, relocation, and real property acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, recipients 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 supportive housing 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 supportive housing is subject to the URA and the 
requirements described in 49 CFR part 24, subpart B.
    (d) Responsibility of recipient. (1) The recipient must certify 
(i.e., provide assurance of compliance) that it will comply with the 
URA, the regulations at 49 CFR part 24, and the requirements of this 
section, and must ensure such compliance notwithstanding any third 
party's contractual obligation to the recipient 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 local public funds or funds 
available from other sources.
    (3) The recipient must maintain records in sufficient detail to 
demonstrate compliance with provisions of this section.
    (e) Appeals. A person who disagrees with the recipient'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 
recipient. A low-income person who is dissatisfied with the recipient's 
determination on his or her appeal may submit a written request for 
review of that determination to the HUD field office.

[[Page 277]]

    (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 
supportive housing project assisted under this part. The term 
``displaced person'' includes, but may not be limited to:
    (i) A person that moves permanently from the real property after the 
property owner (or person in control of the site) issues a vacate notice 
or refuses to renew an expiring lease, if the move occurs on or after:
    (A) The date that the recipient submits to HUD an application for 
assistance that is later approved and funded, if the recipient has 
control of the project site; or
    (B) The date that the recipient obtains control of the project site, 
if such control is obtained after the submission of the application to 
HUD.
    (ii) Any person, including a person who moves before the date 
described in paragraph (f)(1)(i) of this section, if the recipient or 
HUD determines that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project.
    (iii) A tenant-occupant of a dwelling unit who moves permanently 
from the building/complex on or after the date of the ``initiation of 
negotiations'' (see paragraph (g) of this section) if 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 must include a monthly rent and estimated average monthly 
utility costs that do not exceed the greater of:
    (A) The tenant's monthly rent before the initiation of negotiations 
and estimated average utility costs, or
    (B) 30 percent of gross household income. If the initial rent is at 
or near the maximum, there must be a reasonable basis for concluding at 
the time the project is initiated that future rent increases will be 
modest.
    (iv) A tenant of a dwelling who is required to relocate temporarily, 
but does not return to the building/complex, if either:
    (A) A tenant is not offered payment for all reasonable out-of-pocket 
expenses incurred in connection with the temporary relocation, or
    (B) Other conditions of the temporary relocation are not reasonable.
    (v) A tenant of a dwelling who moves from the building/complex 
permanently after he or she has been required to move to another unit in 
the same building/complex, if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) 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 
of applicable Federal, State, or local or tribal law, or other good 
cause, and HUD determines that the eviction was not undertaken for the 
purpose 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 recipient may request, at any time, HUD's determination of 
whether

[[Page 278]]

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 recipient and HUD, or selection 
of the project site, if later.



Sec.  582.340  Other Federal requirements.

    In addition to the Federal requirements set forth in 24 CFR part 5, 
the following requirements apply to this program:
    (a) OMB Circulars.\1\ (1) The policies, guidelines, and requirements 
of OMB Circular No. A-87 (Cost Principles Applicable to Grants, 
Contracts and Other Agreements with State and Local Governments) and 24 
CFR part 85 apply to the acceptance and use of assistance under the 
program by governmental entities, and OMB Circular Nos. A-110 (Grants 
and Cooperative Agreements with Institutions of Higher Education, 
Hospitals, and Other Nonprofit Organizations) and 24 CFR part 84 and A-
122 (Cost Principles Applicable to Grants, Contracts and Other 
Agreements with Nonprofit Institutions) apply to the acceptance and use 
of assistance by private nonprofit organizations, except where 
inconsistent with provisions of the McKinney Act, other Federal 
statutes, or this part.
---------------------------------------------------------------------------

    \1\ Copies of OMB Circulars may be obtained from E.O.P. 
Publications, room 2200, New Executive Office Building, Washington, DC 
20503, telephone (202) 395-7332. (This is not a toll-free number.) There 
is a limit of two free copies.
---------------------------------------------------------------------------

    (2) The financial management systems used by recipients under this 
program must provide for audits in accordance with the provisions of 24 
CFR part 44. Private nonprofit organizations who are subrecipients are 
subject to the audit requirements of 24 CFR part 45. HUD may perform or 
require additional audits as it finds necessary or appropriate.
    (b) Conflict of interest. (1) In addition to the conflict of 
interest requirements in 24 CFR part 85, no person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
recipient 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 decisionmaking process or gain inside 
information with regard to such activities, may obtain a personal or 
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. Participation by homeless individuals who also 
are participants under the program in policy or decisionmaking under 
Sec.  582.300 of this part does not constitute a conflict of interest.
    (2) Upon the written request of the recipient, HUD may grant an 
exception to the provisions of paragraph (b)(1) of this section on a 
case-by-case basis when it determine that the exception will serve to 
further the purposes of the program and the effective and efficient 
administration of the recipient's project. An exception may be 
considered only after the recipient has provided the following:
    (i) For States, units of general local governments, PHAs and IHAs, 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) For all recipients, an opinion of the recipient's attorney that 
the interest for which the exception is sought would not violate State 
or local law.
    (3) In determining whether to grant a requested exception after the 
recipient has satisfactorily met the requirement of paragraph (b)(2) of 
this section, HUD will consider the cumulative effect of the following 
factors, where applicable:
    (i) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the project which would otherwise 
not be available;
    (ii) Whether the person affected is a member of a group or class of 
eligible persons and the exception will permit

[[Page 279]]

such person to receive generally the same interests or benefits as are 
being made available or provided to the group or class;
    (iii) 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;
    (iv) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (b)(1) of this 
section;
    (v) 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
    (vi) Any other relevant considerations.

[58 FR 13892, Mar. 15, 1993, as amended at 61 FR 5210, Feb. 9, 1996; 61 
FR 51171, Sept. 30, 1996; 62 FR 13539, Mar. 21, 1997]



                        Subpart E_Administration



Sec.  582.400  Grant agreement.

    (a) General. The grant agreement will be between HUD and the 
recipient. HUD will hold the recipient responsible for the overall 
administration of the program, including overseeing any subrecipients or 
contractors. Under the grant agreement, the recipient must agree to 
operate the program in accordance with the provisions of this part and 
other applicable HUD regulations.
    (b) Enforcement. HUD will enforce the obligations in the grant 
agreement through such action as may be necessary, including recapturing 
assistance awarded under the program.



Sec.  582.405  Program changes.

    (a) Changes. HUD must approve, in writing, any significant changes 
to an approved program. Significant changes that require approval 
include, but are not limited to, a change in sponsor , a change in the 
project site for SRO or PRA with rehabilitation projects, and a change 
in the type of persons with disabilities to be served. Depending on the 
nature of the change, HUD may require a new certification of consistency 
with the CHAS (seeSec. 582.120).
    (b) Approval. Approval for such changes is contingent upon the 
application ranking remaining high enough to have been competitively 
selected for funding in the year the application was selected.



Sec.  582.410  Obligation and deobligation of funds.

    (a) Obligation of funds. When HUD and the applicant execute a grant 
agreement, HUD will obligate funds to cover the amount of the approved 
grant. The recipient will be expected to carry out the activities as 
proposed in the application. After the initial obligation of funds, HUD 
is under no obligation to make any upward revisions to the grant amount 
for any approved assistance.
    (b) Deobligation. (1) HUD may deobligate all or a portion of the 
approved grant amount if such amount is not expended in a timely manner, 
or the proposed housing for which funding was approved or the supportive 
services proposed in the application are not provided in accordance with 
the approved application, the requirements of this part, and other 
applicable HUD regulations. The grant agreement may set forth other 
circumstances under which funds may be deobligated, and other sanctions 
may be imposed.
    (2) HUD may readvertise, in a notice of fund availability, the 
availability of funds that have been deobligated, or may reconsider 
applications that were submitted in response to the most recently 
published notice of fund availability and select applications for 
funding with the deobligated funds. Such selections would be made in 
accordance with the selection process described inSec. 582.220 of this 
part. Any selections made using deobligated funds will be subject to 
applicable appropriation act requirements governing the use of 
deobligated funding authority.

(Approved by the Office of Management and Budget under control number 
2506-0118)



PART 583_SUPPORTIVE HOUSING PROGRAM--Table of Contents



                            Subpart A_General

Sec.
583.1 Purpose and scope.
583.5 Definitions.

[[Page 280]]

                      Subpart B_Assistance Provided

583.100 Types and uses of assistance.
583.105 Grants for acquisition and rehabilitation.
583.110 Grants for new construction.
583.115 Grants for leasing.
583.120 Grants for supportive service costs.
583.125 Grants for operating costs.
583.130 Commitment of grant amounts for leasing, supportive services, 
          and operating costs.
583.135 Administrative costs.
583.140 Technical assistance.
583.145 Matching requirements.
583.150 Limitations on use of assistance.
583.155 Consolidated plan.

              Subpart C_Application and Grant Award Process

583.200 Application and grant award.
583.230 Environmental review.
583.235 Renewal grants.

                     Subpart D_Program Requirements

583.300 General operation.
583.301 Recordkeeping.
583.305 Term of commitment; repayment of grants; prevention of undue 
          benefits.
583.310 Displacement, relocation, and acquisition.
583.315 Resident rent.
583.320 Site control.
583.325 Nondiscrimination and equal opportunity requirements.
583.330 Applicability of other Federal requirements.

                        Subpart E_Administration

583.400 Grant agreement.
583.405 Program changes.
583.410 Obligation and deobligation of funds.

    Authority: 42 U.S.C. 11389 and 3535(d).

    Source: 58 FR 13871, Mar. 15, 1993, unless otherwise noted.



                            Subpart A_General



Sec.  583.1  Purpose and scope.

    (a) General. The Supportive Housing Program is authorized by title 
IV of the Stewart B. McKinney Homeless Assistance Act (the McKinney Act) 
(42 U.S.C. 11381-11389). The Supportive Housing program is designed to 
promote the development of supportive housing and supportive services, 
including innovative approaches to assist homeless persons in the 
transition from homelessness, and to promote the provision of supportive 
housing to homeless persons to enable them to live as independently as 
possible.
    (b) Components. Funds under this part may be used for:
    (1) Transitional housing to facilitate the movement of homeless 
individuals and families to permanent housing;
    (2) Permanent housing that provides long-term housing for homeless 
persons with disabilities;
    (3) Housing that is, or is part of, a particularly innovative 
project for, or alternative methods of, meeting the immediate and long-
term needs of homeless persons; or
    (4) Supportive services for homeless persons not provided in 
conjunction with supportive housing.

[58 FR 13871, Mar. 15, 1993, as amended at 61 FR 51175, Sept. 30, 1996]



Sec.  583.5  Definitions.

    As used in this part:
    Applicant is defined in section 422(1) of the McKinney Act (42 
U.S.C. 11382(1)). For purposes of this definition, governmental entities 
include those that have general governmental powers (such as a city or 
county), as well as those that have limited or special powers (such as 
public housing agencies).
    Consolidated plan means the plan that a jurisdiction prepares and 
submits to HUD in accordance with 24 CFR part 91.
    Date of initial occupancy means the date that the supportive housing 
is initially occupied by a homeless person for whom HUD provides 
assistance under this part. If the assistance is for an existing 
homeless facility, the date of initial occupancy is the date that 
services are first provided to the residents of supportive housing with 
funding under this part.
    Date of initial service provision means the date that supportive 
services are initially provided with funds under this part to homeless 
persons who do not reside in supportive housing. This definition applies 
only to projects funded under this part that do not provide supportive 
housing.
    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):

[[Page 281]]

    (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; and
    (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 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 those criteria later in life.
    Disability means:
    (1) A condition that:
    (i) Is expected to be long-continuing or of indefinite duration;
    (ii) Substantially impedes the individual's ability to live 
independently;
    (iii) Could be improved by the provision of more suitable housing 
conditions; and
    (iv) Is a physical, mental, or emotional impairment, including an 
impairment caused by alcohol or drug abuse, post-traumatic stress 
disorder, or brain injury;
    (2) A developmental disability, as defined in this section; or
    (3) The disease of acquired immunodeficiency syndrome (AIDS) or any 
conditions arising from the etiologic agent for acquired 
immunodeficiency syndrome, including infection with the human 
immunodeficiency virus (HIV).
    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

[[Page 282]]

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, and faith-based or other social networks, to obtain other 
permanent housing.
    Metropolitan city is defined in section 102(a)(4) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)(4)). In general, 
metropolitan cities are those cities that are eligible for an 
entitlement grant under 24 CFR part 570, subpart D.
    New construction means the building of a structure where none 
existed or an addition to an existing structure that increases the floor 
area by more than 100 percent.
    Operating costs is defined in section 422(5) of the McKinney Act (42 
U.S.C. 11382(5)).
    Outpatient health services is defined in section 422(6) of the 
McKinney Act (42 U.S.C. 11382(6)).
    Permanent housing for homeless persons with disabilities is defined 
in section 424(c) of the McKinney Act (42 U.S.C. 11384(c)).
    Private nonprofit organization is defined in section 422(7) (A), 
(B), and (D) of the McKinney Act (42 U.S.C. 11382(7) (A), (B), and (D)). 
The organization must also have a functioning accounting system that is 
operated in accordance with generally accepted accounting principles, or 
designate an entity that will maintain a functioning accounting system 
for the organization in accordance with generally accepted accounting 
principles.
    Project is defined in sections 422(8) and 424(d) of the McKinney Act 
(42 U.S.C. 11382(8), 11384(d)).
    Recipient is defined in section 422(9) of the McKinney Act (42 
U.S.C. 11382(9)).
    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. Rehabilitation does not include 
minor or routine repairs.
    State is defined in section 422(11) of the McKinney Act (42 U.S.C. 
11382(11)).
    Supportive housing is defined in section 424(a) of the McKinney Act 
(42 U.S.C. 11384(a)).
    Supportive services is defined in section 425 of the McKinney Act 
(42 U.S.C. 11385).
    Transitional housing is defined in section 424(b) of the McKinney 
Act (42 U.S.C. 11384(b)). See alsoSec. 583.300(j).
    Tribe is defined in section 102 of the Housing and Community 
Development Act of 1974 (42 U.S.C. 5302).
    Urban county is defined in section 102(a)(6) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)(6)). In general, 
urban counties are those counties that are eligible for an entitlement 
grant under 24 CFR part 570, subpart D.

[61 FR 51175, Sept. 30, 1996, as amended at 76 FR 76016, Dec. 5, 2011]

[[Page 283]]



                      Subpart B_Assistance Provided



Sec.  583.100  Types and uses of assistance.

    (a) Grant assistance. Assistance in the form of grants is available 
for acquisition of structures, rehabilitation of structures, acquisition 
and rehabilitation of structures, new construction, leasing, operating 
costs for supportive housing, and supportive services, as described in 
Sec.Sec. 583.105 through 583.125. Applicants may apply for more than 
one type of assistance.
    (b) Uses of grant assistance. Grant assistance may be used to:
    (1) Establish new supportive housing facilities or new facilities to 
provide supportive services;
    (2) Expand existing facilities in order to increase the number of 
homeless persons served;
    (3) Bring existing facilities up to a level that meets State and 
local government health and safety standards;
    (4) Provide additional supportive services for residents of 
supportive housing or for homeless persons not residing in supportive 
housing;
    (5) Purchase HUD-owned single family properties currently leased by 
the applicant for use as a homeless facility under 24 CFR part 291; and
    (6) Continue funding supportive housing where the recipient has 
received funding under this part for leasing, supportive services, or 
operating costs.
    (c) Structures used for multiple purposes. Structures used to 
provide supportive housing or supportive services may also be used for 
other purposes, except that assistance under this part will be available 
only in proportion to the use of the structure for supportive housing or 
supportive services.
    (d) Technical assistance. HUD may offer technical assistance, as 
described inSec. 583.140.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36891, July 19, 1994]



Sec.  583.105  Grants for acquisition and rehabilitation.

    (a) Use. HUD will grant funds to recipients to:
    (1) Pay a portion of the cost of the acquisition of real property 
selected by the recipients for use in the provision of supportive 
housing or supportive services, including the repayment of any 
outstanding debt on a loan made to purchase property that has not been 
used previously as supportive housing or for supportive services;
    (2) Pay a portion of the cost of rehabilitation of structures, 
including cost-effective energy measures, selected by the recipients to 
provide supportive housing or supportive services; or
    (3) Pay a portion of the cost of acquisition and rehabilitation of 
structures, as described in paragraphs (a)(1) and (2) of this section.
    (b) Amount. The maximum grant available for acquisition, 
rehabilitation, or acquisition and rehabilitation is the lower of:
    (1) $200,000; or
    (2) The total cost of the acquisition, rehabilitation, or 
acquisition and rehabilitation minus the applicant's contribution toward 
the cost.
    (c) Increased amounts. In areas determined by HUD to have high 
acquisition and rehabilitation costs, grants of more than $200,000, but 
not more than $400,000, may be available.



Sec.  583.110  Grants for new construction.

    (a) Use. HUD will grant funds to recipients to pay a portion of the 
cost of new construction, including cost-effective energy measures and 
the cost of land associated with that construction, for use in the 
provision of supportive housing. If the grant funds are used for new 
construction, the applicant must demonstrate that the costs associated 
with new construction are substantially less than the costs associated 
with 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 associated with 
rehabilitation or new construction may include the cost of real property 
acquisition.
    (b) Amount. The maximum grant available for new construction is the 
lower of:
    (1) $400,000; or
    (2) The total cost of the new construction, including the cost of 
land associated with that construction, minus the applicant's 
contribution toward the cost of same.

[[Page 284]]



Sec.  583.115  Grants for leasing.

    (a) General. HUD will provide grants to pay (as described inSec. 
583.130 of this part) for the actual costs of leasing a structure or 
structures, or portions thereof, used to provide supportive housing or 
supportive services for up to five years.
    (b)(1) Leasing structures. Where grants are used to pay rent for all 
or part of 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 space.
    (2) Leasing individual units. Where 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 by the same owner for comparable unassisted units, and the 
portion of rents paid with grant funds may not exceed HUD-determined 
fair market rents. Recipients may use grant funds in an amount up to one 
month's rent to pay the non-recipient landlord for any damages to leased 
units by homeless participants.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36891, July 19, 1994]



Sec.  583.120  Grants for supportive services costs.

    (a) General. HUD will provide grants to pay (as described inSec. 
583.130 of this part) for the actual costs of supportive services for 
homeless persons for up to five years. All or part of the supportive 
services may be provided directly by the recipient or by arrangement 
with public or private service providers.
    (b) Supportive services costs. Costs associated with providing 
supportive services include salaries paid to providers of supportive 
services and any other costs directly associated with providing such 
services. For a transitional housing project, supportive services costs 
also include the costs of services provided to former residents of 
transitional housing to assist their adjustment to independent living. 
Such services may be provided for up to six months after they leave the 
transitional housing facility.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36891, July 19, 1994]



Sec.  583.125  Grants for operating costs.

    (a) General. HUD will provide grants to pay a portion (as described 
inSec. 583.130) of the actual operating costs of supportive housing 
for up to five years.
    (b) Operating costs. Operating costs are those associated with the 
day-to-day operation of the supportive housing. They also include the 
actual expenses that a recipient incurs for conducting on-going 
assessments of the supportive services needed by residents and the 
availability of such services; relocation assistance underSec. 
583.310, including payments and services; and insurance.
    (c) Recipient match requirement for operating costs. Assistance for 
operating costs will be available for up to 75 percent of the total cost 
in each year of the grant term. The recipient must pay the percentage of 
the actual operating costs not funded by HUD. At the end of each 
operating year, the recipient must demonstrate that it has met its match 
requirement of the costs for that year.

[58 FR 13871, Mar. 15, 1993, as amended at 61 FR 51175, Sept. 30, 1996; 
65 FR 30823, May 12, 2000]



Sec.  583.130  Commitment of grant amounts for leasing, supportive
services, and operating costs.

    Upon execution of a grant agreement covering assistance for leasing, 
supportive services, or operating costs, HUD will obligate amounts for a 
period not to exceed five operating years. The total amount obligated 
will be equal to an amount necessary for the specified years of 
operation, less the recipient's share of operating costs.

(Approved by the Office of Management and Budget under OMB control 
number 2506-0112)

[59 FR 36891, July 19, 1994]



Sec.  583.135  Administrative costs.

    (a) General. Up to five percent of any grant awarded under this part 
may be

[[Page 285]]

used for the purpose of paying costs of administering the assistance.
    (b) Administrative costs. Administrative costs include the costs 
associated with accounting for the use of grant funds, preparing reports 
for submission to HUD, obtaining program audits, similar costs related 
to administering the grant after the award, and staff salaries 
associated with these administrative costs. They do not include the 
costs of carrying out eligible activities under Sec.Sec. 583.105 
through 583.125.

[58 FR 13871, Mar. 15, 1993, as amended at 61 FR 51175, Sept. 30, 1996]



Sec.  583.140  Technical assistance.

    (a) General. HUD may set aside funds annually to provide technical 
assistance, either directly by HUD staff or indirectly through third-
party providers, for any supportive housing project. This technical 
assistance is for the purpose of promoting the development of supportive 
housing and supportive services as part of a continuum of care approach, 
including innovative approaches to assist homeless persons in the 
transition from homelessness, and promoting the provision of supportive 
housing to homeless persons to enable them to live as independently as 
possible.
    (b) Uses of technical assistance. HUD may use these funds to provide 
technical assistance to prospective applicants, applicants, recipients, 
or other providers of supportive housing or services for homeless 
persons, for supportive housing projects. The assistance may include, 
but is not limited to, written information such as papers, monographs, 
manuals, guides, and brochures; person-to-person exchanges; and training 
and related costs.
    (c) Selection of providers. From time to time, as HUD determines the 
need, HUD may advertise and competitively select providers to deliver 
technical assistance. HUD may enter into contracts, grants, or 
cooperative agreements, when necessary, to implement the technical 
assistance.

[59 FR 36892, July 19, 1994]



Sec.  583.145  Matching requirements.

    (a) General. The recipient must match the funds provided by HUD for 
grants for acquisition, rehabilitation, and new construction with an 
equal amount of funds from other sources.
    (b) Cash resources. The matching funds must be cash resources 
provided to the project by one or more of the following: the recipient, 
the Federal government, State and local governments, and private 
resources, in accordance with 42 U.S.C. 11386. This statute provides 
that a recipient may use funds from any source, including any other 
Federal source (but excluding the specific statutory subtitle from which 
Supportive Housing Program funds are provided), as well as State, local, 
and private sources, provided that funds from the other source are not 
statutorily prohibited to be used as a match. It is the responsibility 
of the recipient to ensure that any funds used to satisfy the matching 
requirements of this section are eligible under the laws governing the 
funds to be used as matching funds for a grant awarded under this 
program.
    (c) Maintenance of effort. State or local government funds used in 
the matching contribution are subject to the maintenance of effort 
requirements described atSec. 583.150(a).

[58 FR 13871, Mar. 15, 1993, as amended at 73 FR 75326, Dec. 11, 2008]



Sec.  583.150  Limitations on use of assistance.

    (a) Maintenance of effort. No assistance provided under this part 
(or any State or local government funds used to supplement this 
assistance) may be used to replace State or local funds previously used, 
or designated for use, to assist homeless persons.
    (b) Faith-based activities. (1) Organizations that are religious or 
faith-based are eligible, on the same basis as any other organization, 
to participate in the Supportive Housing Program. Neither the Federal 
government nor a State or local government receiving funds under 
Supportive Housing programs shall discriminate against an organization 
on the basis of the organization's religious character or affiliation.
    (2) Organizations that are directly funded under the Supportive 
Housing Program may not engage in inherently religious activities, such 
as worship,

[[Page 286]]

religious instruction, or proselytization as part of the programs or 
services funded under this part. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (3) A religious organization that participates in the Supportive 
Housing Program will retain its independence from Federal, State, and 
local governments, and may continue to carry out its mission, including 
the definition, practice, and expression of its religious beliefs, 
provided that it does not use direct Supportive Housing Program funds to 
support any inherently religious activities, such as worship, religious 
instruction, or proselytization. Among other things, faith-based 
organizations may use space in their facilities to provide Supportive 
Housing Program-funded services, without removing religious art, icons, 
scriptures, or other religious symbols. In addition, a Supportive 
Housing Program-funded religious organization retains its authority over 
its internal governance, and it may retain religious terms in its 
organization's name, select its board members on a religious basis, and 
include religious references in its organization's mission statements 
and other governing documents.
    (4) An organization that participates in the Supportive Housing 
Program shall not, in providing program assistance, discriminate against 
a program beneficiary or prospective program beneficiary on the basis of 
religion or religious belief.
    (5) Program funds may not be used for the acquisition, construction, 
or rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. Program funds may be used for 
the acquisition, construction, or rehabilitation of structures only to 
the extent that those structures are used for conducting eligible 
activities under this part. Where a structure is used for both eligible 
and inherently religious activities, program funds may not exceed the 
cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities in 
accordance with the cost accounting requirements applicable to 
Supportive Housing Program funds in this part. Sanctuaries, chapels, or 
other rooms that a Supportive Housing Program-funded religious 
congregation uses as its principal place of worship, however, are 
ineligible for Supportive Housing Program-funded improvements. 
Disposition of real property after the term of the grant, or any change 
in use of the property during the term of the grant, is subject to 
government-wide regulations governing real property disposition (see 24 
CFR parts 84 and 85).
    (6) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this section applies to all 
of the commingled funds.
    (c) Participant control of site. Where an applicant does not propose 
to have control of a site or sites but rather proposes to assist a 
homeless family or individual in obtaining a lease, which may include 
assistance with rent payments and receiving supportive services, after 
which time the family or individual remains in the same housing without 
further assistance under this part, that applicant may not request 
assistance for acquisition, rehabilitation, or new construction.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36892, July 19, 1993; 
68 FR 56407, Sept. 30, 2003]



Sec.  583.155  Consolidated plan.

    (a) Applicants that are States or units of general local government. 
The applicant must have a HUD-approved complete or abbreviated 
consolidated plan, in accordance with 24 CFR part 91, and must submit a 
certification that the application for funding is consistent with the 
HUD-approved consolidated plan. Funded applicants must certify in a 
grant agreement that they are following the HUD-approved consolidated 
plan.
    (b) Applicants that are not States or units of general local 
government. The applicant must submit a certification

[[Page 287]]

by the jurisdiction 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 of the consolidated plan 
regulations, 24 CFR part 91, subpart F.
    (c) Indian tribes and the Insular Areas of Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands. These 
entities are not required to have a consolidated plan or to make 
consolidated plan certifications. An application by an Indian tribe or 
other applicant for a project that will be located on a reservation of 
an Indian tribe will not require a certification by the tribe or the 
State. However, where an Indian tribe is the applicant for a project 
that will not be located on a reservation, the requirement for a 
certification under paragraph (b) of this section will apply.
    (d) Timing of consolidated plan certification submissions. Unless 
otherwise set forth in the NOFA, 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.

[60 FR 16380, Mar. 30, 1995]



              Subpart C_Application and Grant Award Process



Sec.  583.200  Application and grant award.

    When funds are made available for assistance, HUD will publish a 
notice of funding availability (NOFA) in the Federal Register, in 
accordance with the requirements of 24 CFR part 4. HUD will review and 
screen applications in accordance with the requirements in section 426 
of the McKinney Act (42 U.S.C. 11386) and the guidelines, rating 
criteria, and procedures published in the NOFA.

[61 FR 51176, Sept. 30, 1996]



Sec.  583.230  Environmental review.

    (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 prior to 
its approval of any conditionally selected applications for Fiscal Year 
2000 and prior years that were received directly from private nonprofit 
entities and governmental entities with special or limited purpose 
powers. For activities under a grant that generally would be subject to 
review under part 58, HUD may make a finding in accordance withSec. 
58.11(d) and may itself perform the environmental review under the 
provisions of part 50 of this title if the recipient 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. 
HUD may eliminate from consideration any application that would require 
an Environmental Impact Statement (EIS).
    (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 inSec. 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 under part 50 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).

[68 FR 56131, Sept. 29, 2003]

[[Page 288]]



Sec.  583.235  Renewal grants.

    (a) General. Grants made under this part, and grants made under 
subtitles C and D (the Supportive Housing Demonstration and SAFAH, 
respectively) of the Stewart B. McKinney Homeless Assistance Act as in 
effect before October 28, 1992, may be renewed on a noncompetitive basis 
to continue ongoing leasing, operations, and supportive services for 
additional years beyond the initial funding period. To be considered for 
renewal funding for leasing, operating costs, or supportive services, 
recipients must submit a request for such funding in the form specified 
by HUD, must meet the requirements of this part, and must submit 
requests within the time period established by HUD.
    (b) Assistance available. The first renewal will be for a period of 
time not to exceed the difference between the end of the initial funding 
period and ten years from the date of initial occupancy or the date of 
initial service provision, as applicable. Any subsequent renewal will be 
for a period of time not to exceed five years. Assistance during each 
year of the renewal period, subject to maintenance of effort 
requirements underSec. 583.150(a) may be for:
    (1) Up to 50 percent of the actual operating and leasing costs in 
the final year of the initial funding period;
    (2) Up to the amount of HUD assistance for supportive services in 
the final year of the initial funding period; and
    (3) An allowance for cost increases.
    (c) HUD review. (1) HUD will review the request for renewal and will 
evaluate the recipient's performance in previous years against the plans 
and goals established in the initial application for assistance, as 
amended. HUD will approve the request for renewal unless the recipient 
proposes to serve a population that is not homeless, or the recipient 
has not shown adequate progress as evidenced by an unacceptably slow 
expenditure of funds, or the recipient has been unsuccessful in 
assisting participants in achieving and maintaining independent living. 
In determining the recipient's success in assisting participants to 
achieve and maintain independent living, consideration will be given to 
the level and type of problems of participants. For recipients with a 
poor record of success, HUD will also consider the recipient's 
willingness to accept technical assistance and to make changes suggested 
by technical assistance providers. Other factors which will affect HUD's 
decision to approve a renewal request include the following: a 
continuing history of inadequate financial management accounting 
practices, indications of mismanagement on the part of the recipient, a 
drastic reduction in the population served by the recipient, program 
changes made by the recipient without prior HUD approval, and loss of 
project site.
    (2) HUD reserves the right to reject a request from any organization 
with an outstanding obligation to HUD that is in arrears or for which a 
payment schedule has not been agreed to, or whose response to an audit 
finding is overdue or unsatisfactory.
    (3) HUD will notify the recipient in writing that the request has 
been approved or disapproved.

(Approved by the Office of Management and Budget under control number 
2506-0112)



                     Subpart D_Program Requirements



Sec.  583.300  General operation.

    (a) State and local requirements. Each recipient of assistance under 
this part must provide housing or services that are in compliance with 
all applicable State and local housing codes, licensing requirements, 
and any other requirements in the jurisdiction in which the project is 
located regarding the condition of the structure and the operation of 
the housing or services.
    (b) Habitability standards. Except for such variations as are 
proposed by the recipient and approved by HUD, supportive housing must 
meet the following requirements:
    (1) 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 the elements.
    (2) 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.

[[Page 289]]

    (3) Space and security. Each resident must be afforded adequate 
space and security for themselves and their belongings. Each resident 
must be provided an acceptable place to sleep.
    (4) 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.
    (5) Water supply. The water supply must be free from contamination.
    (6) Sanitary facilities. Residents must have access to sufficient 
sanitary facilities that are in proper operating condition, may be used 
in privacy, and are adequate for personal cleanliness and the disposal 
of human waste.
    (7) Thermal environment. The housing must have adequate heating and/
or cooling facilities in proper operating condition.
    (8) 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 
appliances while assuring safety from fire.
    (9) 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.
    (10) Sanitary condition. The housing and any equipment must be 
maintained in sanitary condition.
    (11) Fire safety. (i) 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.
    (ii) 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.
    (c) Meals. Each recipient of assistance under this part who provides 
supportive housing for homeless persons with disabilities must provide 
meals or meal preparation facilities for residents.
    (d) Ongoing assessment of supportive services. Each recipient of 
assistance under this part must conduct an ongoing assessment of the 
supportive services required by the residents of the project and the 
availability of such services, and make adjustments as appropriate.
    (e) Residential supervision. Each recipient 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 sufficient knowledge to provide 
or to supervise the provision of supportive services to the residents.
    (f) Participation of homeless persons. (1) Each recipient must 
provide for the participation of homeless persons as required in section 
426(g) of the McKinney Act (42 U.S.C. 11386(g)). This requirement is 
waived if an applicant is unable to meet it and presents a plan for HUD 
approval to otherwise consult with homeless or formerly homeless persons 
in considering and making policies and decisions. See alsoSec. 
583.330(e).
    (2) Each recipient 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.
    (g) Records and reports. Each recipient of assistance under this 
part must keep any records and make any reports (including those 
pertaining to race, ethnicity, gender, and disability status data) that 
HUD may require within the timeframe required.

[[Page 290]]

    (h) Confidentiality. Each recipient that provides family violence 
prevention or treatment services must develop and implement procedures 
to ensure:
    (1) The confidentiality of records pertaining to any individual 
services; and
    (2) That the address or location of any project assisted will not be 
made public, except with written authorization of the person or persons 
responsible for the operation of the project.
    (i) Termination of housing assistance. The recipient may terminate 
assistance to a participant who violates program requirements. 
Recipients should terminate assistance only in the most severe cases. 
Recipients may resume assistance to a participant whose assistance was 
previously terminated. In terminating assistance to a participant, the 
recipient must provide a formal process that recognizes the rights of 
individuals receiving assistance to due process of law. This process, at 
a minimum, must consist of:
    (1) Written notice to the participant containing a clear statement 
of the reasons for termination;
    (2) A review of the decision, in which the participant is given the 
opportunity to present written or oral objections before a person other 
than the person (or a subordinate of that person) who made or approved 
the termination decision; and
    (3) Prompt written notice of the final decision to the participant.
    (j) Limitation of stay in 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.
    (k) Outpatient health services. Outpatient health services provided 
by the recipient must be approved as appropriate by HUD and the 
Department of Health and Human Services (HHS). Upon receipt of an 
application that proposes the provision of outpatient health services, 
HUD will consult with HHS with respect to the appropriateness of the 
proposed services.
    (l) Annual assurances. Recipients who receive assistance only for 
leasing, operating costs or supportive services costs must provide an 
annual assurance for each year such assistance is received that the 
project will be operated for the purpose specified in the application.

(Approved by the Office of Management and Budget under control number 
2506-0112)

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36892, July 19, 1994; 
61 FR 51176, Sept. 30, 1996]



Sec.  583.301  Recordkeeping.

    (a) [Reserved]
    (b) Homeless status. The recipient must maintain and follow written 
intake procedures to ensure compliance with the homeless definition in 
Sec.  583.5. 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, as defined in 
section 401(32) of the McKinney-Vento Homeless Assistance Act, as 
amended by the HEARTH Act. 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 inSec. 583.5, 
acceptable evidence includes a written observation by an outreach

[[Page 291]]

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 inSec. 583.5, 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 inSec. 583.5, because the 
individual or family will imminently lose their housing, the evidence 
must include:
    (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: 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 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 inSec. 583.5, 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 inSec. 583.5, 
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

[[Page 292]]

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 inSec. 
583.5, 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 inSec. 
583.5, 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 for application of 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 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 inSec. 
583.5, 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 the date of 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 inSec. 583.5, 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, as defined in section 401(32) of the McKinney-Vento Homeless 
Assistance Act, as amended by the HEARTH Act, 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, health-care provider, law enforcement agency, legal 
assistance provider, pastoral counselor, or any another 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,

[[Page 293]]

or attempting to flee domestic violence, dating violence, sexual 
assault, and stalking.
    (c) Disability.--Each recipient of assistance under this part must 
maintain and follow written intake procedures to ensure that the 
assistance benefits persons with disabilities, as defined inSec. 
583.5. In addition to the documentation required under paragraph (b) of 
this section, the procedures must require documentation at intake of the 
evidence relied upon to establish and verify the disability of the 
person applying for homeless assistance. The recipient must keep these 
records for 5 years after the end of the grant term. Acceptable evidence 
of the disability includes:
    (1) Written verification of the disability from a professional 
licensed by the state to diagnose and treat the disability and his or 
her certification that the disability is expected to be long-continuing 
or of indefinite duration and substantially impedes the individual's 
ability to live independently;
    (2) Written verification from the Social Security Administration;
    (3) The receipt of a disability check (e.g., Social Security 
Disability Insurance check or Veteran Disability Compensation);
    (4) Other documentation approved by HUD; or
    (5) Intake staff-recorded observation of disability that, no later 
than 45 days of the application for assistance, is confirmed and 
accompanied by evidence in paragraph (c)(1), (2), (3), or (4) of this 
section.

[76 FR 76017, Dec. 5, 2011]



Sec.  583.305  Term of commitment; repayment of grants; prevention
of undue benefits.

    (a) Term of commitment and conversion. Recipients must agree to 
operate the housing or provide supportive services in accordance with 
this part and with sections 423 (b)(1) and (b)(3) of the McKinney Act 
(42 U.S.C. 11383(b)(1), 11383(b)(3)).
    (b) Repayment of grant and prevention of undue benefits. In 
accordance with section 423(c) of the McKinney Act (42 U.S.C. 11383(c)), 
HUD will require recipients to repay the grant unless HUD has authorized 
conversion of the project under section 423(b)(3) of the McKinney Act 
(42 U.S.C. 11383(b)(3)).

[61 FR 51176, Sept. 30, 1996]



Sec.  583.310  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, recipients 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 supportive housing 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 supportive housing is subject to the URA and the 
requirements described in 49 CFR part 24, subpart B.
    (d) Responsibility of recipient. (1) The recipient must certify 
(i.e., provide assurance of compliance) that it will comply with the 
URA, the regulations at 49 CFR part 24, and the requirements of this 
section, and must ensure such compliance notwithstanding any third 
party's contractual obligation to the recipient 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 local public funds or funds 
available from other sources.
    (3) The recipient must maintain records in sufficient detail to 
demonstrate compliance with provisions of this section.
    (e) Appeals. A person who disagrees with the recipient'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 
recipient. A low-income person who is

[[Page 294]]

dissatisfied with the recipient's determination on his or her appeal may 
submit a written request for review of that determination to the HUD 
field office.
    (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 
supportive housing projects assisted under this part. The term 
``displaced person'' includes, but may not be limited to:
    (i) A person that moves permanently from the real property after the 
property owner (or person in control of the site) issues a vacate 
notice, or refuses to renew an expiring lease in order to evade the 
responsibility to provide relocation assistance, if the move occurs on 
or after the date the recipient submits to HUD the application or 
application amendment designating the project site.
    (ii) Any person, including a person who moves before the date 
described in paragraph (f)(1)(i) of this section, if the recipient or 
HUD determines that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project.
    (iii) A tenant-occupant of a dwelling unit who moves permanently 
from the building/complex on or after the date of the ``initiation of 
negotiations'' (see paragraph (g) of this section) if 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 must include a monthly rent and estimated average monthly 
utility costs that do not exceed the greater of:
    (A) The tenant's monthly rent before the initiation of negotiations 
and estimated average utility costs, or
    (B) 30 percent of gross household income. If the initial rent is at 
or near the maximum, there must be a reasonable basis for concluding at 
the time the project is initiated that future rent increases will be 
modest.
    (iv) A tenant of a dwelling who is required to relocate temporarily, 
but does not return to the building/complex, if either:
    (A) A tenant is not offered payment for all reasonable out-of-pocket 
expenses incurred in connection with the temporary relocation, or
    (B) Other conditions of the temporary relocation are not reasonable.
    (v) A tenant of a dwelling who moves from the building/complex 
permanently after he or she has been required to move to another unit in 
the same building/complex, if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) 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 
of applicable Federal, State, or local or tribal law, or other good 
cause, and HUD determines that the eviction was not undertaken for the 
purpose 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 recipient may request, at any time, HUD's determination of 
whether

[[Page 295]]

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 recipient and HUD.
    (h) Definition of project. For purposes of this section, the term 
``project'' means an undertaking paid for in whole or in part with 
assistance under this part. Two or more activities that are integrally 
related, each essential to the others, are considered a single project, 
whether or not all component activities receive assistance under this 
part.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36892, July 19, 1994]



Sec.  583.315  Resident rent.

    (a) Calculation of resident rent. Each resident of supportive 
housing may be required to pay as rent an amount determined by the 
recipient which 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). The calculation of 
the family's monthly adjusted income must include the expense deductions 
provided in 24 CFR 5.611(a), and for persons with disabilities, the 
calculation of the family's 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.
    (b) Use of rent. Resident rent may be used in the operation of the 
project or may be reserved, in whole or in part, to assist residents of 
transitional housing in moving to permanent housing.
    (c) Fees. In addition to resident rent, recipients may charge 
residents reasonable fees for services not paid with grant funds.

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 36892, July 19, 1994; 
66 FR 6225, Jan. 19, 2001]



Sec.  583.320  Site control.

    (a) Site control. (1) Where grant funds will be used for 
acquisition, rehabilitation, or new construction to provide supportive 
housing or supportive services, or where grant funds will be used for 
operating costs of supportive housing, or where grant funds will be used 
to provide supportive services except where an applicant will provide 
services at sites not operated by the applicant, an applicant must 
demonstrate site control before HUD will execute a grant agreement 
(e.g., through a deed, lease, executed contract of sale). If such site 
control is not demonstrated within one year after initial notification 
of the award of assistance under this part, the grant will be 
deobligated as provided in paragraph (c) of this section.
    (2) Where grant funds will be used to lease all or part of a 
structure to provide supportive housing or supportive services, or where 
grant funds will be used to lease individual housing units for homeless 
persons who will eventually control the units, site control need not be 
demonstrated.
    (b) Site change. (1) A recipient may obtain ownership or control of 
a suitable site different from the one specified in its application. 
Retention of an assistance award is subject to the new site's meeting 
all requirements under this part for suitable sites.
    (2) If the acquisition, rehabilitation, acquisition and 
rehabilitation, or new construction costs for the substitute site are 
greater than the amount of the grant awarded for the site specified in 
the application, the recipient must provide for all additional costs. If 
the recipient is unable to demonstrate to HUD that it is able to provide 
for the difference in costs, HUD may deobligate the award of assistance.

[[Page 296]]

    (c) Failure to obtain site control within one year. HUD will 
recapture or deobligate any award for assistance under this part if the 
recipient is not in control of a suitable site before the expiration of 
one year after initial notification of an award.



Sec.  583.325  Nondiscrimination and equal opportunity requirements.

    (a) General. Notwithstanding the permissibility of proposals that 
serve designated populations of disabled homeless persons, recipients 
serving a designated population of disabled homeless persons are 
required, within the designated population, to comply with these 
requirements for nondiscrimination on the basis of race, color, 
religion, sex, national origin, age, familial status, and disability.
    (b) Nondiscrimination and equal opportunity requirements. The 
nondiscrimination and equal opportunity requirements set forth at part 5 
of this title apply to this program. The Indian Civil Rights Act (25 
U.S.C. 1301 et seq.) applies to tribes when they exercise their powers 
of self-government, and to Indian housing authorities (IHAs) when 
established by the exercise of such powers. When an IHA is established 
under State law, the applicability of the Indian Civil Rights Act will 
be determined on a case-by-case basis. Projects subject to the Indian 
Civil Rights Act must be developed and operated in compliance with its 
provisions and all implementing HUD requirements, instead of title VI 
and the Fair Housing Act and their implementing regulations.
    (c) Procedures. (1) If the procedures that the recipient intends to 
use to make known the availability of the supportive housing are 
unlikely to reach persons of any particular race, color, religion, sex, 
age, national origin, familial status, or handicap who may qualify for 
admission to the housing, the recipient must establish additional 
procedures that will ensure that such persons can obtain information 
concerning availability of the housing.
    (2) The recipient must adopt procedures to make available 
information on the existence and locations of facilities and services 
that are accessible to persons with a handicap and maintain evidence of 
implementation of the procedures.
    (d) Accessibility requirements. The recipient must comply with the 
new construction accessibility requirements of the Fair Housing Act and 
section 504 of the Rehabilitation Act of 1973, and the reasonable 
accommodation and rehabilitation accessibility requirements of section 
504 as follows:
    (1) All new construction must meet the accessibility requirements of 
24 CFR 8.22 and, as applicable, 24 CFR 100.205.
    (2) Projects in which costs of rehabilitation are 75 percent or more 
of the replacement cost of the building must meet the requirements of 24 
CFR 8.23(a). Other rehabilitation must meet the requirements of 24 CFR 
8.23(b).

[58 FR 13871, Mar. 15, 1993, as amended at 59 FR 33894, June 30, 1994; 
61 FR 5210, Feb. 9, 1996; 61 FR 51176, Sept. 30, 1996]



Sec.  583.330  Applicability of other Federal requirements.

    In addition to the requirements set forth in 24 CFR part 5, use of 
assistance provided under this part must comply with the following 
Federal requirements:
    (a) Flood insurance. (1) The Flood Disaster Protection Act of 1973 
(42 U.S.C. 4001-4128) prohibits the approval of applications for 
assistance for acquisition or construction (including rehabilitation) 
for supportive housing located in an area identified by the Federal 
Emergency Management Agency (FEMA) as having special flood hazards, 
unless:
    (i) The community in which the area is situated is participating in 
the National Flood Insurance Program (see 44 CFR parts 59 through 79), 
or less than a year has passed since FEMA notification regarding such 
hazards; and
    (ii) Flood insurance is obtained as a condition of approval of the 
application.
    (2) Applicants with supportive housing located in an area identified 
by FEMA as having special flood hazards and receiving assistance for 
acquisition or construction (including rehabilitation) are responsible 
for assuring that flood insurance under the National Flood Insurance 
Program is obtained and maintained.

[[Page 297]]

    (b) The Coastal Barrier Resources Act of 1982 (16 U.S.C. 3501 et 
seq.) may apply to proposals under this part, depending on the 
assistance requested.
    (c) Applicability of OMB Circulars. The policies, guidelines, and 
requirements of OMB Circular No. A-87 (Cost Principles Applicable to 
Grants, Contracts and Other Agreements with State and Local Governments) 
and 24 CFR part 85 apply to the award, acceptance, and use of assistance 
under the program by governmental entities, and OMB Circular Nos. A-110 
(Grants and Cooperative Agreements with Institutions of Higher 
Education, Hospitals, and Other Nonprofit Organizations) and A-122 (Cost 
Principles Applicable to Grants, Contracts and Other Agreements with 
Nonprofit Institutions) apply to the acceptance and use of assistance by 
private nonprofit organizations, except where inconsistent with the 
provisions of the McKinney Act, other Federal statutes, or this part. 
(Copies of OMB Circulars may be obtained from E.O.P. Publications, room 
2200, New Executive Office Building, Washington, DC 20503, telephone 
(202) 395-7332. (This is not a toll-free number.) There is a limit of 
two free copies.
    (d) 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 title apply to activities under 
this program.
    (e) Conflicts of interest. (1) In addition to the conflict of 
interest requirements in 24 CFR part 85, no person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
recipient 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 decisionmaking process or gain inside 
information with regard to such activities, may obtain a personal or 
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. Participation by homeless individuals who also 
are participants under the program in policy or decisionmaking under 
Sec.  583.300(f) does not constitute a conflict of interest.
    (2) Upon the written request of the recipient, HUD may grant an 
exception to the provisions of paragraph (e)(1) of this section on a 
case-by-case basis when it determines that the exception will serve to 
further the purposes of the program and the effective and efficient 
administration of the recipient's project. An exception may be 
considered only after the recipient has provided the following:
    (i) For States and other governmental entities, 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) For all recipients, an opinion of the recipient's attorney that 
the interest for which the exception is sought would not violate State 
or local law.
    (3) In determining whether to grant a requested exception after the 
recipient has satisfactorily met the requirement of paragraph (e)(2) of 
this section, HUD will consider the cumulative effect of the following 
factors, where applicable:
    (i) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the project which would otherwise 
not be available;
    (ii) 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;
    (iii) 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;
    (iv) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (e)(1) of this 
section;
    (v) 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 298]]

    (vi) Any other relevant considerations.
    (f) Audit. The financial management systems used by recipients under 
this program must provide for audits in accordance with 24 CFR part 44 
or part 45, as applicable. HUD may perform or require additional audits 
as it finds necessary or appropriate.
    (g) Davis-Bacon Act. The provisions of the Davis-Bacon Act do not 
apply to this program.

[58 FR 13871, Mar. 15, 1993, as amended at 61 FR 5211, Feb. 9, 1996; 64 
FR 50226, Sept. 15, 1999]



                        Subpart E_Administration



Sec.  583.400  Grant agreement.

    (a) General. The duty to provide supportive housing or supportive 
services in accordance with the requirements of this part will be 
incorporated in a grant agreement executed by HUD and the recipient.
    (b) Enforcement. HUD will enforce the obligations in the grant 
agreement through such action as may be appropriate, including repayment 
of funds that have already been disbursed to the recipient.



Sec.  583.405  Program changes.

    (a) HUD approval. (1) A recipient may not make any significant 
changes to an approved program without prior HUD approval. Significant 
changes include, but are not limited to, a change in the recipient, a 
change in the project site, additions or deletions in the types of 
activities listed inSec. 583.100 of this part approved for the program 
or a shift of more than 10 percent of funds from one approved type of 
activity to another, and a change in the category of participants to be 
served. Depending on the nature of the change, HUD may require a new 
certification of consistency with the consolidated plan (seeSec. 
583.155).
    (2) Approval for changes is contingent upon the application ranking 
remaining high enough after the approved change to have been 
competitively selected for funding in the year the application was 
selected.
    (b) Documentation of other changes. Any changes to an approved 
program that do not require prior HUD approval must be fully documented 
in the recipient's records.

[58 FR 13871, Mar. 15, 1993, as amended at 61 FR 51176, Sept. 30, 1996]



Sec.  583.410  Obligation and deobligation of funds.

    (a) Obligation of funds. When HUD and the applicant execute a grant 
agreement, funds are obligated to cover the amount of the approved 
assistance under subpart B of this part. The recipient will be expected 
to carry out the supportive housing or supportive services activities as 
proposed in the application.
    (b) Increases. After the initial obligation of funds, HUD will not 
make revisions to increase the amount obligated.
    (c) Deobligation. (1) HUD may deobligate all or parts of grants for 
acquisition, rehabilitation, acquisition and rehabilitation, or new 
construction:
    (i) If the actual total cost of acquisition, rehabilitation, 
acquisition and rehabilitation, or new construction is less than the 
total cost anticipated in the application; or
    (ii) If proposed activities for which funding was approved are not 
begun within three months or residents do not begin to occupy the 
facility within nine months after grant execution.
    (2) HUD may deobligate the amounts for annual leasing costs, 
operating costs or supportive services in any year:
    (i) If the actual leasing costs, operating costs or supportive 
services for that year are less than the total cost anticipated in the 
application; or
    (ii) If the proposed supportive housing operations are not begun 
within three months after the units are available for occupancy.
    (3) The grant agreement may set forth in detail other circumstances 
under which funds may be deobligated, and other sanctions may be 
imposed.
    (4) HUD may:
    (i) Readvertise the availability of funds that have been deobligated 
under this section in a notice of fund availability underSec. 583.200, 
or
    (ii) Award deobligated funds to applications previously submitted in 
response to the most recently published

[[Page 299]]

notice of fund availability, and in accordance with subpart C of this 
part.



PART 585_YOUTHBUILD PROGRAM--Table of Contents



                            Subpart A_General

Sec.
585.1 Authority.
585.2 Program purpose.
585.3 Program components.
585.4 Definitions.

Subpart B [Reserved]

                  Subpart C_Youthbuild Planning Grants

585.201 Purpose.
585.202 Award limits.
585.203 Grant term.
585.204 Locational considerations.
585.205 Eligible activities.

               Subpart D_Youthbuild Implementation Grants

585.301 Purpose.
585.302 Award limits.
585.303 Grant term.
585.304 Locational considerations.
585.305 Eligible activities.
585.306 Designation of costs.
585.307 Environmental procedures and standards.
585.308 Relocation assistance and real property acquisition.
585.309 Project-related restrictions applicable to Youthbuild 
          residential rental housing.
585.310 Project-related restrictions applicable to Youthbuild 
          transitional housing for the homeless.
585.311 Project-related restrictions applicable to Youthbuild 
          homeownership housing.
585.312 Wages, labor standards, and nondiscrimination.
585.313 Labor standards.

                        Subpart E_Administration

585.401 Recordkeeping by recipients.
585.402 Grant agreement.
585.403 Reporting requirements.
585.404 Program changes.
585.405 Obligation and deobligation of funds.
585.406 Faith-based activities.

          Subpart F_Applicability of Other Federal Requirements

585.501 Application of OMB Circulars.
585.502 Certifications.
585.503 Conflict of interest.
585.504 Use of debarred, suspended, or ineligible contractors.

    Authority: 42 U.S.C. 3535(d) and 8011.

    Source: 60 FR 9737, Feb. 21, 1995, unless otherwise noted.



                            Subpart A_General



Sec.  585.1  Authority.

    (a) General. The Youthbuild program is authorized under subtitle D 
of title IV of the National Affordable Housing Act (42 U.S.C. 8011), as 
added by section 164 of the Housing and Community Development Act of 
1992 (Pub. L. 102-550).
    (b) Authority restriction. No provision of the Youthbuild program 
may be construed to authorize any agency, officer, or employee of the 
United States to exercise any direction, supervision, or control over 
the curriculum, program of instruction, administration, or personnel of 
any educational institution, school, or school system, or over the 
selection of library resources, textbooks, or other printed or published 
instructional materials used by any educational institution or school 
system participating in a Youthbuild program.



Sec.  585.2  Program purpose.

    The purposes of the Youthbuild program are set out in section 451 of 
the National Affordable Housing Act (42 U.S.C. 12899) (``NAHA'').

[61 FR 52187, Oct. 4, 1996]



Sec.  585.3  Program components.

    A Youthbuild implementation program uses comprehensive and multi-
disciplinary approaches designed to prepare young adults who have 
dropped out of high school for educational and employment opportunities 
by employing them as construction trainees on work sites for housing 
designated for homeless persons and low- and very low-income families. A 
Youthbuild planning grant is designed to give recipients sufficient time 
and financial resources to develop a comprehensive Youthbuild program 
that can be effectively implemented. Youthbuild programs must contain 
the three components described in paragraphs (a), (b) and (d) of this 
section. Other activities described in paragraph (c) of this section are 
optional:
    (a) Educational services, including:
    (1) Services and activities designed to meet the basic educational 
needs of

[[Page 300]]

participants. For example, a Youthbuild program may include basic skills 
instruction and remedial education, bilingual education for individuals 
with limited English proficiency, secondary educational services and 
activities designed to lead to the attainment of a high school diploma 
or its equivalency (GED), or counseling and assistance in attaining 
post-secondary education and required financial aid;
    (2) Vocational classroom courses geared to construction terminology 
and concepts; and
    (3) Strategies to coordinate with local trade unions and 
apprenticeship programs where possible.
    (b) Leadership training, counseling and other support activities, 
including:
    (1) Activities designed to develop employment and leadership skills, 
including support for youth councils;
    (2) Counseling services to assist trainees in personal, health, 
housing, child care, family or legal problems and/or referral services 
to appropriate social service resources;
    (3) Support services and stipends necessary to enable individuals to 
participate in the program and, for a period not to exceed 12 months 
after completion of training, to assist participants through continued 
support services;
    (4) Job development and placement activities and post-graduation 
follow-up assistance; and
    (5) Pre-employment training plan aimed at developing job seeking 
skills.
    (c) Other activities. A local program may be designed to include 
other, special activities such as:
    (1) Entrepreneurial training and courses in small business 
development;
    (2) Assistance to correct learning disabilities; or
    (3) Drivers' education courses.
    (d) On-site training, through actual housing rehabilitation and/or 
construction work. This component must include:
    (1) Access to housing sites where construction/ rehabilitation work 
is being carried out;
    (2) Work site training plan for a closely supervised construction 
site;
    (3) Construction or rehabilitation plan and timetable; and
    (4) Approaches to work site safety.
    (e) The Youthbuild implementation program must be structured so that 
50 percent of each full-time participant's time is spent in educational 
services and activities (paragraphs (a), (b), and (c) of this section) 
and 50 percent is spent in on-site training (paragraph (d) of this 
section). Youthbuild planning grant applications must contain 
strategies, plans and approaches to be used during the planning process 
to ultimately implement these program requirements.



Sec.  585.4  Definitions.

    The terms ``adjusted income,'' ``community based organization,'' 
``homeless individual,'' ``housing development agency,'' ``Indian 
tribe,'' ``individual who has dropped out of high school,'' 
``institution of higher education,'' ``limited-English proficiency,'' 
``low-income family,'' ``offender,'' ``State,'' and ``very low-income 
family'' are defined in section 457 of NAHA.
    The terms Secretary and 1937 Act are defined in 24 CFR part 5.
    1992 Act means the Housing and Community Development Act of 1992.
    Access to housing applies to Youthbuild implementation grants 
required to document that the program has access to the housing 
project(s) for young adult on-site training, e.g. program participants 
have permission to work on the housing site.
    Applicable residential rental housing quality standards shall mean 
those standards of the applicable HUD or other Federal, State or local 
program providing assistance for residential rental housing involved in 
a Youthbuild implementation grant as used under section 455(a), 
Youthbuild Program Requirements, of the Act.
    Applicant means a public or private nonprofit agency, including:
    (1) A community-based organization;
    (2) An administrative entity designated under section 103(b)(1)(B) 
of the Job Training Partnership Act;
    (3) A community action agency;
    (4) A State or local housing development agency;
    (5) A community development corporation;

[[Page 301]]

    (6) A public and/or Indian housing authority and resident management 
corporations, resident councils and resident organizations;
    (7) A State or local youth service or conservation corps; and
    (8) Any other entity (including States, units of general local 
government, and Indian Tribes) eligible to provide education and 
employment training.
    Combined Youthbuild application means the submission by an applicant 
of a single application to HUD for a planning and implementation grant 
request for one Youthbuild program.
    Consolidated Plan means the document that is submitted to HUD that 
serves as the planning documents (comprehensive housing affordability 
strategy and community development plan) of the jurisdiction and an 
application for funding under any of the Community Planning and 
Development formula grant programs which is prepared in accordance with 
the process described in 24 CFR part 91.
    Full-time participation for program eligible participants is limited 
to not less than 6 months and not more than 24 months.
    Graduates are those participants who have completed the full-time 
education/on-site training components of a Youthbuild program and who 
are eligible to take advantage of meaningful opportunities in continued 
education, in owning their own businesses, in meaningful employment or 
in other means by which the participant can attain economic self-
sufficiency.
    Homeless Act means the Stewart B. McKinney Homeless Assistance Act, 
as amended, (42 U.S.C. 11301 et seq.).
    JTPA means the Job Training Partnership Act (P.L. 102-235), as 
amended.
    Participant means:
    (1) An individual who is:
    (i) 16 to 24 years of age, inclusive, at time of enrollment;
    (ii) A very low-income individual or a member of a very low-income 
family; and
    (iii) An individual who has dropped out of high school.
    (2) An exception of not more than 25 percent of all full-time 
participants is permitted for young adults who do not meet the program's 
income or educational requirements but who have educational needs 
despite attainment of a high school diploma or its equivalent.
    Private nonprofit organization means any private nonprofit 
organization that:
    (1) Is organized and exists under Federal, State, local, or tribal 
law;
    (2) Has no part of its earnings inuring to the benefit of any 
individual, corporation, or other entity;
    (3) Has a voluntary board;
    (4) Has an accounting system or has designated a fiscal agent in 
accordance with requirements established by HUD; and
    (5) Practices nondiscrimination in the provision of assistance.
    Project-related restrictions mean Youthbuild housing restrictions 
applicable only in cases where a Youthbuild implementation grant is 
providing assistance to residential rental, transitional or 
homeownership housing projects for specific costs relating to property 
acquisition, architectural and engineering fees, construction, 
rehabilitation, operating costs, or replacement reserves.
    Recipient means any entity that receives assistance under this part.
    Related facilities include cafeterias or dining halls, community 
rooms or buildings, child care centers, appropriate recreation 
facilities, and other essential service facilities that are physically 
attached to the housing to be constructed or rehabilitated. Related 
facilities which stand alone are not appropriate construction sites for 
trainees.
    Title IV means title IV of the National Affordable Housing Act, as 
amended (42 U.S.C. 1437).
    Transitional housing means a project that has as its purpose 
facilitating the movement of homeless individuals and families to 
permanent housing within a reasonable amount of time (usually 24 
months). Transitional housing includes housing primarily designed to 
serve deinstitutionalized homeless individuals and other homeless 
individuals with mental or physical disabilities and homeless families 
with children.
    Useful life shall mean a period of 10 years upon construction 
completion and issuance of an occupancy permit

[[Page 302]]

applicable to a residential rental, transitional or homeownership 
property acquired, constructed or rehabilitated (including architectural 
and engineering fees), or maintained (i.e., operating costs or 
replacement reserves), in whole or in part, with Youthbuild 
implementation grant funds (as used in section 455(a), Youthbuild 
Program Requirements, of the Act).

[60 FR 9737, Feb. 21, 1995, as amended at 61 FR 5211, Feb. 9, 1996; 61 
FR 52187, Oct. 4, 1996]

Subpart B [Reserved]



                  Subpart C_Youthbuild Planning Grants



Sec.  585.201  Purpose.

    HUD will award Youthbuild planning grants to eligible applicants for 
the purpose of developing Youthbuild programs in accordance with 
subtitle D of title IV of the National Affordable Housing Act. 
Applications will be selected in a national competition in accordance 
with the selection process described in the current NOFA.



Sec.  585.202  Award limits.

    Maximum awards. The maximum amount of a Youthbuild planning grant is 
$150,000 unless a lower amount is established in the NOFA. HUD may for 
good cause approve a grant in a higher amount.



Sec.  585.203  Grant term.

    Funds awarded for planning grants are expected to be used within 12 
months of the effective date of the planning grant agreement. The award 
of a Youthbuild planning grant does not obligate HUD to fund the 
implementation of the program upon completion of the approved planning 
activities (unless the companion implementation grant was submitted as a 
combined application and funded in the implementation grant 
competition).



Sec.  585.204  Locational considerations.

    HUD will not approve multiple applications for planning grants in 
the same jurisdiction unless it determines that the jurisdiction is 
sufficiently large to justify approval of more than one application.



Sec.  585.205  Eligible activities.

    Planning grant activities to develop a Youthbuild program may 
include:
    (a) The undertaking of studies and research efforts to determine the 
feasibility and need for a Youthbuild program in a selected location 
including whether a proposed program can meet the education and training 
needs of young adults, aid in the expansion of affordable housing to 
meet the needs of the community, and achieve financial feasibility;
    (b) The formation and establishment of a consortium among Federal, 
State, or local training and education programs, service providers, 
housing programs and providers including but not limited to homeless 
providers, housing owners, developers, and other organizations necessary 
for the establishment of a Youthbuild program;
    (c) The preliminary identification and potential selection of 
housing for the Youthbuild program including an assessment of the type 
of housing program to be used and the method by which program 
participants will have access to the housing project;
    (d) The planning and identification of resources required for basic 
skills instruction and education, job training and job development, 
leadership and employment skills development, counseling, referral, and 
other related support services that will be provided as part of the 
Youthbuild program;
    (e) The preparation of an application for an implementation grant.
    (f) Preliminary architectural and engineering (A & E) work for the 
Youthbuild proposed housing including:
    (1) The development of cost and time estimates associated with the 
amount of work to be done through new construction or the rehabilitation 
of existing housing;
    (2) Technical studies to evaluate environmental problems and to 
determine whether mitigation is feasible on the potential site; and
    (3) The identification and initiation of the permit process required 
to commence work on the selected site.
    (g) The planning and development of multi-disciplinary educational 
and employment training curricula, leadership development training, 
counseling,

[[Page 303]]

and other supportive services and activities for the Youthbuild program 
including the identification and training of staff assigned to each 
program component;
    (h) The identification and establishment of relationships with local 
unions, apprenticeship programs, housing owners, local employers and 
public or private community organizations for job training, development, 
and placement opportunities;
    (i) Administration. Youthbuild funds for administrative costs may 
not exceed 15 percent of the total amount of Youthbuild program and 
project costs or such higher percentage as HUD determines is necessary 
to support capacity development by a private nonprofit organization.



               Subpart D_Youthbuild Implementation Grants



Sec.  585.301  Purpose.

    HUD will award Youthbuild implementation grants to eligible 
applicants for the purpose of carrying out Youthbuild programs in 
accordance with subtitle D of title IV of the National Affordable 
Housing Act. Applications will be selected in a national competition in 
accordance with the selection process described in the current NOFA.



Sec.  585.302  Award limits.

    Maximum awards. The maximum award for a Youthbuild implementation 
grant will be defined in the NOFA for each competition and may vary by 
competition. HUD may for good cause approve a grant in a higher amount 
than the specified limit.



Sec.  585.303  Grant term.

    Funds awarded for implementation grants are expected to be used 
within 30 months of the effective date of the implementation grant 
agreement.



Sec.  585.304  Locational considerations.

    Each application for an implementation grant may only include 
activities to carry out one Youthbuild program, i.e., to start a new 
Youthbuild program or to fund new classes of Youthbuild participants for 
an existing program. The same applicant organization may submit more 
than one application in the current competition if the proposed programs 
are in different jurisdictions. HUD will not approve multiple 
applications for implementation grants in the same jurisdiction unless 
it determines that the jurisdiction is sufficiently large to justify 
approval of more than one application.



Sec.  585.305  Eligible activities.

    Implementation grant activities to conduct a Youthbuild program may 
include:
    (a) Acquisition of housing and related facilities to be used for the 
purposes of providing homeownership, residential rental housing, or 
transitional housing for the homeless and low- and very low-income 
persons and families;
    (b) Architectural and engineering work associated with Youthbuild 
housing;
    (c) Construction of housing and related facilities to be used for 
the purposes of providing homeownership, residential rental housing, or 
transitional housing for the homeless and low- and very low-income 
persons and families;
    (d) Rehabilitation of housing and related facilities to be used for 
the purposes of providing homeownership, residential rental housing, or 
transitional housing for the homeless and low- and very low-income 
persons and families, including lead-based paint activities; in 
accordance with part 35 of this title;
    (e) Operating expenses and replacement reserves for the housing 
assisted in the Youthbuild program;
    (f) Relocation payments and other assistance required to comply with 
Sec.  585.308, legal fees, and construction management;
    (g) Outreach and recruitment activities, emphasizing special 
outreach efforts to be undertaken to recruit eligible young women 
(including young women with dependent children);
    (h) Education and job training services and activities including 
work experience, basic skills instruction and remedial education, 
bilingual education; secondary education leading to the attainment of a 
high school diploma or its equivalent; counseling and assistance in 
attaining post-secondary education and required financial aid;

[[Page 304]]

    (i) Wages, benefits and need-based stipends provided to 
participants;
    (j) Leadership development, counseling, support services, and 
development of employment skills;
    (k) Defraying costs for the ongoing training and technical 
assistance needs of the recipient that are related to developing and 
carrying out a Youthbuild program;
    (l) Job placement (including entrepreneurial training and business 
development), counseling, and support services for a period not to 
exceed 12 months after completion of training to assist participants; 
and
    (m) Administration. Youthbuild funds for administrative costs may 
not exceed 15 percent of the total amount of Youthbuild program and 
project costs or such higher percentage as HUD determines is necessary 
to support capacity development by a private nonprofit organization.

[60 FR 9737, Feb. 21, 1995, as amended at 64 FR 50226, Sept. 15, 1999]



Sec.  585.306  Designation of costs.

    The following budget items are to be considered training or other 
costs under the Youthbuild implementation grant and should not be 
considered costs associated with acquisition, rehabilitation, or new 
construction for the purposes of Sec.Sec. 585.307, 585.309, 585.310, 
and 585.311.
    (a) Trainees' tools and clothing.
    (b) Participant stipends and wages.
    (c) On-site trainee supervisors.
    (d) Construction management.
    (e) Relocation costs.
    (f) Legal fees.
    (g) Clearance and demolition.



Sec.  585.307  Environmental procedures and standards.

    (a) Environmental procedures. Applicants are encouraged to select 
hazard-free and problem-free properties for their Youthbuild projects. 
Environmental procedures apply to HUD approval of implementation grants 
when the applicant proposes to use Youthbuild funds to cover any costs 
for the lease, acquisition, rehabilitation, or new construction of real 
property that is proposed for housing project development. Environmental 
procedures do not apply to HUD approval of implementation grants when 
applicants propose to use their Youthbuild funds solely to cover any 
costs for classroom and/or on-the-job construction training and 
supportive services. For those applicants that propose to use their 
Youthbuild funds to cover any costs of the lease, acquisition, 
rehabilitation, or new construction of real property, the applicant 
shall submit all relevant environmental information in its application 
to support HUD decision-making in accordance with the following 
environmental procedures and standards.
    (1) Before any Youthbuild implementation application that requests 
funds for acquisition, rehabilitation, or construction can be selected 
for funding, 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.
    (i) 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;
    (ii) In performing its review, HUD may use previously issued 
environmental reviews prepared by local, State, or other Federal 
agencies for the proposed property;
    (iii)(A) The application for the Youthbuild implementation grant 
shall provide HUD with:
    (1) Applicant documentation for environmental threshold review; and
    (2) Any previously issued environmental reviews prepared by local, 
State, or other Federal agencies for the proposed property.
    (B) The applicant 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. In using previous reviews by other sources, HUD must, 
however, conduct the environmental analysis and prepare the 
environmental review and be

[[Page 305]]

responsible for any required environmental findings.
    (2) HUD reserves the right to disqualify any application where one 
or more environmental thresholds are exceeded if HUD determines that the 
compliance review cannot be conducted and satisfactorily completed 
within the HUD review period for applications.
    (3) If Youthbuild funds are requested for acquisition, 
rehabilitation, or construction, applicants are prohibited from 
committing or expending State, local or other funds to undertake 
property acquisition (including lease), rehabilitation or construction 
under this program until notification of grant award.
    (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 any property 
acquisition (including lease), 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 and also for substantial 
improvement in floodplains, in addition to paragraphs (b)(1)(i) through 
(vi) of this section, other Federal environmental laws and authorities 
may apply when the property:
    (i) Has significant impact to the human environment;
    (ii) Is a project involving five or more dwelling units severely 
noise-impacted; or
    (iii) Affects coastal zone management.
    (3) For new construction, conversion or increase in dwelling unit 
density, in addition to paragraphs (b)(1)(i) through (vi) and paragraphs 
(b)(2)(i) through (iii) of this section, other Federal environmental 
laws and authorities may apply when the property:
    (i) Is located near hazardous industrial operations handling fuels 
or chemicals of an explosive or flammable nature;
    (ii) Affects a sole source aquifer;
    (iii) Affects endangered species; or
    (iv) Is located within a designated wetland.
    (c) Qualified data sources. The environmental threshold information 
provided by applicants must 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., the local community 
development agency; the local planning agency; the State environmental 
protection agency; the State Historic Preservation Officer) or any other 
source qualified to provide reliable information on the particular 
property.
    (d) Minor rehabilitation means proposed fixing and repairs:
    (1) Whose estimated cost is less than 75 percent of the property 
value after completion;
    (2) That does not involve changes in land use from residential to 
nonresidential, or from nonresidential to residential;
    (3) That does not involve the demolition of one or more buildings, 
or parts of a building, containing the primary use served by the 
property; and
    (4) That does not increase unit density more than 20 percent.



Sec.  585.308  Relocation assistance and real property acquisition.

    The Youthbuild program is subject to the provisions of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970, as

[[Page 306]]

amended (URA) and implementing regulations at 49 CFR part 24. HUD 
Handbook 1378, Tenant Assistance, Relocation and Real Property 
Acquisition, available from the Relocation and Real Estate Division at 
the address listed in this section, describes these policies and 
procedures. Any occupied property used in a Youthbuild program is 
subject to the URA regardless of the source of the property or 
construction funds. The URA requires recipients to provide relocation 
assistance to persons (families, individuals, businesses, and nonprofit 
organizations) that are displaced as a direct result of acquisition, 
rehabilitation or demolition for an assisted project. Property occupants 
who are not displaced also have certain rights. Therefore, if a proposed 
Youthbuild implementation program involves occupied property, before 
submitting the application the applicant should consult with staff of 
the Relocation and Real Estate Division, Office of Community Planning 
and Development, Department of Housing and Urban Development, Room 7154, 
451 Seventh Street, SW, Washington, DC 20410; telephone: (202) 708-0336. 
TDD: (202) 708-1455. Fax: (202) 708-1744. (These are not toll-free 
numbers.)



Sec.  585.309  Project-related restrictions applicable to Youthbuild 
residential rental housing.

    Where the award of a Youthbuild implementation grant includes the 
eligible activities of acquisition, architectural and engineering fees, 
construction, rehabilitation, operating costs or replacement reserves 
for residential rental units, and where the costs for these activities 
are to be funded, in whole or in part, from the Youthbuild grant award, 
the recipient shall be required to comply with the following Youthbuild 
project-related restrictions for a period of not less than 10 years:
    (a) Occupancy by low- and very low-income families. (1) For the 10 
year period of the residential rental Youthbuild project, the recipient 
or rightful owner will be required to maintain at least a 90 percent 
level of occupancy for individuals and families with incomes less than 
60 percent of the area median income, adjusted for family size--``the 90 
percent category.'' The recipient or rightful owner must offer each 
available rental unit to the 60 percent of area median income group for 
an advertising period of not less than 90 days upon each vacancy 
occurrence throughout the 10 year period. Community-wide advertisements 
for tenants of this income group must be conducted.
    (2) In order to maintain the financial stability of the project and 
to provide flexibility in averting long-term vacancies in the 90 percent 
category, the rightful owner is permitted, under certain circumstances 
described below, to execute temporary two year leases with individuals 
and families with incomes between 60 and 80 percent of the area median 
income. This temporary deviation is permitted when no qualifying tenant 
(with an income of 60 percent or less of median) leases the unit upon 
the end of the 90 day advertising period. The owner may then advertise 
the unit to individuals and families with incomes less than 80 percent 
of the area median income, adjusted for family size, for another 
advertisement period of 90 days. Temporary leases for tenants whose 
incomes are between 60 and 80 percent of the area median income 
(exclusive of the 10 percent allowance) shall be limited to two years. 
Temporary tenants are not covered by Youthbuild tenant protections 
regarding termination of tenancy (paragraph (b)(2) of this section), 
tenant selection plan (paragraph (b)(4) of this section) and tenant 
participation plan (paragraph (d) of this section).
    (3) The remaining 10 percent of the units must be made available to 
and occupied by low-income families--``the 10 percent category.'' The 
income test must be conducted for both the 90 percent and 10 percent 
categories only at time of entry for each unit available for occupancy.
    (b) Tenant protections. Upon submission of the implementation grant 
application, the applicant or rightful owner of the residential rental 
units covered under this paragraph shall certify to the following tenant 
protections:
    (1) Lease. As part of the Youthbuild implementation grant 
application, the

[[Page 307]]

applicant or rightful owner of the property shall provide a model lease 
containing terms and conditions acceptable to HUD. The model lease shall 
become an addendum to the executed grant agreement and shall remain in 
force for a period of 10 years. The lease between a tenant and the owner 
of residential rental housing shall be for a period of not less than one 
year, unless otherwise mutually agreed to by the tenant and the owner, 
and shall contain such terms and conditions as HUD determines to be 
appropriate. Any change to a lease must be approved by HUD.
    (2) Termination of tenancy. Upon submission of the implementation 
grant application, the applicant or other rightful owner of the property 
must certify that the following restrictions will be applied to all 
lease terminations initiated by the owner. The restrictions must state 
that an owner shall not terminate the tenancy or refuse to renew the 
lease of a tenant occupying a Youthbuild residential rental housing unit 
except for serious or repeated violations of the terms and conditions of 
the lease, or for violation of applicable Federal, State, or local laws, 
or for other good cause. Any termination or refusal to renew the lease 
must be preceded by not less than 30 days by the owner's service upon 
the tenant of a written notice specifying the grounds for the action. 
With regard to leases for tenants in units controlled by public housing 
authorities, 24 CFR part 966 shall take precedence over this provision.
    (3) Maintenance and replacements. Upon submission of the 
implementation grant application, the applicant or rightful owner of 
Youthbuild residential rental housing must certify that the premises 
will be maintained in compliance with all applicable housing quality 
standards and local code requirements for the 10 year period. HUD's 
section 8 housing quality standards apply when no other public 
assistance is involved other than the Youthbuild grant. In other cases, 
the applicable HUD or other Federal, State or local program guidelines 
shall apply.
    (4) Tenant selection. The applicant or rightful owner of Youthbuild 
residential rental housing must develop and adopt a tenant selection 
plan containing selection policies and criteria that are consistent with 
HUD requirements. The tenant selection plan shall remain in force for 
the 10 year period. Upon submission of the implementation grant 
application, the applicant or owner of the property must certify that 
the plan complies with the following HUD requirements:
    (i) The plan is consistent with the purpose of providing housing for 
homeless and very low-income families and individuals;
    (ii) The plan is reasonably related to program eligibility and the 
applicant's or owner's ability to perform the obligations of the lease;
    (iii) The plan gives reasonable consideration to the housing needs 
of families that would qualify for a preference under section 6(c)(4)(A) 
of the United States Housing Act of 1937;
    (iv) The plan provides for the selection of tenants from a written 
waiting list in the chronological order of their application, to the 
extent practicable, and for the prompt notification in writing of any 
rejected applicant of the grounds for any rejection; and
    (v) The plan acknowledges that a family holding tenant-based 
assistance under section 8 of the United States Housing Act of 1937 will 
not be refused tenancy because of the status of the prospective tenant 
as a holder of such assistance.
    (c) Limitation on rental payments. Upon submission of the 
implementation grant application, the applicant or other rightful owner 
of Youthbuild residential rental housing project involved in a 
Youthbuild program shall certify that tenants in each rental unit shall 
be not required to pay rent in excess of the amount provided under 
section 3(a) of the United States Housing Act of 1937.
    (d) Tenant participation plan. The Youthbuild program shall require 
a tenant participation plan applicable to the rightful owner of 
Youthbuild residential rental housing, provided such owner is a 
nonprofit public or private organization. Upon submission of the 
implementation grant application, the nonprofit owner shall certify that 
the tenant participation plan is the plan to

[[Page 308]]

be adopted and followed for tenant participation in management decisions 
for the 10 year period.
    (e) Limitations on profit. Youthbuild residential rental housing 
projects meeting the requirements of this section shall be restricted 
from producing profit in excess of the limitations set out in sections 
455(c)(1) and (2) of NAHA.
    (f) Restrictions on conveyance. Conveyance restrictions apply to 
Youthbuild residential rental housing project(s) meeting the 
requirements of this section. Ownership of the property may not be 
conveyed unless the instrument of conveyance requires a subsequent owner 
to comply with the same restrictions imposed upon the original owner for 
the balance of the 10 year period.
    (g) Ten year restriction. The restrictions listed in paragraphs (a) 
through (f) of this section shall remain in force for a period of not 
less than 10 years after construction completion and issuance of an 
occupancy permit for all Youthbuild residential rental housing projects 
receiving Youthbuild assistance.

(Approved by the Office of Management and Budget under control number 
2506-0142)

[60 FR 9737, Feb. 21, 1995, as amended at 61 FR 52187, Oct. 4, 1996]



Sec.  585.310  Project-related restrictions applicable to Youthbuild 
transitional housing for the homeless.

    Where the award of a Youthbuild implementation grant includes the 
eligible activities of acquisition, architectural and engineering fees, 
construction, rehabilitation, operating costs or replacement reserves of 
transitional housing units, and where the costs for these activities are 
funded, in whole or in part, with Youthbuild grant funds, the housing 
project shall be required to comply with the following Youthbuild 
project-related restrictions:
    (a) Limitations on profit. Youthbuild residential rental housing 
projects meeting the requirements of this section shall be restricted 
from producing profit in excess of the limitations set out in sections 
455(c)(1) and (2) of NAHA.
    (b) Restrictions on conveyance. Conveyance restrictions apply to 
Youthbuild transitional housing projects meeting the requirements of 
this section. Ownership of the property may not be conveyed unless the 
instrument of conveyance requires a subsequent owner to comply with the 
same restrictions imposed upon the original owner for the balance of the 
10 year period.
    (c) Program requirements for transitional housing. (1) Youthbuild 
transitional housing projects meeting the requirements of this section 
shall adhere to the requirements regarding service delivery, housing 
standards and rent limitations applicable to comparable housing 
receiving assistance under the Transitional Housing component of the 
Supportive Housing Program (title IV of the Stewart B. McKinney Homeless 
Assistance Act).
    (2) The Secretary may waive these requirements to permit the 
conversion of a Youthbuild transitional housing project to a permanent 
housing project only if such housing complies with the Youthbuild 
project-related restrictions for residential rental housing projects 
found inSec. 585.309.
    (d) Ten year restriction. The restrictions listed in paragraphs (a) 
through (c) of this section shall remain in force for a period of not 
less than 10 years after construction completion and issuance of an 
occupancy permit for a Youthbuild transitional housing project receiving 
Youthbuild assistance.

[60 FR 9737, Feb. 21, 1995, as amended at 61 FR 52187, Oct. 4, 1996]



Sec.  585.311  Project-related restrictions applicable to Youthbuild 
homeownership housing.

    Where the award of a Youthbuild implementation grant includes the 
eligible activities of acquisition, architectural and engineering fees, 
construction, or rehabilitation of homeownership housing, and where the 
costs for these activities are to be funded, in whole or in part, with 
Youthbuild grant funds, the housing project shall be required to comply 
with the following Youthbuild project-related restrictions:
    (a) Program compliance. Each homeownership project meeting the 
requirements of this section shall comply with the requirements of the 
HOPE II or

[[Page 309]]

HOPE III program authorized under subtitle B or C respectively of title 
IV of the National Affordable Housing Act.
    (b) Restrictions on conveyance. Conveyance restrictions apply to 
Youthbuild homeownership housing projects meeting the requirements of 
this part. Ownership of the property may not be conveyed unless the 
instrument of conveyance requires a subsequent owner to comply with the 
same restrictions imposed upon the original owner for the balance of the 
10 year period.
    (c) Ten year restriction. The restrictions listed in paragraphs (a) 
and (b) of this section shall remain in force for a period of not less 
than 10 years after construction completion and issuance of an occupancy 
permit for Youthbuild homeownership housing projects meeting the 
requirements of this part.



Sec.  585.312  Wages, labor standards, and nondiscrimination.

    Applicable provisions are stated in section 456(e) of NAHA.

[61 FR 52187, Oct. 4, 1996]



Sec.  585.313  Labor standards.

    (a) Trainees. Davis-Bacon prevailing wage rate requirements are not 
applicable to trainees on housing projects or in training programs 
assisted by Youthbuild grant funds, regardless of whether other Federal 
assistance is involved. However, where the trainees' performance of 
public and Indian housing work is subject to HUD-determined prevailing 
wage rates under section 12 of the United States Housing Act of 1937, 
trainees must be paid HUD-determined wage rates; as a matter of policy, 
the wage rates determined by HUD to apply to Youthbuild trainees will be 
the trainee wage rates rather than journeyperson rates.
    (b) Laborers and mechanics other than Youthbuild Trainees. (1) All 
laborers and mechanics (other than Youthbuild trainees) employed by 
contractors or subcontractors in any construction, alteration or repair, 
including painting and decorating, of housing that is assisted by a 
Youthbuild grant shall be paid 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 (40 U.S.C. 276a through 
276a-5). The employment of such laborers and mechanics on assisted 
housing shall be subject to the provisions of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327 through 333). Where these 
requirements are applicable, recipients, sponsors, owners, contractors 
and subcontractors must comply with all related Department of Labor and 
HUD rules, regulations and requirements.
    (2) The labor standards requirements in paragraph (b)(1) of this 
section do not apply where a Youthbuild grant is provided solely for 
classroom and/or on-the-job training and supportive services for 
Youthbuild trainees, and the grant does not include costs for housing 
project development involving acquisition (including lease), 
rehabilitation or new construction of real properties; however, if other 
Federal programs provide assistance to the housing project, labor 
standards apply to laborers and mechanics other than Youthbuild trainees 
to the extent required by the other Federal programs. Applicants need to 
review applicable Federal regulations to determine which relevant 
requirements apply to their individual situations.



                        Subpart E_Administration



Sec.  585.401  Recordkeeping by recipients.

    (a) Each recipient of a planning or implementation Youthbuild grant 
award must keep records that will facilitate an effective audit to 
determine compliance with program requirements and that fully disclose:
    (1) The amount and disposition by the recipient of the planning or 
implementation Youthbuild grants received, including sufficient records 
that document the reasonableness, accuracy and necessity of each 
expenditure;
    (2) The amount and disposition of proceeds, if any, from financing 
obtained in connection with the Youthbuild program, e.g., housing sales 
to eligible low-income families, property sales to other public or 
private entities;

[[Page 310]]

    (3) The total cost from all sources of funding for the Youthbuild 
program including all educational, training, counseling, placement, and 
housing activities and services;
    (4) The amount and nature of any other assistance, including cash, 
property, services, materials, in-kind contributions or other items 
contributed as a condition of receiving an implementation grant;
    (5) Any other proceeds received for, or otherwise used in connection 
with, the Youthbuild program.
    (6) Participant information. The recipient must maintain records on 
each Youthbuild participant, including such information as age, high 
school drop out status, income level, gender, employment status, and 
racial and ethnic characteristics.
    (7) Housing information. If Youthbuild grant funds are used for 
acquisition, architectural and engineering fees, construction, 
rehabilitation, operating costs or replacement reserves for housing used 
in a Youthbuild program, the recipient must maintain records on family 
size, income, and racial and ethnic characteristics of families renting 
or purchasing Youthbuild properties.
    (8) Relocation Assistance and Real Property Acquisition. The 
recipient shall maintain records sufficient to demonstrate compliance 
with relocation assistance and real property acquisition requirements, 
as described in chapter 6 of HUD Handbook 1378, Tenant Assistance, 
Relocation and Real Property Acquisition. SeeSec. 585.308.
    (b) Implementation grant recipients must submit reports pursuant to 
section 3 regulations at 24 CFR part 135.
    (c) Access by HUD and the Comptroller General. For purposes of 
audit, examination, monitoring, and evaluation, each recipient must give 
HUD (including any duly authorized representatives and the Inspector 
General) and the Comptroller General of the United States (and any duly 
authorized representatives) access to any books, documents, papers, and 
records of the recipient that are pertinent to assistance received.

(Approved by the Office of Management and Budget under control number 
2506-0142)



Sec.  585.402  Grant agreement.

    (a) General. The recipient will provide education and job training 
in accordance with the requirements of this part as incorporated in a 
grant agreement executed by HUD and the recipient.
    (b) Enforcement. HUD will enforce the obligations in the grant 
agreement through such actions as may be appropriate, including 
repayment of funds that have already been disbursed to the recipient.



Sec.  585.403  Reporting requirements.

    (a) Quarterly Progress Reports. Each recipient of a Youthbuild grant 
must submit a report on a quarterly basis. The form and substance of the 
quarterly progress report will be provided to recipients. The 
Performance Evaluation Report noted in paragraph (b) of this section 
will constitute the final Quarterly Report.
    (b) Performance Evaluation Report. Each recipient of a Youthbuild 
grant must submit a Performance Evaluation Report on activities 
undertaken and completed in accordance with the grant agreement. The 
form and substance of the Performance Evaluation Report shall be 
provided to recipients.

(Approved by the Office of Management and Budget under control number 
2506-0142)



Sec.  585.404  Program changes.

    (a) There are three basic types of changes that recipients may wish 
to make to their programs:
    (1) Grant Agreement amendments.
    (2) Material changes, which include, but are not limited to changes 
in housing sites, changes in significant participating parties, and 
changes in approved activities. All material changes require HUD 
approval.
    (3) Self-implementing program changes, which may include changes in 
recipient staffing and content of curriculum. All self-implementing 
changes require documentation in the recipient's files.
    (b) Approval for Grant Agreement amendments and material changes is 
contingent upon the application ranking remaining high enough after the 
approved change to have been competitively selected for funding in the 
year the application was selected.

[[Page 311]]



Sec.  585.405  Obligation and deobligation of funds.

    (a) Obligation of funds. When HUD and the applicant execute a grant 
agreement, funds are obligated to carry out approved activities 
consistent withSec. 585.205 or 585.305 of this part and in accordance 
with the grant agreement.
    (b) Increases. After the initial obligation of funds, HUD will not 
make revisions to increase the amount obligated.
    (c) Deobligation. (1) HUD may deobligate all or parts of grants if 
the grant amounts are not expended within the term of the grant or if 
there is a condition of default as defined in the grant agreement.
    (2) HUD may award deobligated funds to applications previously 
submitted in response to the most recently published NOFA, and in 
accordance with subpart B of this part.



Sec.  585.406  Faith-based activities.

    (a) Organizations that are religious or faith-based are eligible, on 
the same basis as any other organization, to participate in the 
Youthbuild program. Neither the Federal government nor a State or local 
government receiving funds under Youthbuild programs shall discriminate 
against an organization on the basis of the organization's religious 
character or affiliation.
    (b) Organizations that are directly funded under the Youthbuild 
program may not engage in inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
programs or services funded under this part. If an organization conducts 
such activities, the activities must be offered separately, in time or 
location, from the programs or services funded under this part, and 
participation must be voluntary for the beneficiaries of the HUD-funded 
programs or services.
    (c) A religious organization that participates in the Youthbuild 
Program will retain its independence from Federal, State, and local 
governments, and may continue to carry out its mission, including the 
definition, practice, and expression of its religious beliefs, provided 
that it does not use direct Youthbuild Program funds to support any 
inherently religious activities, such as worship, religious instruction, 
or proselytization. Among other things, faith-based organizations may 
use space in their facilities to provide Youthbuild Program-funded 
services, without removing religious art, icons, scriptures, or other 
religious symbols. In addition, a Youthbuild Program-funded religious 
organization retains its authority over its internal governance, and it 
may retain religious terms in its organization's name, select its board 
members on a religious basis, and include religious references in its 
organization's mission statements and other governing documents.
    (d) An organization that participates in the Youthbuild program 
shall not, in providing program assistance, discriminate against a 
program beneficiary or prospective program beneficiary on the basis of 
religion or religious belief.
    (e) Youthbuild funds may not be used for the acquisition, 
construction, or rehabilitation of structures to the extent that those 
structures are used for inherently religious activities. Youthbuild 
funds may be used for the acquisition, construction, or rehabilitation 
of structures only to the extent that those structures are used for 
conducting eligible activities under this part. Where a structure is 
used for both eligible and inherently religious activities, Youthbuild 
funds may not exceed the cost of those portions of the acquisition, 
construction, or rehabilitation that are attributable to eligible 
activities in accordance with the cost accounting requirements 
applicable to Youthbuild funds in this part. Sanctuaries, chapels, or 
other rooms that a Youthbuild-funded religious congregation uses as its 
principal place of worship, however, are ineligible for Youthbuild-
funded improvements. Disposition of real property after the term of the 
grant, or any change in use of the property during the term of the 
grant, is subject to government-wide regulations governing real property 
disposition (see 24 CFR parts 84 and 85).
    (f) If a State or local government voluntarily contributes its own 
funds to supplement federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the

[[Page 312]]

funds are commingled, this section applies to all of the commingled 
funds.

[68 FR 56407, Sept. 30, 2003]



          Subpart F_Applicability of Other Federal Requirements



Sec.  585.501  Application of OMB Circulars.

    (a) The policies, guidelines and requirements of OMB Circular Nos. 
A-87 (Cost Principles Applicable to Grants, Contracts and other 
Agreements with State and Local Governments) and 24 CFR part 85 
(Administrative Requirements for Grants and Cooperative Agreements to 
State, Local and Federally Recognized Indian Tribal Governments) apply 
to the award, acceptance and use of assistance under the program by 
applicable entities, and to the remedies for non-compliance, except 
where inconsistent with the provisions of NAHA, other Federal statutes 
or this part. 24 CFR part 84 (Grants and Cooperative Agreements with 
Institutions of Higher Education, Hospitals, and other Nonprofit 
Organizations), OMB Circular A-122 (Cost Principles Applicable to 
Grants, Contracts and other Agreements with Nonprofit Institutions), 
and, as applicable, OMB Circular A-21 (Cost Principles for Educational 
Institutions) apply to the acceptance and use of assistance by covered 
organizations, except where inconsistent with the provisions of NAHA, 
other Federal statutes or this part. Recipients are also subject to the 
audit requirements of 24 CFR part 44 (Audit Requirements for State and 
Local Governments) and 24 CFR part 45 (Audit Requirements for 
Institutions of Higher Education and other Nonprofit Institutions), as 
applicable. HUD may perform or require additional audits as it finds 
necessary or appropriate.
    (b) Copies of OMB Circulars may be obtained from E.O.P. 
Publications, Room 2200, New Executive Office Building, Washington, DC 
20503, telephone (202) 395-7332. (This is not a toll-free number.) There 
is a limit of two free copies.



Sec.  585.502  Certifications.

    In addition to the standard assurances of compliance with Federal 
rules and OMB Circulars contained in applications for Federal grant 
assistance, applicants must also make the following certifications:
    (a) Consolidated Plan--(1) Applicants that are States or units of 
general local government. The applicant must have a HUD-approved 
Consolidated Plan in accordance with 24 CFR part 91 for the current year 
and must submit a certification that the proposed activities are 
consistent with the HUD-approved Consolidated Plan.
    (2) Applicants that are not States or units of general local 
government. The applicant must submit a certification by the 
jurisdiction or jurisdictions in which the proposed program will be 
located that the applicant's proposed activities are consistent with the 
jurisdiction's current HUD-approved Consolidated Plan. A required 
certification must be made by the unit of general local government if it 
is required to have, or has, a Consolidated Plan. Otherwise the 
certification may be made by the State.
    (3) The Insular Areas of Guam, the Virgin Islands, American Samoa 
and the Northern Mariana Islands are not required to have a Consolidated 
Plan or to make a Consolidate Plan certification. An application by an 
Indian tribe or other applicant for a Youthbuild program that will be 
located on a reservation of an Indian tribe does not require a 
certification by the tribe or State. However, where an Indian tribe or 
an Indian Housing Authority (IHA) is the applicant for a Youthbuild 
program that will not be located on a reservation, the requirement for a 
certification by the jurisdiction or jurisdictions in which the 
Youthbuild program will be located under the preceding paragraph 
applies.
    (b) Fair housing and equal opportunity. A certification that the 
applicant is in compliance and will continue to comply with the 
requirements of the Fair Housing Act, title VI of the Civil Rights Act 
of 1964, section 504 of the Rehabilitation Act of 1973, and the Age 
Discrimination Act of 1975, and will affirmatively further fair housing, 
or, in the case of a Youthbuild application from an Indian tribe or an 
Indian Housing Authority (IHA), a certification that the applicant will 
comply with the

[[Page 313]]

Indian Civil Rights Act (25 U.S.C. 1301 et seq.), section 504 of the 
Rehabilitation Act of 1973, and the Age Discrimination Act of 1975.
    (c) Employment opportunities. A certification that the applicant 
will comply with the requirements of section 3 of the Housing and Urban 
Development Act of 1968 (12 U.S.C. 17017), as implemented by 24 CFR part 
135. Section 3 requires that employment and other economic opportunities 
generated by HUD assisted housing and community development programs 
shall, to the greatest extent feasible, be directed toward section 3 
residents and business concerns.
    (d) Anti-lobbying. In accordance with the disclosure requirements 
and prohibitions of section 319 of the Department of Interior and 
Related Agencies Appropriations Act for Fiscal Year 1990 (31 U.S.C. 
1352) (The Byrd Amendment) and the implementing regulations at 24 CFR 
part 87, applicants for and recipients of assistance exceeding $100,000 
must certify that no Federal funds have been or will be spent on 
lobbying activities in connection with the assistance. Applicants and 
recipients must also disclose where nonappropriated funds have been 
spent or committed for lobbying activities if those activities would be 
prohibited if paid with appropriated funds. Substantial monetary 
penalties may be imposed for failure to file the required certification 
or disclosure.
    (e) Relocation assistance and real property acquisition. A 
certification that the applicant will comply with the requirements of 
the Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970, as amended (URA), and implementing regulations at 49 CFR 
part 24 and HUD Handbook 1378, Tenant Assistance, Relocation and Real 
Property Acquisition. SeeSec. 585.308.
    (f) Use of housing. A certification that the housing to be produced 
in conjunction with the Youthbuild program is to be provided for the 
homeless and low- and very low-income families.
    (g) Lead-based paint. A certification that the applicant will comply 
with the 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.
    (h) State and local standards. A certification that all educational 
programs and activities supported with funds provided under this 
subtitle shall be consistent with applicable State and local educational 
standards. Standards and procedures with respect to the awarding of 
academic credit and certifying educational attainment in such programs 
shall be consistent with applicable State and local educational 
standards.
    (i) Labor standards. A certification that the applicant and related 
parties will comply with the provisions of the Davis-Bacon Act, as 
amended (40 U.S.C. 276a through 276a-5), the Contract Work Hours and 
Safety Standards Act (40 U.S.C. 327 through 333), and HUD Handbook 
1344.1, Revision 1, Federal Labor Standards in Housing and Community 
Development Programs, as applicable, available from the Office of 
Assistant to the Secretary for Labor Relations, room 7118, 451 Seventh 
Street, SW., Washington, DC 20410; Telephone (202) 708-0370; FAX, (202) 
619-8022; TDD, (202) 708-1455. (These are not toll-free numbers).

(Approved by the Office of Management and Budget under control number 
2506-0142)

[60 FR 9737, Feb. 21, 1995, as amended at 64 FR 50227, Sept. 15, 1999; 
72 FR 73496, Dec. 27, 2007]



Sec.  585.503  Conflict of interest.

    (a)(1) In addition to the conflict of interest requirements in 24 
CFR parts 84 and 85, no person who is an employee, agent, consultant, 
officer, or elected or appointed official of the recipient or 
cooperating entity named in the application 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

[[Page 314]]

ties, during his or her tenure or for one year thereafter, except that a 
resident of an eligible property may acquire an ownership interest.
    (2) Exception. HUD may grant an exception to the exclusion in 
paragraph (a)(1) of this section on a case-by-case basis when it 
determines that such an exception will serve to further the purposes of 
the Youthbuild program. An exception may be considered only after the 
applicant or recipient has provided a disclosure of the nature of the 
conflict, accompanied by an assurance that there has been public 
disclosure of the conflict, a description of how the public disclosure 
was made, and an opinion of the applicant's or recipient's attorney that 
the interest for which the exception is sought would not violate State 
or local law. In determining whether to grant a requested exception, HUD 
will consider the cumulative effect of the following factors, where 
applicable:
    (i) Whether the exception would provide a significant cost benefit 
or an essential degree of expertise to the Youthbuild program 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 
intended to be the beneficiaries of the 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 decision-making process, with 
respect to the specific activity in question;
    (v) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (a)(2) of this 
section;
    (vi) Whether undue hardship will result either to the applicant, 
recipient, or the person affected when weighed against the public 
interest served by avoiding the prohibited conflict; and
    (vii) Any other relevant considerations.
    (b) [Reserved]



Sec.  585.504  Use of debarred, suspended, or ineligible contractors.

    The provisions of 2 CFR part 2424 apply to the employment of, 
engagement of services from, awarding of contracts to, or funding of any 
contractors or subcontractors during any period of debarment, 
suspension, or placement in ineligibility status.

[72 FR 73496, Dec. 27, 2007]



PART 586_REVITALIZING BASE CLOSURE COMMUNITIES AND COMMUNITY 
ASSISTANCE_COMMUNITY REDEVELOPMENT AND HOMELESS ASSISTANCE--
Table of Contents



Sec.
586.1 Purpose.
586.5 Definitions.
586.10 Applicability.
586.15 Waivers and extensions of deadlines.
586.20 Overview of the process.
586.25 HUD's negotiations and consultations with the LRA.
586.30 LRA application.
586.35 HUD's review of the application.
586.40 Adverse determinations.
586.45 Disposal of buildings and property.

    Authority: 10 U.S.C. 2687 note; 42 U.S.C. 3535(d).

    Source: 62 FR 37479, July 11, 1997, unless otherwise noted.



Sec.  586.1  Purpose.

    This part implements the Base Closure Community Redevelopment and 
Homeless Assistance Act, as amended (10 U.S.C. 2687 note), which 
instituted a new community-based process for addressing the needs of the 
homeless at base closure and realignment sites. In this process, Local 
Redevelopment Authorities (LRAs) identify interest from homeless 
providers in installation property and develop a redevelopment plan for 
the installation that balances the economic redevelopment and other 
development needs of the communities in the vicinity of the installation 
with the needs of the homeless in those communities. The Department of 
Housing and Urban Development (HUD) reviews the LRA's plan to see that 
an appropriate balance is achieved. This part also implements the 
process for identifying interest from State and local entities for 
property under a public benefit transfer. The LRA is responsible

[[Page 315]]

for concurrently identifying interest from homeless providers and State 
and local entities interested in property under a public benefit 
transfer.



Sec.  586.5  Definitions.

    As used in this part:
    CERCLA. Comprehensive Environmental Response, Compensation, and 
Liability Act (42 U.S.C. 9601 et seq.).
    Communities in the vicinity of the installation. The communities 
that constitute the political jurisdictions (other than the State in 
which the installation is located) that comprise the LRA for the 
installation. If no LRA is formed at the local level, and the State is 
serving in that capacity, the communities in the vicinity of the 
installation are deemed to be those political jurisdiction(s) (other 
than the State) in which the installation is located.
    Consolidated Plan. The plan prepared in accordance with the 
requirements of 24 CFR part 91.
    Continuum of care system.
    (1) A comprehensive homeless assistance system that includes:
    (i) A system of outreach and assessment for determining the needs 
and condition of an individual or family who is homeless, or whether 
assistance is necessary to prevent an individual or family from becoming 
homeless;
    (ii) Emergency shelters with appropriate supportive services to help 
ensure that homeless individuals and families receive adequate emergency 
shelter and referral to necessary service providers or housing finders;
    (iii) Transitional housing with appropriate supportive services to 
help those homeless individuals and families who are not prepared to 
make the transition to independent living;
    (iv) Housing with or without supportive services that has no 
established limitation on the amount of time of residence to help meet 
long-term needs of homeless individuals and families; and
    (v) Any other activity that clearly meets an identified need of the 
homeless and fills a gap in the continuum of care.
    (2) Supportive services are services that enable homeless persons 
and families to move through the continuum of care toward independent 
living. These services include, but are not limited to, case management, 
housing counseling, job training and placement, primary health care, 
mental health services, substance abuse treatment, child care, 
transportation, emergency food and clothing, family violence services, 
education services, moving services, assistance in obtaining 
entitlements, and referral to veterans services and legal services.
    Day. One calendar day including weekends and holidays.
    DoD. Department of Defense.
    HHS. Department of Health and Human Services.
    Homeless person. (1) An individual or family who lacks a fixed, 
regular, and adequate nighttime residence; and
    (2) An individual or family who has a primary nighttime residence 
that is:
    (i) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters and transitional housing for the mentally ill);
    (ii) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (iii) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (3) This term does not include any individual imprisoned or 
otherwise detained under an Act of the Congress or a State law.
    HUD. Department of Housing and Urban Development.
    Installation. A base, camp, post, station, yard, center, homeport 
facility for any ship or other activity under the jurisdiction of DoD, 
including any leased facility, that is approved for closure or 
realignment under the Base Closure and Realignment Act of 1988 (Pub. L. 
100-526), as amended, or the Defense Base Closure and Realignment Act of 
1990 (Pub. L. 101-510), as amended (both at 10 U.S.C. 2687, note).
    Local redevelopment authority (LRA). Any authority or 
instrumentality established by State or local government and recognized 
by the Secretary of Defense, through the Office of Economic Adjustment, 
as the entity responsible for developing the redevelopment plan

[[Page 316]]

with respect to the installation or for directing implementation of the 
plan.
    NEPA. National Environmental Policy Act of 1969 (42 U.S.C. 4320).
    OEA. Office of Economic Adjustment, Department of Defense.
    Private nonprofit organization. An organization, no part of the net 
earnings of which inures to the benefit of any member, founder, 
contributor, or individual; that has a voluntary board; that has an 
accounting system or has designated an entity that will maintain a 
functioning accounting system for the organization in accordance with 
generally accepted accounting procedures; and that practices 
nondiscrimination in the provision of assistance.
    Public benefit transfer. The transfer of surplus military property 
for a specified public purpose at up to a 100 percent discount in 
accordance with 40 U.S.C. 471 et seq., or 49 U.S.C. 47151-47153.
    Redevelopment plan. A plan that is agreed to by the LRA with respect 
to the installation and provides for the reuse or redevelopment of the 
real property and personal property of the installation that is 
available for such reuse and redevelopment as a result of the closure of 
the installation.
    Representative(s) of the homeless. A State or local government 
agency or private nonprofit organization, including a homeless 
assistance planning board, that provides or proposes to provide services 
to the homeless.
    Substantially equivalent. Property that is functionally suitable to 
substitute for property referred to in an approved Title V application. 
For example, if the representative of the homeless had an approved Title 
V application for a building that would accommodate 100 homeless persons 
in an emergency shelter, the replacement facility would also have to 
accommodate 100 at a comparable cost for renovation.
    Substantially equivalent funding. Sufficient funding to acquire a 
substantially equivalent facility.
    Surplus property. Any excess property not required for the needs and 
the discharge of the responsibilities of all Federal Agencies. Authority 
to make this determination, after screening with all Federal Agencies, 
rests with the Military Departments.
    Title V. Title V of the Stewart B. McKinney Homeless Assistance Act 
of 1987 (42 U.S.C 11411) as amended by the National Defense 
Authorization Act for Fiscal Year 1994 (Pub. L. 103-160).
    Urban county. A county within a metropolitan area as defined at 24 
CFR 570.3.



Sec.  586.10  Applicability.

    (a) General. This part applies to all installations that are 
approved for closure/realignment by the President and Congress under 
Pub. L. 101-510 after October 25, 1994.
    (b) Request for inclusion under this process. This part also applies 
to installations that were approved for closure/realignment under either 
Public Law 100-526 or Public Law 101-510 prior to October 25, 1994 and 
for which an LRA submitted a request for inclusion under this part to 
DoD by December 24, 1994. A list of such requests was published in the 
Federal Register on May 30, 1995 (60 FR 28089).
    (1) For installations with Title V applications pending but not 
approved before October 25, 1994, the LRA shall consider and 
specifically address any application for use of buildings and property 
to assist the homeless that were received by HHS prior to October 25, 
1994, and were pending with the Secretary of HHS on that date. These 
pending requests shall be addressed in the LRA's homeless assistance 
submission.
    (2) For installations with Title V applications approved before 
October 25, 1994 where there is an approved Title V application, but 
property has not been assigned or otherwise disposed of by the Military 
Department, the LRA must ensure that its homeless assistance submission 
provides the Title V applicant with:
    (i) The property requested;
    (ii) Properties, on or off the installation, that are substantially 
equivalent to those requested;
    (iii) Sufficient funding to acquire such substantially equivalent 
properties;
    (iv) Services and activities that meet the needs identified in the 
application; or

[[Page 317]]

    (v) A combination of the properties, funding, and services and 
activities described inSec. 586.10(b)(2)(i) through (iv).
    (c) Revised Title V process. All other installations approved for 
closure or realignment under either Public Law 100-526 or Public Law 
101-510 prior to October 25, 1994, for which there was no request for 
consideration under this part, are covered by the process stipulated 
under Title V. Buildings or property that were transferred or leased for 
homeless use under Title V prior to October 25, 1994, may not be 
reconsidered under this part.



Sec.  586.15  Waivers and extensions of deadlines.

    (a) After consultation with the LRA and HUD, and upon a finding that 
it is in the interest of the communities affected by the closure/
realignment of the installation, DoD, through the Director of the Office 
of Economic Adjustment, may extend or postpone any deadline contained in 
this part.
    (b) Upon completion of a determination and finding of good cause, 
and except for deadlines and actions required on the part of DoD, HUD 
may waive any provision of Sec.Sec. 586.20 through 586.45 in any 
particular case, subject only to statutory limitations.



Sec.  586.20  Overview of the process.

    (a) Recognition of the LRA. As soon as practicable after the list of 
installations recommended for closure or realignment is approved, DoD, 
through OEA, will recognize an LRA for the installation. Upon 
recognition, OEA shall publish the name, address, and point of contact 
for the LRA in the Federal Register and in a newspaper of general 
circulation in the communities in the vicinity of the installation.
    (b) Responsibilities of the Military Department. The Military 
Department shall make installation properties available to other DoD 
components and Federal agencies in accordance with the procedures set 
out at 32 CFR part 175. The Military Department will keep the LRA 
informed of other Federal interest in the property during this process. 
Upon completion of this process the Military Department will notify HUD 
and either the LRA, or the Chief Executive Officer of the State, as 
appropriate, and publish a list of surplus property on the installation 
that will be available for reuse in the Federal Register and a newspaper 
of general circulation in the communities in the vicinity of the 
installation.
    (c) Responsibilities of the LRA. The LRA should begin to conduct 
outreach efforts with respect to the installation as soon as is 
practicable after the date of approval of closure/realignment of the 
installation. The local reuse planning process must begin no later than 
the date of the Military Department's Federal Register publication of 
available property described atSec. 586.20(b). For those installations 
that began the process described in this part prior to August 17, 1995, 
HUD will, on a case by case basis, determine whether the statutory 
requirements have been fulfilled and whether any additional requirements 
listed in this part should be required. Upon the Federal Register 
publication described inSec. 586.20(b), the LRA shall:
    (1) Publish, within 30 days, in a newspaper of general circulation 
in the communities in the vicinity of the installation, the time period 
during which the LRA will receive notices of interest from State and 
local governments, representatives of the homeless, and other interested 
parties. This publication shall include the name, address, telephone 
number and the point of contact for the LRA who can provide information 
on the prescribed form and contents of the notices of interest. The LRA 
shall notify DoD of the deadline specified for receipt of notices of 
interest. LRAs are strongly encouraged to make this publication as soon 
as possible within the permissible 30 day period in order to expedite 
the closure process.
    (i) In addition, the LRA has the option to conduct an informal 
solicitation of notices of interest from public and non-profit entities 
interested in obtaining property via a public benefit transfer other 
than a homeless assistance conveyance under either 40 U.S.C. 471 et 
seq., or 49 U.S.C. 47151-47153. As part of such a solicitation, the LRA 
may wish to request that interested entities submit a description of the 
proposed use to the LRA and the sponsoring Federal agency.

[[Page 318]]

    (ii) For all installations selected for closure or realignment prior 
to 1995 that elected to proceed under Public Law 103-421, the LRA shall 
accept notices of interest for not less than 30 days.
    (iii) For installations selected for closure or realignment in 1995 
or thereafter, notices of interest shall be accepted for a minimum of 90 
days and not more than 180 days after the LRA's publication underSec. 
586.20(c)(1).
    (2) Prescribe the form and contents of notices of interest.
    (i) The LRA may not release to the public any information regarding 
the capacity of the representative of the homeless to carry out its 
program, a description of the organization, or its financial plan for 
implementing the program, without the consent of the representative of 
the homeless concerned, unless such release is authorized under Federal 
law and under the law of the State and communities in which the 
installation concerned is located. The identity of the representative of 
the homeless may be disclosed.
    (ii) The notices of interest from representatives of the homeless 
must include:
    (A) A description of the homeless assistance program proposed, 
including the purposes to which the property or facility will be put, 
which may include uses such as supportive services, job and skills 
training, employment programs, shelters, transitional housing or housing 
with no established limitation on the amount of time of residence, food 
and clothing banks, treatment facilities, or any other activity which 
clearly meets an identified need of the homeless and fills a gap in the 
continuum of care;
    (B) A description of the need for the program;
    (C) A description of the extent to which the program is or will be 
coordinated with other homeless assistance programs in the communities 
in the vicinity of the installation;
    (D) Information about the physical requirements necessary to carry 
out the program including a description of the buildings and property at 
the installation that are necessary to carry out the program;
    (E) A description of the financial plan, the organization, and the 
organizational capacity of the representative of the homeless to carry 
out the program; and
    (F) An assessment of the time required to start carrying out the 
program.
    (iii) The notices of interest from entities other than 
representatives of the homeless should specify the name of the entity 
and specific interest in property or facilities along with a description 
of the planned use.
    (3) In addition to the notice required underSec. 586.20(c)(1), 
undertake outreach efforts to representatives of the homeless by 
contacting local government officials and other persons or entities that 
may be interested in assisting the homeless within the vicinity of the 
installation.
    (i) The LRA may invite persons and organizations identified on the 
HUD list of representatives of the homeless and any other 
representatives of the homeless with which the LRA is familiar, 
operating in the vicinity of the installation, to the workshop described 
inSec. 586.20(c)(3)(ii).
    (ii) The LRA, in coordination with the Military Department and HUD, 
shall conduct at least one workshop where representatives of the 
homeless have an opportunity to:
    (A) Learn about the closure/realignment and disposal process;
    (B) Tour the buildings and properties available either on or off the 
installation;
    (C) Learn about the LRA's process and schedule for receiving notices 
of interest as guided bySec. 586.20(c)(2); and
    (D) Learn about any known land use constraints affecting the 
available property and buildings.
    (iii) The LRA should meet with representatives of the homeless that 
express interest in discussing possible uses for these properties to 
alleviate gaps in the continuum of care.
    (4) Consider various properties in response to the notices of 
interest. The LRA may consider property that is located off the 
installation.
    (5) Develop an application, including the redevelopment plan and 
homeless assistance submission, explaining how the LRA proposes to 
address the needs

[[Page 319]]

of the homeless. This application shall consider the notices of interest 
received from State and local governments, representatives of the 
homeless, and other interested parties. This shall include, but not be 
limited to, entities eligible for public benefit transfers under either 
40 U.S.C. 471 et seq., or 49 U.S.C. 47151-47153; representatives of the 
homeless; commercial, industrial, and residential development interests; 
and other interests. From the deadline date for receipt of notices of 
interest described atSec. 586.20(c)(1), the LRA shall have 270 days to 
complete and submit the LRA application to the appropriate Military 
Department and HUD. The application requirements are described atSec. 
586.30.
    (6) Make the draft application available to the public for review 
and comment periodically during the process of developing the 
application. The LRA must conduct at least one public hearing on the 
application prior to its submission to HUD and the appropriate Military 
Department. A summary of the public comments received during the process 
of developing the application shall be included in the application when 
it is submitted.
    (d) Public benefit transfer screening. The LRA should, while 
conducting its outreach efforts, work with the Federal agencies that 
sponsor public benefit transfers under either 40 U.S.C. 471 et seq. or 
49 U.S.C. 47151-47153. Those agencies can provide a list of parties in 
the vicinity of the installation that might be interested in and 
eligible for public benefit transfers. The LRA should make a reasonable 
effort to inform such parties of the availability of the property and 
incorporate their interests within the planning process. Actual 
recipients of property are to be determined by the sponsoring Federal 
agency. The Military Departments shall notify sponsoring Federal 
agencies about property that is available based on the community 
redevelopment plan and keep the LRA apprised of any expressions of 
interest. Such expressions of interest are not required to be 
incorporated into the redevelopment plan, but must be considered.



Sec.  586.25  HUD's negotiations and consultations with the LRA.

    HUD may negotiate and consult with the LRA before and during the 
course of preparation of the LRA's application and during HUD's review 
thereof with a view toward avoiding any preliminary determination that 
the application does not meet any requirement of this part. LRAs are 
encouraged to contact HUD for a list of persons and organizations that 
are representatives of the homeless operating in the vicinity of the 
installation.



Sec.  586.30  LRA application.

    (a) Redevelopment plan. A copy of the redevelopment plan shall be 
part of the application.
    (b) Homeless assistance submission. This component of the 
application shall include the following:
    (1) Information about homelessness in the communities in the 
vicinity of the installation.
    (i) A list of all the political jurisdictions which comprise the 
LRA.
    (ii) A description of the unmet need in the continuum of care system 
within each political jurisdiction, which should include information 
about any gaps that exist in the continuum of care for particular 
homeless subpopulations. The source for this information shall depend 
upon the size and nature of the political jurisdictions(s) that comprise 
the LRA. LRAs representing:
    (A) Political jurisdictions that are required to submit a 
Consolidated Plan shall include a copy of their Homeless and Special 
Needs Population Table (table 1), Priority Homeless Needs Assessment 
Table (table 2), and narrative description thereof from that 
Consolidated Plan, including the inventory of facilities and services 
that assist the homeless in the jurisdiction.
    (B) Political jurisdictions that are part of an urban county that is 
required to submit a Consolidated Plan shall include a copy of their 
Homeless and Special Needs Population Table (table 1), Priority Homeless 
Needs Assessment Table (table 2), and narrative description thereof from 
that Consolidated Plan, including the inventory of facilities and 
services that assist the

[[Page 320]]

homeless in the jurisdiction. In addition, the LRA shall explain what 
portion of the homeless population and subpopulations described in the 
Consolidated Plan are attributable to the political jurisdiction it 
represents.
    (C) A political jurisdiction not described bySec. 
586.30(b)(1)(ii)(A) orSec. 586.30(b)(1)(ii)(B) shall submit a 
narrative description of what it perceives to be the homeless population 
within the jurisdiction and a brief inventory of the facilities and 
services that assist homeless persons and families within the 
jurisdiction. LRAs that represent these jurisdictions are not required 
to conduct surveys of the homeless population.
    (2) Notices of interest proposing assistance to homeless persons 
and/or families.
    (i) A description of the proposed activities to be carried out on or 
off the installation and a discussion of how these activities meet a 
portion or all of the needs of the homeless by addressing the gaps in 
the continuum of care. The activities need not be limited to expressions 
of interest in property, but may also include discussions of how 
economic redevelopment may benefit the homeless;
    (ii) A copy of each notice of interest from representatives of the 
homeless for use of buildings and property and a description of the 
manner in which the LRA's application addresses the need expressed in 
each notice of interest. If the LRA determines that a particular notice 
of interest should not be awarded property, an explanation of why the 
LRA determined not to support that notice of interest, the reasons for 
which may include the impact of the program contained in the notice of 
interest on the community as described inSec. 586.30(b)(2)(iii); and
    (iii) A description of the impact that the implemented redevelopment 
plan will have on the community. This shall include information on how 
the LRA's redevelopment plan might impact the character of existing 
neighborhoods adjacent to the properties proposed to be used to assist 
the homeless and should discuss alternative plans. Impact on schools, 
social services, transportation, infrastructure, and concentration of 
minorities and/or low income persons shall also be discussed.
    (3) Legally binding agreements for buildings, property, funding, 
and/or services.
    (i) A copy of the legally binding agreements that the LRA proposes 
to enter into with the representative(s) of the homeless selected by the 
LRA to implement homeless programs that fill gaps in the existing 
continuum of care. The legally binding agreements shall provide for a 
process for negotiating alternative arrangements in the event that an 
environmental analysis conducted underSec. 586.45(b) indicates that 
any property identified for transfer in the agreement is not suitable 
for the intended purpose. Where the balance determined in accordance 
withSec. 586.30(b)(4) provides for the use of installation property as 
a homeless assistance facility, legally binding agreements must provide 
for the reversion or transfer, either to the LRA or to another entity or 
entities, of the buildings and property in the event they cease to be 
used for the homeless. In cases where the balance proposed by the LRA 
does not include the use of buildings or property on the installation, 
the legally binding agreements need not be tied to the use of specific 
real property and need not include a reverter clause. Legally binding 
agreements shall be accompanied by a legal opinion of the chief legal 
advisor of the LRA or political jurisdiction or jurisdictions which will 
be executing the legally binding agreements that the legally binding 
agreements, when executed, will constitute legal, valid, binding, and 
enforceable obligations on the parties thereto;
    (ii) A description of how buildings, property, funding, and/or 
services either on or off the installation will be used to fill some of 
the gaps in the current continuum of care system and an explanation of 
the suitability of the buildings and property for that use; and
    (iii) Information on the availability of general services such as 
transportation, police, and fire protection, and a discussion of 
infrastructure such as water, sewer, and electricity in the vicinity of 
the proposed homeless activity at the installation.

[[Page 321]]

    (4) An assessment of the balance with economic and other development 
needs.
    (i) An assessment of the manner in which the application balances 
the expressed needs of the homeless and the needs of the communities 
comprising the LRA for economic redevelopment and other development; and
    (ii) An explanation of how the LRA's application is consistent with 
the appropriate Consolidated Plan(s) or any other existing housing, 
social service, community, economic, or other development plans adopted 
by the jurisdictions in the vicinity of the installation.
    (5) A description of the outreach undertaken by the LRA. The LRA 
shall explain how the outreach requirements described atSec. 
586.20(c)(1) andSec. 586.20(c)(3) have been fulfilled. This 
explanation shall include a list of the representatives of the homeless 
the LRA contacted during the outreach process.
    (c) Public comments. The LRA application shall include the materials 
described atSec. 586.20(c)(6). These materials shall be prefaced with 
an overview of the citizen participation process observed in preparing 
the application.



Sec.  586.35  HUD's review of the application.

    (a) Timing. HUD shall complete a review of each application no later 
than 60 days after its receipt of a completed application.
    (b) Standards of review. The purpose of the review is to determine 
whether the application is complete and, with respect to the expressed 
interest and requests of representatives of the homeless, whether the 
application:
    (1) Need. Takes into consideration the size and nature of the 
homeless population in the communities in the vicinity of the 
installation, the availability of existing services in such communities 
to meet the needs of the homeless in such communities, and the 
suitability of the buildings and property covered by the application for 
use and needs of the homeless in such communities. HUD will take into 
consideration the size and nature of the installation in reviewing the 
needs of the homeless population in the communities in the vicinity of 
the installation.
    (2) Impact of notices of interest. Takes into consideration any 
economic impact of the homeless assistance under the plan on the 
communities in the vicinity of the installation, including:
    (i) Whether the plan is feasible in light of demands that would be 
placed on available social services, police and fire protection, and 
infrastructure in the community; and,
    (ii) Whether the selected notices of interest are consistent with 
the Consolidated Plan(s) or any other existing housing, social service, 
community, economic, or other development plans adopted by the political 
jurisdictions in the vicinity of the installation.
    (3) Legally binding agreements. Specifies the manner in which the 
buildings, property, funding, and/or services on or off the installation 
will be made available for homeless assistance purposes. HUD will review 
each legally binding agreement to verify that:
    (i) They include all the documents legally required to complete the 
transactions necessary to realize the homeless use(s) described in the 
application;
    (ii) They include all appropriate terms and conditions;
    (iii) They address the full range of contingencies including those 
described atSec. 586.30(b)(3)(i);
    (iv) They stipulate that the buildings, property, funding, and/or 
services will be made available to the representatives of the homeless 
in a timely fashion; and
    (v) They are accompanied by a legal opinion of the chief legal 
advisor of the LRA or political jurisdiction or jurisdictions which will 
be executing the legally binding agreements that the legally binding 
agreements will, when executed, constitute legal, valid, binding, and 
enforceable obligations on the parties thereto.
    (4) Balance. Balances in an appropriate manner a portion or all of 
the needs of the communities in the vicinity of the installation for 
economic redevelopment and other development with the needs of the 
homeless in such communities.
    (5) Outreach. Was developed in consultation with representatives of 
the homeless and the homeless assistance

[[Page 322]]

planning boards, if any, in the communities in the vicinity of the 
installation and whether the outreach requirements described atSec. 
586.20(c)(1) andSec. 586.20(c)(3) have been fulfilled by the LRA.
    (c) Notice of determination. (1) HUD shall, no later than the 60th 
day after its receipt of the application, unless such deadline is 
extended pursuant toSec. 586.15(a), send written notification both to 
DoD and the LRA of its preliminary determination that the application 
meets or fails to meet the requirements ofSec. 586.35(b). If the 
application fails to meet the requirements, HUD will send the LRA:
    (i) A summary of the deficiencies in the application;
    (ii) An explanation of the determination; and
    (iii) A statement of how the LRA must address the determinations.
    (2) In the event that no application is submitted and no extension 
is requested as of the deadline specified inSec. 586.20(c)(5), and the 
State does not accept within 30 days a DoD written request to become 
recognized as the LRA, the absence of such application will trigger an 
adverse determination by HUD effective on the date of the lapsed 
deadline. Under these conditions, HUD will follow the process described 
atSec. 586.40.
    (d) Opportunity to cure. (1) The LRA shall have 90 days from its 
receipt of the notice of preliminary determination underSec. 
586.35(c)(1) within which to submit to HUD and DoD a revised application 
which addresses the determinations listed in the notice. Failure to 
submit a revised application shall result in a final determination, 
effective 90 days from the LRA's receipt of the preliminary 
determination, that the redevelopment plan fails to meet the 
requirements ofSec. 586.35(b).
    (2) HUD shall, within 30 days of its receipt of the LRA's 
resubmission, send written notification of its final determination of 
whether the application meets the requirements ofSec. 586.35(b) to 
both DOD and the LRA.



Sec.  586.40  Adverse determinations.

    (a) Review and consultation. If the resubmission fails to meet the 
requirements ofSec. 586.35(b), or if no resubmission is received, HUD 
will review the original application, including the notices of interest 
submitted by representatives of the homeless. In addition, in such 
instances or when no original application has been submitted, HUD:
    (1) Shall consult with the representatives of the homeless, if any, 
for purposes of evaluating the continuing interest of such 
representatives in the use of buildings or property at the installation 
to assist the homeless;
    (2) May consult with the applicable Military Department regarding 
the suitability of the buildings and property at the installation for 
use to assist the homeless; and
    (3) May consult with representatives of the homeless and other 
parties as necessary.
    (b) Notice of decision. (1) Within 90 days of receipt of an LRA's 
revised application which HUD determines does not meet the requirements 
ofSec. 586.35(b), HUD shall, based upon its reviews and consultations 
underSec. 586.40(a):
    (i) Notify DoD and the LRA of the buildings and property at the 
installation that HUD determines are suitable for use to assist the 
homeless; and
    (ii) Notify DoD and the LRA of the extent to which the revised 
redevelopment plan meets the criteria set forth inSec. 586.35(b).
    (2) In the event that an LRA does not submit a revised redevelopment 
plan underSec. 586.35(d), HUD shall, based upon its reviews and 
consultations underSec. 586.40(a), notify DoD and the LRA of the 
buildings and property at the installation that HUD determines are 
suitable for use to assist the homeless, either
    (i) Within 190 days after HUD sends its notice of preliminary 
adverse determination underSec. 586.35(c)(1), if an LRA has not 
submitted a revised redevelopment plan; or
    (ii) Within 390 days after the Military Department's Federal 
Register publication of available property underSec. 586.20(b), if no 
redevelopment plan has been received and no extension has been approved.

[[Page 323]]



Sec.  586.45  Disposal of buildings and property.

    (a) Public benefit transfer screening. Not later than the LRA's 
submission of its redevelopment plan to DoD and HUD, the Military 
Department will conduct an official public benefit transfer screening in 
accordance with the Federal Property Management Regulations (41 CFR part 
101-47.303-2) based upon the uses identified in the redevelopment plan. 
Federal sponsoring agencies shall notify eligible applicants that any 
request for property must be consistent with the uses identified in the 
redevelopment plan. At the request of the LRA, the Military Department 
may conduct the official State and local public benefit screening at any 
time after the publication of available property described atSec. 
586.20(b).
    (b) Environmental analysis. Prior to disposal of any real property, 
the Military Department shall, consistent with NEPA and section 2905 of 
the Defense Base Closure and Realignment Act of 1990, as amended (10 
U.S.C. 2687 note), complete an environmental impact analysis of all 
reasonable disposal alternatives. The Military Department shall consult 
with the LRA throughout the environmental impact analysis process to 
ensure both that the LRA is provided the most current environmental 
information available concerning the installation, and that the Military 
Department receives the most current information available concerning 
the LRA's redevelopment plans for the installation.
    (c) Disposal. Upon receipt of a notice of approval of an application 
from HUD underSec. 586.35(c)(1) orSec. 586.35(d)(2), DoD shall 
dispose of buildings and property in accordance with the record of 
decision or other decision document prepared underSec. 586.45(b). 
Disposal of buildings and property to be used as homeless assistance 
facilities shall be to either the LRA or directly to the 
representative(s) of the homeless and shall be without consideration. 
Upon receipt of a notice from HUD underSec. 586.40(b), DoD will 
dispose of the buildings and property at the installation in 
consultation with HUD and the LRA.
    (d) LRA's responsibility. The LRA shall be responsible for the 
implementation of and compliance with legally binding agreements under 
the application.
    (e) Reversions to the LRA. If a building or property reverts to the 
LRA under a legally binding agreement under the application, the LRA 
shall take appropriate actions to secure, to the maximum extent 
practicable, the utilization of the building or property by other 
homeless representatives to assist the homeless. An LRA may not be 
required to utilize the building or property to assist the homeless.



PART 590_URBAN HOMESTEADING--Table of Contents



Sec.
590.1 General.
590.3 [Reserved]
590.5 Definitions.
590.7 Program requirements.
590.9-590.18 [Reserved]
590.19 Use of section 810 funds.
590.21 [Reserved]
590.23 Program close-out.
590.25 Retention of records.
590.27 Audit.
590.29 HUD review of LUHA performance.
590.31 Corrective and remedial action.

    Authority: 12 U.S.C. 1706e; 42 U.S.C. 3535(d).

    Source: 54 FR 23937, June 2, 1989, unless otherwise noted.



Sec.  590.1  General.

    This part applies to the completion of activities remaining under 
the Urban Homesteading Program authorized under section 810(b) of the 
Housing and Community Development Act of 1974 (12 U.S.C. 1706e). 
Authority to reimburse Federal agencies for transfer of additional 
properties to LUHAs under this part was repealed effective October 1, 
1991.

[61 FR 7062, Feb. 23, 1996]



Sec.  590.3  [Reserved]



Sec.  590.5  Definitions.

    Act means section 810 of the Housing and Community Development Act 
of 1974, as amended from time to time.
    Applicant means any State or unit of general local government that 
applies for HUD approval of a local urban

[[Page 324]]

homesteading program under these regulations.
    Homesteader means an individual or family that participates in a 
local urban homesteading program by agreeing to rehabilitate and occupy 
a property in accordance withSec. 590.7(b)(5).
    Local urban homesteading agency (LUHA) means a State, a unit of 
general local government, or a public agency or qualified community 
organization designated in accordance withSec. 590.7(c) by a State or 
a unit of general local government.
    Local urban homesteading program means the operating procedures and 
requirements developed by a LUHA and approved by HUD in accordance with 
this part for selecting and conveying federally-owned properties to 
qualified homesteaders.
    Low-income families means those families and individuals whose 
adjusted incomes do not exceed 80 per centum of the median income for 
the area, as determined by the Secretary under section 3(b)(2) of the 
United States Housing Act of 1937. Under the provision of 24 CFR part 
813, the Secretary's income limits for this purpose are updated annually 
and are are available from the Housing Management Division in HUD field 
offices.
    Qualified community organization has the meaning specified inSec. 
590.7(c)(4).
    Section 810 funds means funds available to reimburse HUD, FmHA, VA, 
or RTC (as applicable) for federally-owned property transferred to LUHAs 
in accordance with this part.
    State means any State of the United States, any instrumentality of a 
State approved by the Governor, and the Commonwealth of Puerto Rico.
    Unit of general local government means any city, county, town, 
township, parish, village, or other general purpose political 
subdivision of a State, Guam, the Virgin Islands, or American Samoa, or 
any general purpose political subdivision thereof; the District of 
Columbia; the Trust Territory of the Pacific Islands; and Indian tribes, 
bands, groups, and nations of the United States, including Alaska 
Indians, Aleuts, and Eskimos.
    Urban homesteading neighborhood means any geographic area approved 
by HUD for the conduct of a local urban homesteading program that meets 
the requirements of this part.

[54 FR 23937, June 2, 1989, as amended at 54 FR 39525, Sept. 27, 1989; 
56 FR 6808, Feb. 20, 1991; 61 FR 5211, Feb. 9, 1996; 61 FR 7062, Feb. 
23, 1996]



Sec.  590.7  Program requirements.

    (a) [Reserved]
    (b) Development of local urban homesteading program. The applicant 
shall develop, in compliance with this part, a local urban homesteading 
program containing the following major elements:
    (1) Selection and management of properties. The program shall 
include procedures for selecting federally-owned properties suitable for 
homesteading and for managing the properties before conditional 
conveyance to homesteaders. The program shall also provide that, by 
accepting title to a property under this part, the LUHA assumes 
liability for injury or damage to persons or property by reason of a 
defect in the dwelling, its equipment or appurtenances, or for any other 
reason related to ownership of the property.
    (2) Homesteader selection. The program shall include equitable 
procedures for homesteader selection which:
    (i) Exclude prospective homesteaders who own other residential 
property;
    (ii) Take into account a prospective homesteader's capacity to make 
or cause to be made the repairs and improvements required under the 
homesteader agreement, including the capacity to contribute a 
substantial amount of labor to the rehabilitation process, or to obtain 
assistance from private sources, community organizations, or other 
sources;
    (iii) Provide that membership in, or other ties to, any private 
organization (including a qualified community organization) may not be 
made a factor affecting selection as a homesteader;
    (iv) Include locally adopted criteria reasonably matching family 
size to the number of bedrooms in each property for which a homesteader 
is being selected, provided that a prospective homesteader who is a one 
person household shall not be permitted to receive a property having 
more than two bedrooms, unless there are no larger

[[Page 325]]

households on the waiting list, notwithstanding the relative standing of 
the respective households under the low-income priority (seeSec. 
590.7(b)(2)(v)).
    (v) Provide that, before a property is offered to other prospective 
homesteaders who are eligible, the property will be offered to eligible 
low-income families, except that properties obtained under the RTC's 
Affordable Housing Disposition Program (12 CFR part 1609) must be 
transferred to low-income families; and
    (vi) Include other reasonable selection criteria which are 
consistent with thisSec. 590.7(b)(2) and which shall be specified in 
the applicant's application pursuant toSec. 590.11(a) and approved by 
HUD underSec. 590.13. Such selection criteria may include preferences 
for the selection of neighborhood residents or other local residents, 
but only to the extent that they are not inconsistent with this section 
and with affirmative marketing objectives underSec. 590.11(d)(5)(ii). 
Such preferences based on residential location may not be based upon the 
length of time the prospective homesteader has resided in the 
jurisdiction or the neighborhood. Also, persons who are employed, or who 
have been notified that they have been hired, in the jurisdiction shall 
be extended any preference available to current residents.
    (3) Conditional conveyance. The program shall provide for the 
conditional conveyance of federally-owned properties to homesteaders 
without any substantial consideration within one year, or less, of title 
transfer to the LUHA, unless otherwise approved by HUD in writing prior 
to the transfer.
    (4) Financing. The program shall provide procedures for the LUHA to 
undertake, or to assist the homesteader in arranging, financing for the 
rehabilitation required under the homesteader agreement. Where direct 
Federal loans under section 312 of the Housing Act of 1964 (42 USC 
1452b) are used as a rehabilitation financing resource by the LUHA, the 
LUHA shall make reasonable efforts to assist HUD in monitoring and 
securing compliance with the terms of the loan during the homesteader's 
conditional title period.
    (5) Homesteader agreement. The program shall provide for the 
execution, concurrent with or as a part of the conditional conveyance, 
of a homesteader agreement between the LUHA and the homesteader which 
shall require the homesteader:
    (i) To repair, within one year from the date of conditional 
conveyance of the property to the homesteader, any defects that pose a 
substantial danger to health and safety;
    (ii) To make or cause to be made additional repairs and improvements 
necessary to meet the applicable local standards for decent, safe, and 
sanitary housing within three years from the date of conditional 
conveyance of the property to the homesteader, and to comply with any 
energy conservation measures designated by the LUHA as part of the 
repairs;
    (iii) To occupy the property as his or her principal residence for 
not less than five consecutive years from the date of initial occupancy 
except as otherwise approved in writing by HUD on a case-by-case basis 
when emergency conditions make compliance with this requirement 
infeasible;
    (iv) To permit reasonable inspections at reasonable times by 
employees or designated agents of the LUHA to determine compliance with 
the agreement; and
    (v) To surrender possession of, and any interest in, the property 
upon material breach of the homesteader agreement (including default on 
any rehabilitation financing secured by the property), as determined by 
the LUHA in accordance with this part.
    (6) Monitoring and selecting successor homesteaders. The program 
shall provide that the LUHA will monitor the homesteader's compliance 
with the homesteader agreement, will revoke the conditional conveyance 
and homesteader agreement upon any material breach by the homesteader, 
and, to the extent necessary and practicable, will select one or more 
successor homesteaders for the property. The LUHA shall make reasonable 
efforts to assure that any proposed successor homesteader assumes any 
section 312 loan on the property, subject to HUD approval of the terms 
of the assumption.

[[Page 326]]

If the LUHA selects a successor homesteader, it shall require the 
successor homesteader to assume the original homesteader's remaining 
obligations under his/her homesteader agreement and conditional 
conveyance in compliance with this part.
    (7) Fee simple title. The program shall provide for the conveyance 
of fee simple title to the property from the LUHA to the homesteader, or 
successor homesteader, without substantial consideration upon compliance 
with the terms of the homesteader agreement and conditional conveyance.
    (8) Homesteading infeasible; alternative use. If completion of 
homesteading proves, in the judgment of HUD, to be infeasible for any 
reason after a LUHA has accepted title to a federally-owned property, 
the LUHA shall not demolish, dispose of, rent or otherwise convert the 
property to its own use until HUD approves an alternative use.
    (c) Designation of LUHA--(1) Responsibilities. Under the 
requirements of thisSec. 590.7(c), the applicant shall designate a 
LUHA, which shall have primary responsibility for administering the 
local urban homesteading program for the applicant. Although the 
applicant may at any time amend its local urban homesteading program to 
designate a new LUHA, subject to HUD approval, neither the applicant nor 
the designated LUHA may delegate or contract out to another legal entity 
the function of accepting and conveying in its own name title to 
properties for homesteading purposes under this part. To the extent 
permitted by the applicant, the LUHA may use third parties as 
contractors, consultants, or agents to assist if in carrying out other 
functions and responsibilities with respect to the local urban 
homesteading program, by entering into a written agreement between the 
LUHA and the third party. No such agreement shall be deemed to relieve 
the LUHA or the applicant of responsibility for the thrid party's 
actions in connection with the local urban homesteading program.
    (2) Identity of LUHA. The LUHA must have legal authority to carry 
out a local urban homesteading program as described in this part, 
including the authority to accept and convey title to properties under 
paragraph (b) of thisSec. 590.7. To the extent consistent therewith, 
the applicant State or unit of general local government may:
    (i) Act as LUHA in its own name, while identifying within its 
administrative organization a lead department or agency to act as the 
primary contact point for HUD;
    (ii) Designate, and enter into a written agreement with, a legally 
separate public body or agency to act as LUHA in accordance with this 
part; or
    (iii) Designate, and enter into a written agreement with, a 
qualified community organization (as defined in the Act) to act as LUHA 
in accordance with this part.

[54 FR 23937, June 2, 1989, as amended at 56 FR 6808, Feb. 20, 1991; 61 
FR 7062, Feb. 23, 1996]



Sec.  590.9-590.18  [Reserved]



Sec.  590.19  Use of section 810 funds.

    Participants receiving Community Development Block Grant (CDBG) 
funds may charge eligible administrative expenses incurred in operating 
their urban homesteading programs to their otherwise available CDBG 
administrative funds, provided such administrative expenditures would 
satisfy other title I requirements.

[56 FR 6809, Feb. 20, 1991, as amended at 61 FR 7062, Feb. 23, 1996]



Sec.  590.21  [Reserved]



Sec.  590.23  Program close-out.

    (a) Initiation of close-out. The LUHA shall institute close-out 
procedures, as prescribed by HUD.
    (b) Close-out may be subject to later audit in accordance withSec. 
590.27(b).
    (c) Close-out conditions. Upon completion of HUD close-out review, 
HUD will send the LUHA a letter of completion, which HUD may condition. 
Conditions may reflect unmet obligations, deadlines to meet them, and a 
statement of any required interim reporting procedures. In addition to 
any other conditions that may be specifically set forth in the letter of 
completion, the LUHA remains reponsible after close-out to take whatever 
actions may be necessary to enforce the homesteader agreement and 
complete final fee simple conveyance to the homesteader or a

[[Page 327]]

successor homesteader, or to obtain alternative use approval from HUD 
underSec. 590.7(b)(8), for properties conveyed to the LUHA for 
homesteading prior to close-out.

[54 FR 23937, June 2, 1989, as amended at 61 FR 7062, Feb. 23, 1996]



Sec.  590.25  Retention of records.

    The LUHA shall maintain adequate financial records, property 
disposition documents, supporting documents, statistical records, and 
all other records pertinent to the local urban homesteading program 
until fee simple title has been conveyed to all homesteaders, generally 
a five-year period. The LUHA will also maintain current and accurate 
data on the race and ethnicity of program beneficiaries.



Sec.  590.27  Audit.

    (a) Access to records. The Secretary, the Comptroller General of the 
United States, or any of their duly authorized representatives, shall 
have access to all books, accounts, records, reports, files, and other 
papers or property of LUHAs pertaining to funds or property transferred 
under this part, for the purpose of making surveys, audits, 
examinations, excerpts, and transcripts.
    (b) Audit. The LUHA's financial management system shall provide for 
audits in accordance with 24 CFR part 44.



Sec.  590.29  HUD review of LUHA performance.

    (a) HUD may review the performance of each active LUHA as necessary, 
as determined by HUD, to determine whether:
    (1) The program complies with the urban homesteading program 
participation agreement and certifications, the Act, this part, and 
other applicable Federal laws and regulations;
    (2) The LUHA is carrying out its program substantially as approved 
by HUD;
    (3) The federally-owned properties the LUHA selects are suitable for 
homesteading and rehabilitation;
    (4) The LUHA is making reasonable progress in moving properties 
through the stages of the homesteading process, including acquisition, 
homesteader selection, conditional conveyance, rehabilitation, and final 
conveyance.
    (5) The improvements in neighborhood public facilities and services 
provided for in the coordinated approach toward neighborhood improvement 
are occurring on a timely basis; and
    (6) The LUHA has a continuing administrative and legal capacity to 
carry out the approved program in a cost-effective and timely manner.
    (b) In reviewing a LUHA's performance, HUD will consider all 
available evidence, which may include, but need not be limited to, the 
following:
    (1) Records maintained by the LUHA;
    (2) Results of HUD's monitoring of the LUHA's performance;
    (3) Audit reports, whether conducted by the LUHA or by HUD auditors;
    (4) Records of comments and complaints by citizens and 
organizations; and
    (5) Litigation history.
    (c) LUHAs shall supply data and make available records necessary for 
HUD's monitoring of the LUHA's local urban homesteading program.

[54 FR 23937, June 2, 1989, as amended at 61 FR 7063, Feb. 23, 1996]



Sec.  590.31  Corrective and remedial action.

    When HUD determines on the basis of its review that the LUHA's 
performance does not meet the standards specified inSec. 590.29(a), 
HUD shall take one or more of the following corrective or remedial 
actions, as appropriate in the circumstances:
    (a) Issue a letter of warning that advises the LUHA of the 
deficiency and puts it on notice that HUD will take more serious 
corrective and remedial action if the LUHA does not correct the 
deficiency, or if it is repeated;
    (b) Advise the LUHA to suspend, discontinue or not incur costs for 
identified defective aspects of the local program;
    (c) [Reserved]
    (d) In cases of continued substantial noncompliance, terminate the 
urban homesteading program participation agreement, close out the 
program and advise the LUHA of the reasons for such action; or
    (e) Where HUD determines that a LUHA has, contrary to its 
obligations underSec. 590.7(b), converted a property received under 
this part to its own use,

[[Page 328]]

failed to adequately preserve and protect the property, failed to timely 
secure a homesteader for the property, or received excessive 
consideration for conveyance of the property, HUD may direct the LUHA to 
repay to HUD either the amount of compensation HUD finds that the LUHA 
has received for the property or the amount of section 810 funds 
expended for the property, as HUD determines appropriate.

[54 FR 23937, June 2, 1989, as amended at 61 FR 7063, Feb. 23, 1996]



PART 594_JOHN HEINZ NEIGHBORHOOD DEVELOPMENT PROGRAM--
Table of Contents



                            Subpart A_General

Sec.
594.1 Applicability and purpose.
594.3 Definitions.

                          Subpart B_Eligibility

594.5 Eligible applicants.
594.7 Other threshold requirements.
594.10 Eligible activities.

                Subpart C_Funding Allocation and Criteria

594.15 Allocation amounts.
594.17 General criteria for competitive selection.

                Subpart D_Award and Use of Grant Amounts

594.20 Submission procedures.
594.23 Approval and certification procedures.
594.25 Project administration.
594.28 Environmental reviews.
594.30 Equal opportunity and other Federal requirements.

    Authority: 42 U.S.C. 3535(d) and 5318a.

    Source: 60 FR 16359, Mar. 29, 1995, unless otherwise noted.



                            Subpart A_General



Sec.  594.1  Applicability and purpose.

    (a) General. This part establishes as a permanent program the John 
Heinz Neighborhood Development Program, as authorized by section 832 of 
the Housing and Community Development Act of 1992. Previously, the 
program had been administered by the Department as a demonstration 
program under section 123 of the Housing and Urban-Rural Recovery Act of 
1983 (42 U.S.C. 5318 note).
    (b) Purpose. The program is intended to assist communities to become 
more viable, by providing incentive funds to carry out neighborhood 
development activities that benefit low- and moderate-income families. 
The program objectives are to increase the capacity of neighborhood 
organizations, promote long-term financial support for their 
neighborhood projects, and encourage greater participation of 
neighborhood organizations with private and public institutions.



Sec.  594.3  Definitions.

    Empowerment zone means an area designated by HUD as an Empowerment 
Zone under 26 U.S.C. 1391-1393.
    Enterprise community means an area designated by HUD as an 
Enterprise Community under 26 U.S.C. 1391-1393.
    Grantee means an eligible neighborhood organization that executes a 
grant agreement with HUD under this part.
    Low- and moderate-income persons means families and individuals 
whose incomes do not exceed 80 percent of the median income for the 
area, as determined by the Secretary of HUD in accordance with 42 U.S.C. 
5302(a)(20).
    Neighborhood development funding organization means:
    (1) A depository institution, the accounts of which are insured 
pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., 
or the Federal Credit Union Act, 12 U.S.C. 1751 et seq., and any 
subsidiary (as such term is defined in 12 U.S.C. 1813(w)) thereof;
    (2) A depository institution holding company and any subsidiary (as 
such term is defined in 12 U.S.C. 1813(w)) thereof; or
    (3) A company at least 75 percent of the common stock of which is 
owned by one or more insured depository institutions or depository 
institution holding companies.
    Neighborhood development organization means the same as the term is 
defined inSec. 594.5.
    Rural neighborhoods. In small cities with under 10,000 in population 
and in rural areas, a neighborhood area can be

[[Page 329]]

the same unit as the unit of general local government.
    Unit of general local government means a city, town, township, 
county, parish, village, or other general purpose political subdivision 
of a State; an urban county; the Federated States of Micronesia; the 
Marshall Islands; or a general purpose political subdivision thereof.

[60 FR 16359, Mar. 29, 1995, as amended at 61 FR 5211, Feb. 9, 1996]



                          Subpart B_Eligibility



Sec.  594.5  Eligible applicants.

    (a) General requirements. To be eligible under this program, a 
neighborhood development organization must be located within the 
neighborhood for which assistance is to be provided. It cannot be a 
city-wide consortium, or, in general, an organization serving a large 
area of the city. The applicant must meet all of the following 
requirements:
    (1) The organization must be incorporated as a private, voluntary, 
nonprofit corporation under the laws of the State in which it operates;
    (2) The organization must be responsible through a governing body to 
the residents of the neighborhood it serves, and not less than 51 
percent of the members of the governing body must be residents of the 
neighborhood;
    (3) The organization must have conducted business for at least one 
year;
    (4) The organization must operate within an area that meets at least 
one of the following criteria:
    (i) The area meets the requirements for Federal assistance under 
section 119 of the Housing and Community Development Act of 1974, 42 
U.S.C. 5318;
    (ii) The area is designated as an Enterprise Community or 
Empowerment Zone under Federal law as enacted;
    (iii) The area is designated as an enterprise zone under State law 
and is recognized by the Secretary as a State enterprise zone for 
purposes of this part; or
    (iv) The area is a qualified distressed community within the meaning 
of section 233(b)(1) of the Bank Enterprise Act of 1991, 12 U.S.C. 
1834a(b)(1); and
    (5) The organization must have conducted one or more eligible 
neighborhood development activities that primarily benefit low- and 
moderate-income persons.
    (b) Special eligibility. Any facility that provides small 
entrepreneurial business with affordable shared support services and 
business development services and that meets the requirements of 
paragraph (a) of this section may also be eligible to participate in 
this program.



Sec.  594.7  Other threshold requirements.

    In addition, an applicant must meet the following threshold 
requirements:
    (a) Specify a management business plan for accomplishing one or more 
of the eligible activities specified inSec. 594.10;
    (b) Specify a strategy for achieving greater long-term private 
sector support, especially in cooperation with a neighborhood 
development funding organization; and
    (c) Specify a strategy for increasing the capacity of the applicant.



Sec.  594.10  Eligible activities.

    Eligible activities include, but are not limited to, the following:
    (a) Developing economic development activities that include:
    (1) Creating permanent jobs in the neighborhood; or
    (2) Establishing or expanding businesses within the neighborhood;
    (b) Developing new housing, rehabilitating existing housing, or 
managing housing stock within the neighborhood;
    (c) Developing delivery mechanisms for essential services that have 
lasting benefits to the neighborhood; and
    (d) Planning, promoting, or financing voluntary neighborhood 
improvement efforts.



                Subpart C_Funding Allocation and Criteria



Sec.  594.15  Allocation amounts.

    (a) Amounts and match requirement. HUD will make grants, in the form 
of matching funds, to eligible neighborhood development organizations. 
HUD reserves the right to make grants for less than the maximum amount 
established by statute, and to limit the number of times a previous 
grantee can

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receive funding. A Federal matching ratio will be established for each 
grantee in accordance with the statutory requirement that the highest 
ratios be established for neighborhoods having the greatest degree of 
economic distress or the smallest number of households.
    (b) Administrative costs. The Secretary may use no more than 5 
percent of the funds appropriated for the program for administrative or 
other expenses in connection with the program.



Sec.  594.17  General criteria for competitive selection.

    (a) Criteria. HUD will use the following general criteria for 
selecting and ranking applications for all competitions for John Heinz 
Neighborhood Development Program funds. The relative values for the 
criteria will be indicated in each NOFA:
    (1) The degree of economic distress and the benefit to low- and 
moderate-income residents of the neighborhood;
    (2) The past performance in carrying out eligible activities, and 
staff capability;
    (3) The quality of the Management/Business Plan;
    (4) The evidence of coordination and resident participation; and
    (5) The quality of the strategy to increase the capacity of the 
organization and the strategy developed for meeting long-term financial 
needs.
    (b) Geographic diversity. The Department also reserves the right to 
fund applicants in other than rank order, for the purpose of achieving 
geographic balance.



                Subpart D_Award and Use of Grant Amounts



Sec.  594.20  Submission procedures.

    (a) Use of NOFAs. The Department will publish a Notice of Funding 
Availability (NOFA) in the Federal Register for each funding competition 
under this program, indicating the objective of the competition; the 
amount of funding available; the application procedures, including the 
eligible applicants and activities to be funded; and any special 
conditions applicable to the competition, including the requirements for 
the match. The NOFA also will describe the maximum points to be awarded 
under each evaluation criterion, for the purpose of ranking 
applications, and any special factors to be considered in assigning the 
points to each criterion.
    (b) Applications shall be submitted in accordance with the time, 
place, and content described in the NOFA.

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



Sec.  594.23  Approval and certification procedures.

    (a) Approval of application. HUD's acceptance of an application for 
review does not imply a commitment to provide funding. HUD will provide 
notification of whether a project will be funded in accordance with the 
criteria and procedures set out in the applicable NOFA.
    (b) Certifications. In the absence of independent evidence that 
tends to challenge in a substantial manner the certifications made by 
the applicant pursuant toSec. 594.30, the required certifications will 
be accepted by HUD.
    However, if independent evidence is available that tends to 
challenge in a substantial manner an applicant's certification, HUD may 
require further information or assurances to be submitted in order to 
determine whether the applicant's certification is satisfactory.



Sec.  594.25  Project administration.

    Project administration will be governed by the terms of the grant 
agreement.



Sec.  594.28  Environmental reviews.

    (a) For all proposed actions or activities that are not considered 
categorically excluded under 24 CFR 50.20, HUD will perform the 
appropriate environmental reviews under the National Environmental 
Policy Act (NEPA).
    (b) Whether the action or activity is categorically excluded from 
NEPA review or not, HUD will comply also with other applicable 
requirements of environmental statutes, Executive Orders, and HUD 
standards listed in 24 CFR 50.4. The environmental reviews will be 
performed before award of a grant. Grantees shall adhere to all 
assurances applicable to environmental concerns

[[Page 331]]

as contained in the RFGA and grant agreements.



Sec.  594.30  Equal opportunity and other Federal requirements.

    Each participating neighborhood development organization must 
certify that it will carry out activities assisted under the program in 
compliance with the nondiscrimination and equal opportunity requirements 
set forth in 24 CFR part 5 and:
    (a) The requirements at 24 CFR part 200, subpart M;
    (b) The prohibitions against discrimination and related requirements 
of section 109 of the Housing and Community Development Act of 1974 (42 
U.S.C. 5309);
    (c) The requirements of the Americans with Disabilities Act (42 
U.S.C. 12181-12189) and implementing regulations at 28 CFR part 36, as 
applicable;
    (d) The Consolidated Plan of the appropriate unit of general local 
government; and
    (e) Other Federal requirements as specified in the applicable NOFA 
and application kit.

[60 FR 16359, Mar. 29, 1995, as amended at 61 FR 5211, Feb. 9, 1996]



PART 597_URBAN EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES:
ROUND ONE DESIGNATIONS--Table of Contents



                      Subpart A_General Provisions

Sec.
597.1 Applicability and scope.
597.2 Objective and purpose.
597.3 Definitions.
597.4 Secretarial review and designation.

                       Subpart B_Area Requirements

597.100 Eligibility requirements and data usage.
597.101 Data utilized for eligibility determinations.
597.102 Tests of pervasive poverty, unemployment and general distress.
597.103 Poverty rate.

                     Subpart C_Nomination Procedure

597.200 Nominations by State and local governments.
597.201 Evaluating the strategic plan.
597.202 Submission of nominations for designation.

                      Subpart D_Designation Process

597.300 HUD action and review of nominations for designation.
597.301 Selection factors for designation of nominated urban areas.

                 Subpart E_Post-Designation Requirements

597.400 Reporting.
597.401 Periodic performance reviews.
597.402 Validation of designation.
597.403 Revocation of designation.

                         Subpart F_Special Rules

597.500 Indian Reservations.
597.501 Governments.
597.502 Nominations by economic development corporations or the District 
          of Columbia.
597.503 Use of census data.

    Authority: 26 U.S.C. 1391; 42 U.S.C. 3535(d).

    Source: 60 FR 3038, Jan. 12, 1995, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  597.1  Applicability and scope.

    (a) This part establishes policies and procedures applicable to 
urban Empowerment Zones and Enterprise Communities, authorized under 
subchapter U of the Internal Revenue Code of 1986, as amended, relating 
to the designation and treatment of Empowerment Zones, Enterprise 
Communities and Rural Development Investment Areas.
    (b) This part contains provisions relating to area requirements, the 
nomination process for urban Empowerment Zones and urban Enterprise 
Communities, and the designation and administration of these Zones and 
Communities by HUD. Provisions dealing with the nomination and 
designation of rural Empowerment Zones and Enterprise Communities will 
be promulgated by the Department of Agriculture. HUD and the Department 
of Agriculture will consult in all cases in which nominated areas 
possess both urban and rural characteristics, and will utilize a 
flexible approach in determining the appropriate designation.



Sec.  597.2  Objective and purpose.

    The purpose of this part is to provide for the establishment of 
Empowerment Zones and Enterprise Communities in urban areas, to 
stimulate the creation

[[Page 332]]

of new jobs, particularly for the disadvantaged and long-term 
unemployed, and to promote revitalization of economically distressed 
areas.



Sec.  597.3  Definitions.

    The terms HUD and Secretary are defined in 24 CFR part 5.
    Designation means the process by which the Secretary designates 
urban areas as Empowerment Zones or Enterprise Communities eligible for 
tax incentives and credits established by subchapter U of the Internal 
Revenue Code of 1986, as amended (26 U.S.C. 1391 et seq.) and for 
special consideration for programs of Federal assistance.
    Empowerment Zone means an urban area so designated by the Secretary 
pursuant to this part.
    Enterprise Community means an urban area so designated by the 
Secretary pursuant to this part.
    Local government means any county, city, town, township, parish, 
village, or other general purpose political subdivision of a State, and 
any combination of these political subdivisions which is recognized by 
the Secretary.
    Nominated area means an area nominated by one or more local 
governments and the State or States in which it is located for 
designation pursuant to this part.
    Population census tract means a census tract, or, if census tracts 
are not defined for the area, a block numbering area.
    Poverty means the number of persons listed as being in poverty in 
the 1990 Decennial Census.
    Revocation of designation means the process by which the Secretary 
may revoke the designation of an urban area as an Empowerment Zone or 
Enterprise Community pursuant toSec. 597.403.
    State means any State of the United States.
    Strategic plan means a strategy developed and agreed to by the 
nominating local government(s) and State(s), which have provided 
certifications of their authority to adopt such a strategy in their 
application for nomination, in consultation and cooperation with the 
residents of the nominated are, pursuant to the provisions ofSec. 
597.200(c). The plan must include written commitments from the local 
government(s) and State(s) that they will adhere to that strategy.
    Urban area means:
    (1) Any area that lies inside a Metropolitan Area (MA), as 
designated by the Office of Management and Budget; or
    (2) Any area outside an MA if the jurisdiction of the nominating 
local government has a population of 20,000 or more, or documents the 
urban character of the area.

[60 FR 3038, Jan. 12, 1995, as amended at 61 FR 5211, Feb. 9, 1996; 63 
FR 10715, Mar. 4, 1998]



Sec.  597.4  Secretarial review and designation.

    (a) Designation. The Secretary will review applications for the 
designation of nominated urban areas to determine the effectiveness of 
the strategic plans submitted by nominating State and local 
government(s) in accordance withSec. 597.200(c).
    (b) Period of designation. The designation of an urban area as an 
Empowerment Zone or Enterprise Community shall remain in full effect 
during the period beginning on the date of designation and ending on the 
earliest of:
    (1) The close of the tenth calendar year beginning on or after the 
date of designation;
    (2) The termination date designated by the State and local 
governments in their application for nomination; or
    (3) The date the Secretary modifies or revokes the designation, in 
accordance withSec. 597.402 or 597.403.

[60 FR 3038, Jan. 12, 1995, as amended at 63 FR 10715, Mar. 4, 1998]



                       Subpart B_Area Requirements



Sec.  597.100  Eligibility requirements and data usage.

    A nominated urban area may be eligible for designation pursuant to 
this part only if the area:
    (a) Has a maximum population which is the lesser of:
    (1) 200,000; or
    (2) The greater of 50,000 or ten percent of the population of the 
most populous city located within the nominated area;

[[Page 333]]

    (b) Is one of pervasive poverty, unemployment and general distress, 
as described inSec. 597.102;
    (c) Does not exceed twenty square miles in total land area;
    (d) Has a continuous boundary, or consists of not more than three 
noncontiguous parcels;
    (e) Is located entirely within the jurisdiction of the unit or units 
of general local government making the nomination, and is located in no 
more than two contiguous States; and
    (f) 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 
poverty rate for each population census tract in the district is not 
less than 35 percent for an Empowerment Zone and 30 percent for an 
Enterprise Community.



Sec.  597.101  Data utilized for eligibility determinations.

    (a) Source of data. The data to be employed in determining 
eligibility pursuant to the criteria set forth atSec. 597.102 shall be 
based upon the 1990 Decennial Census, and from information published by 
the Bureau of the Census and the Bureau of Labor Statistics. The data 
shall be comparable as to point or period of time and methodology 
employed. Specific information on appropriate data to be submitted will 
be provided in the application.
    (b) Use of statistics on boundaries. The boundary of an urban area 
nominated for designation as an Empowerment Zone or Enterprise Community 
must coincide with the boundaries of census tracts, or, where tracts are 
not defined, with block numbering areas.



Sec.  597.102  Tests of pervasive poverty, unemployment and general
distress.

    (a) Pervasive poverty. Pervasive poverty shall be demonstrated by 
the nominating entities by providing evidence that:
    (1) Poverty is widespread throughout the nominated area; or
    (2) Poverty has become entrenched or intractable over time (through 
comparison of 1980 and 1990 census data or other relevant evidence); or
    (3) That no portion of the nominated area contains any component 
areas of an affluent character.
    (b) Unemployment. Unemployment shall be demonstrated by:
    (1) Data indicating that the weighted average rate of unemployment 
for the nominated area is not less than the national average rate of 
unemployment; or
    (2) Evidence of especially severe economic conditions, such as 
military base or plant closings or other conditions which have brought 
about significant job dislocation within the nominated area.
    (c) General distress. General distress shall be evidenced by 
describing adverse conditions within the nominated urban area other than 
those of pervasive poverty and unemployment. A high incidence of crime, 
narcotics use, homelessness, abandoned housing, and deteriorated 
infrastructure or substantial population decline, are examples of 
appropriate indicators of general distress.



Sec.  597.103  Poverty rate.

    (a) General. The poverty rate shall be established in accordance 
with the following criteria:
    (1) In each census tract within a nominated urban area, the poverty 
rate shall be not less than 20 percent;
    (2) For at least 90 percent of the population census tracts within 
the nominated urban area, the poverty rate shall not be less than 25 
percent; and
    (3) For at least 50 percent of the population census tracts within 
the nominated urban area, the poverty rate shall be not less than 35 
percent.
    (b) Special rules relating to the determination of poverty rate--(1) 
Census tracts with no population. Census tracts with no population shall 
be treated as having a poverty rate which meets the standards of 
paragraphs (a)(1) and (2) of this section, but shall be treated as 
having a zero poverty rate for purposes of applying paragraph (a)(3) of 
this section.
    (2) Census tracts with populations of less than 2,000. A population 
census tract which has a population of less than 2,000 shall be treated 
as having a poverty rate which meets the requirements of paragraphs 
(a)(1) and (a)(2) of

[[Page 334]]

this section if more than 75 percent of the tract is zoned for 
commercial or industrial use.
    (3) Adjustment of poverty rates for Enterprise Communities. Where 
necessary to carry out the purposes of this part, the Secretary may 
reduce by 5 percentage points one of the following thresholds for not 
more than 10 percent of the census tracts, or, if fewer, five population 
tracts in the nominated urban area:
    (i) The 20 percent threshold in paragraph (a)(1) of this section;
    (ii) The 25 percent threshold in paragraph (a)(2) of this section; 
and
    (iii) The 35 percent threshold in paragraph (a)(3) of this section; 
Provided that, the Secretary may in the alternative reduce the 35 
percent threshold by 10 percentage points for three population census 
tracts.
    (4) Rounding up of percentages. In making the calculations required 
by this section, the Secretary shall round all fractional percentages of 
one-half percent or more up to the next highest whole percentage figure.
    (c) Noncontiguous areas. A nominated urban area may not contain a 
noncontiguous parcel unless such parcel separately meets the criteria 
set forth at paragraphs (a)(1), (2), and (3) of this section.
    (d) Areas not within census tracts. In the case of an area which 
does not have population census tracts, the block numbering area shall 
be used.



                     Subpart C_Nomination Procedure



Sec.  597.200  Nominations by State and local governments.

    (a) Nomination criteria. One or more local governments and the State 
or States in which an urban area is located may nominate such area for 
designation as an Empowerment Zone and/or as an Enterprise Community, 
if:
    (1) The urban area meets the requirements for eligibility set forth 
in Sec.Sec. 597.100 and 597.103;
    (2) The urban area is within the jurisdiction of a State or States 
and local government(s) that have the authority to nominate the urban 
area for designation and that provide written assurances satisfactory to 
the Secretary that the strategic plan described in paragraph (c) of this 
section will be implemented;
    (3) All information furnished by the nominating State(s) and local 
government(s) is determined by the Secretary to be reasonably accurate; 
and
    (4) The State(s) and local government(s) certify that no portion of 
the area nominated is already included in an Empowerment Zone or 
Enterprise Community or in an area otherwise nominated to be designated 
under this section.
    (b) Nomination for designation. No urban area may be considered for 
designation pursuant to subpart D of this part unless the nomination for 
designation:
    (1) Demonstrates that the nominated urban area satisfies the 
eligibility criteria set forth atSec. 597.100;
    (2) Includes a strategic plan, as described in paragraph (c) of this 
section; and
    (3) Includes such other information as may be required by HUD in the 
application or in a Notice Inviting Applications, to be published in the 
Federal Register.
    (c) Strategic plan. Each application for designation must be 
accompanied by a strategic plan, which must be developed in accordance 
with four key principles, which will also be utilized to evaluate the 
plan. These principles are:
    (1) Economic opportunity, including job creation within the 
community and throughout the region, as well as entrepreneurial 
initiatives, small business expansion and training for jobs that offer 
upward mobility;
    (2) Sustainable community development, to advance the creation of 
liveable and vibrant communities through comprehensive approaches that 
coordinate economic, physical, community and human development;
    (3) Community-based partnerships, involving the participation of all 
segments of the community, including the political and governmental 
leadership, community groups, health and social service groups, 
environmental groups, religious organizations, the private and non-
profit sectors, centers of learning and other community institutions; 
and

[[Page 335]]

    (4) Strategic vision for change, which identifies what the community 
will become and a strategic map for revitalization. The vision should 
build on assets and coordinate a response to community needs in a 
comprehensive fashion. It should also set goals and performance 
benchmarks for measuring progress and establish a framework for 
evaluating and adjusting the revitalization plan.
    (d) Elements of strategic plan. The strategic plan should:
    (1) Indicate and briefly describe the specific groups, 
organizations, and individuals participating in the production of the 
plan and describe the history of these groups in the community;
    (2) Explain how participants were selected and provide evidence that 
the participants, taken as a whole, broadly represent the racial, 
cultural and economic diversity of the community;
    (3) Describe the role of the participants in the creation, 
development and future implementation of the plan;
    (4) Identify two or three topics addressed in the plan that caused 
the most serious disagreements among participants and describe how those 
disagreements were resolved;
    (5) Explain how the community participated in choosing the area to 
be nominated and why the area was nominated;
    (6) Provide evidence that key participants have the capacity to 
implement the plan;
    (7) Provide a brief explanation of the community's vision for 
revitalizing the area;
    (8) Explain how the vision creates economic opportunity, encourages 
self-sufficiency and promotes sustainable community development;
    (9) Identify key needs of the area and the current barriers to 
achieving the vision for it, including a description of poverty and 
general distress, barriers to economic opportunity and development and 
barriers to human development;
    (10) Discuss how the vision is related to the assets and needs of 
the area and its surroundings;
    (11) Describe the ways in which the community's approaches to 
economic development, social/human services, transportation, housing, 
sustainable community development, public safety, drug abuse prevention, 
and educational and environmental concerns will be addressed in a 
coordinated fashion; and explain how these linkages support the 
community's vision;
    (12) Indicate how all Social Services Block Grant funds for 
designated Empowerment Zones and Enterprise Communities (EZ/EC SSBG 
funds) will be utilized.
    (i) In doing so, the strategic plan shall provide the following 
information:
    (A) A commitment by the applicant, as well as by the nominating 
State-chartered economic development corporation or State government(s) 
and local governments, that the EZ/EC SSBG funds will be used to 
supplement, not replace, other Federal or non-Federal funds available 
for financing for services or activities which can be used to achieve or 
maintain the goals outlined in paragraph (d)(12) of this section;
    (B) A description of the entities that will administer the EZ/EC 
SSBG funds;
    (C) A certification by such entities that they will provide periodic 
reports on the use of the EZ/EC SSBG funds; and
    (D) A detailed description of all the activities to be financed with 
the EZ/EC SSBG funds and how all such funds will be allocated.
    (ii) The EZ/EC SSBG funds must be used to achieve or maintain the 
following goals. The goals may be achieved by undertaking one or more of 
the following program options:
    (A) The goal of economic self-support to prevent, reduce or 
eliminate dependencies, through one or more of the following program 
options:
    (1) Funding community and economic development services focused on 
disadvantaged adults and youths, including skills training, 
transportation services and job, housing, business, and financial 
management counseling;
    (2) Supporting programs that promote home ownership, education or 
other routes to economic independence for low-income families, youths, 
and other individuals;

[[Page 336]]

    (3) Assisting in the provision of emergency and transitional shelter 
for disadvantaged families, youths, and other individuals;
    (B) The goal of self-sufficiency, including reduction or prevention 
of dependencies, through one or more of the following program options:
    (1) Providing assistance to non-profit organizations and/or 
community and junior colleges that provide disadvantaged adults and 
youths with opportunities for short-term training courses in 
entrepreneurial and self employment skills and other training that 
promotes individual self-sufficiency, and the interest of the community;
    (2) Funding programs to provide training and employment for 
disadvantaged adults and youths in construction, rehabilitation or 
improvement of affordable housing, public infrastructure and community 
facilities; and
    (C) The goal of prevention or remedying the neglect, abuse or 
exploitation of children and/or adults unable to protect their own 
interest; and the goal of preservation, rehabilitation, or reuniting of 
families, through one or more of the following program options:
    (1) Providing support for residential or non-residential drug and 
alcohol prevention and treatment programs that offer comprehensive 
services for pregnant women, and mothers and their children;
    (2) Establishing programs that provide activities after school 
hours, including keeping school buildings open during evenings and 
weekends for mentor and study programs.
    (iii) Designated Empowerment Zone and Enterprise Communities may 
work to achieve or maintain the goals outlined in paragraphs 
(d)(12)(ii)(A) and (B) of this section by using EZ/EC SSBG funds to 
capitalize revolving or micro-enterprise loan funds which benefit low-
income residents of the designated Empowerment Zones and Enterprise 
Communities. Similarly, the Zones and Communities may work to achieve or 
maintain the goals outlined in paragraphs (d)(12)(ii)(A) and (B) of this 
section by using the EZ/EC SSBG funds to create jobs and promote 
economic opportunity for low-income families and individuals through 
matching grants, loans, or investments in community development 
financial institutions.
    (iv) If the EZ/EC SSBG funds are to be used for program options not 
included in paragraph (d)(12)(ii) of this section, the strategic plan 
must indicate how the proposed activities meet the goals set forth in 
paragraph (d)(12)(ii) of this section and the reasons the approved 
program options were not pursued.
    (v) To the extent that the EZ/EC SSBG funds are to be used for the 
program options included in paragraph (d)(12)(ii) of this section, they 
may be used for the following activities, in addition to those 
activities permitted by section 2005 of the Social Security Act (42 
U.S.C. 1379d):
    (A) To purchase or improve land or facilities;
    (B) To make cash payments to individuals for subsistence or room and 
board;
    (C) To make wage payments to individuals as a social service;
    (D) To make cash payments for medical care; and
    (E) To provide social services to institutionalized persons.
    (vi) The State must obligate the EZ/EC SSBG funds in accordance with 
the strategic plan within 2 years from the date of payment to the State, 
or remit the unobligated funds to the Secretary of Health and Human 
Services (HHS).
    (vii) The strategic plan must indicate how all the EZ/EC SSBG funds 
will be invested and used for the period of designation of the 
Empowerment Zone or Enterprise Community.
    (viii) The strategic plan must provide for periodic reporting of 
information by the State in which the Empowerment Zone or Enterprise 
Community is located.
    (13) Indicate how tax benefits for designated Zones and Communities, 
State and local resources, existing Federal resources available to the 
locality and additional Federal resources believed necessary to 
implement the strategic plan will be utilized within the Empowerment 
Zone or Enterprise Community;
    (14) Indicate a level of commitment necessary to ensure that these 
resources will be available to the area upon designation;

[[Page 337]]

    (15) Identify the Federal resources applied for or for which 
applications are planned; if a strategic plan indicates how Community 
Development Block Grant (CDBG), HOME, Emergency Shelter Grant, and 
Housing Opportunities for People with AIDS (HOPWA) funds will be 
expended (for the entire locality including the nominated area), the 
strategic plan will be considered by the Office of Community Planning 
and Development at HUD toward satisfying the consolidated planning 
requirements that will soon be issued for these programs;
    (16) Identify private resources and support, including assistance 
from business, non-profit organizations and foundations, which are 
available to be leveraged with public resources; and provide assurances 
that these resources will be made available to the area upon 
designation;
    (17) Identify changes necessary to Federal rules and regulations 
necessary to implement the plan, including specific paperwork or other 
Federal program requirements that must be altered to permit effective 
implementation of the strategic plan; and
    (18) Identify specific regulatory and other impediments to 
implementing the strategic plan for which waivers are requested, with 
appropriate citations and an indication whether waivers can be 
accomplished administratively or require statutory changes;
    (19) Demonstrate how State and local governments will reinvent 
themselves to help implement the plan, by identifying changes that will 
be made in State and local organizations, processes and procedures, 
including laws and ordinances;
    (20) Explain how different agencies in State and local governments 
will work together in new responsive ways to implement the strategic 
plan;
    (21) Identify the specific tasks and timetable necessary to 
implement the plan;
    (22) Describe the partnerships that will be established to carry out 
the plan;
    (23) Explain how the plan will be regularly revised to reflect new 
information and opportunities; and
    (24) Identify benchmarks and goals that should be used in evaluating 
performance in implementing the plan.
    (e) Prohibition against business relocation. The strategic plan may 
not include any action to assist any establishment in relocating from 
one area outside the nominated urban area to the nominated urban area, 
except that assistance for the expansion of an existing business entity 
through the establishment of a new branch, affiliate, or subsidiary is 
permitted if:
    (1) The establishment of a new branch, affiliate, or subsidiary will 
not result in a decrease in employment in the area of original location 
or in any other area where the existing business entity conducts 
business operations; and
    (2) There is no reason to believe that the new branch, affiliate, or 
subsidiary is being established with the intention of closing down the 
operations of the existing business entity in the area of its original 
location or in any other area where the existing business entity 
conducts business operations.
    (f) Implementation of strategic plan. The strategic plan may be 
implemented by the local government(s) and/or by the State(s) nominating 
an urban area for designation and/or by nongovernmental entities 
identified in the strategic plan. Activities included in the plan may be 
funded from any source, Federal, State, local, or private, which 
provides assistance in the nominated area.
    (g) Activities included in strategic plan. A strategic plan may 
include, but is not limited to, activities which address:
    (1) Economic problems, through measures designed to create job 
training and employment opportunities; support for business start-up or 
expansion; or development of community institutions;
    (2) Human concerns, through the provision of social services, such 
as rehabilitation and treatment programs or the provision of training, 
education, or other services within the affected area;
    (3) Community needs, such as the expansion of housing stock and 
homeownership opportunities, efforts to reduce homelessness, efforts to 
promote

[[Page 338]]

fair housing and equal opportunity, efforts to reduce and prevent crime 
and improve security in the area; and
    (4) Physical improvements, such as the provision or improvement of 
recreational areas, transportation or other public services within the 
affected area, and improvements to the infrastructure and environmental 
protection.



Sec.  597.201  Evaluating the strategic plan.

    The strategic plan will be evaluated for effectiveness as part of 
the designation process for nominated urban areas described inSec. 
597.301. On the basis of this evaluation, HUD may negotiate reasonable 
modifications of the strategic plan or of the boundaries of a nominated 
urban area or the period for which such designation shall remain in full 
effect. The effectiveness of the strategic plan will be determined in 
accordance with the four key principles set forth inSec. 597.200(c). 
HUD will review each plan submitted in terms of the four equally 
weighted key principles, and of such other elements of these key 
principles as are appropriate to address the opportunities and problems 
of each nominated area which may include:
    (a) Economic opportunity. (1) The extent to which businesses, jobs, 
and entrepreneurship increase within the Zone or Community;
    (2) The extent to which residents will achieve a real economic stake 
in the Zone or Community;
    (3) The extent to which residents will be employed in the process of 
implementing the plan and in all phases of economic and community 
development;
    (4) The extent to which residents will be linked with employers and 
jobs throughout the entire region or metropolitan area, and the way in 
which residents will receive training, assistance, and family support to 
become economically self-sufficient;
    (5) The extent to which economic revitalization in the Zone or 
Community interrelates with the broader regional or metropolitan 
economies; and
    (6) The extent to which lending and investment opportunities will 
increase within the Zone or Community through the establishment of 
mechanisms to encourage community investment and to create new economic 
growth.
    (b) Sustainable community development--(1) Consolidated planning. 
The extent to which the plan is part of a larger strategic community 
development plan for the nominating locality and is consistent with 
broader regional development strategies;
    (2) Public safety. The extent to which strategies such as community 
policing will be used to guarantee the basic safety and security of 
persons and property within the Zone or Community;
    (3) Amenities and design. The extent to which the plan considers 
issues of design and amenities that will foster a sustainable community, 
such as open spaces, recreational areas, cultural institutions, 
transportation, energy, land and water uses, waste management, 
environmental protection, and the quality of life in the community;
    (4) Sustainable development. The extent to which economic 
development will be achieved in a manner that protects public health and 
the environment;
    (5) Supporting families. The extent to which the strengths of 
families will be supported so that parents can succeed at work, provide 
nurture in the home, and contribute to the life of the community;
    (6) Youth development. The extent to which the development of 
children, youth, and young adults into economically productive and 
socially responsible adults will be promoted, and the extent to which 
young people will be provided with the opportunity to take 
responsibility for learning the skills, discipline, attitude, and 
initiative to make work rewarding;
    (7) Education goals. The extent to which schools, religious 
institutions, non-profit organizations, for-profit enterprises, local 
governments and families will work cooperatively to provide all 
individuals with the fundamental skills and knowledge they need to 
become active participants and contributors to their community, and to 
succeed in an increasingly competitive global economy;
    (8) Affordable housing. The extent to which a housing component, 
providing for adequate safe housing and ensuring

[[Page 339]]

that all residents will have equal access to that housing is contained 
in the strategic plan;
    (9) Drug abuse. The extent to which the plan addresses levels of 
drug abuse and drug related activity through the expansion of drug 
treatment services, drug law enforcement initiatives and community based 
drug abuse education programs;
    (10) Equal opportunity. The extent to which the plan offers an 
opportunity for diverse residents to participate in the rewards and 
responsibilities of work and service. The extent to which the plan 
ensures that no business within a nominated Zone or Community will 
directly or through contractual or other arrangements subject a person 
to discrimination on the basis of race, color, national origin, gender 
or disability in its employment practices, including recruitment, 
recruitment advertising, employment, layoff, termination, upgrading, 
demotion, transfer, rates of pay or other forms of compensation, or use 
of facilities.
    (c) Community-based partnerships--(1) Community partners. The extent 
to which residents of the nominated area have participated in the 
development of the strategic plan and their commitment to implementing 
it, and the extent to which community-based organizations in the 
nominated area have participated in the development of the plan and 
their record of success measured by their achievements and support for 
undertakings within the nominated area; and the extent to which the plan 
integrates the local educational, social, civic, environmental and 
health organizations and reflects the prominent place that these 
institutions play in the life of a revitalized community;
    (2) Private and non-profit organizations as partners. The extent to 
which partnership arrangements include commitments from private and non-
profit organizations, including corporations, utilities, banks and other 
financial institutions, and educational institutions supporting 
implementation of the strategic plan;
    (3) State and local government partners. The extent to which State 
and local governments are committed to providing support to implement 
the strategic plan, including their commitment to ``reinventing'' their 
roles and coordinating programs to implement the strategic plan; and
    (4) Permanent implementation and evaluation structure. The extent to 
which a responsible and accountable implementation structure or process 
has been created to ensure that the plan is successfully carried out and 
that improvements are made throughout the period of the Zone or 
Community's designation and the extent to which the partners agree to be 
bound by their commitments.
    (d) Strategic vision for change--(1) Goals and coordinated strategy. 
The extent to which the strategic plan reflects a projection for the 
community's revitalization which links economic, human, physical, 
community development and other activities in a mutually reinforcing, 
synergistic way to achieve ultimate goals;
    (2) Creativity and innovation. The extent to which the activities 
proposed in the plan are creative, innovative and promising and will 
promote the civic spirit necessary to revitalize the nominated area;
    (3) Building on assets. The extent to which the vision for 
revitalization realistically addresses the needs of the nominated area 
in a way that takes advantage of its assets;
    (4) Benchmarks and learning. The extent to which the plan includes 
performance benchmarks for measuring progress in its implementation, 
including an on-going process for adjustments, corrections and building 
on what works.



Sec.  597.202  Submission of nominations for designation.

    (a) General. A nomination for designation as an Empowerment Zone 
and/or Enterprise Community must be submitted for each urban area for 
which such designation is requested. The nomination shall be submitted 
in a form to be prescribed by HUD in the application and in the Notice 
Inviting Applications published in the Federal Register, and must 
contain complete and accurate information.
    (b) Certifications. Certifications must be submitted by the State(s) 
and local government(s) requesting designation stating that:

[[Page 340]]

    (1) The nominated urban area satisfies the boundary tests ofSec. 
597.100(d);
    (2) The nominated urban area is one of pervasive poverty, 
unemployment and general distress, as prescribed bySec. 597.102;
    (3) The nominated urban area satisfies the poverty rate tests set 
forth inSec. 597.103;
    (4) The nominated urban area contains no portion of an area that is 
either already designated as an Empowerment Zone and/or Enterprise 
Community, or is otherwise included in any other area nominated for 
designation as an Empowerment Zone and/or Enterprise Community;
    (5) Each nominating governmental entity has the authority to:
    (i) Nominate the urban area for designation as an Empowerment Zone 
and/or Enterprise Community;
    (ii) Make the State and local commitments required bySec. 
597.200(d); and
    (iii) Provide written assurances satisfactory to the Secretary that 
these commitments will be met.
    (6) Provide assurances that the amounts provided to the State for 
the area under section 2007 of title XX of the Social Security Act will 
not be used to supplant Federal or non-Federal funds for services and 
activities which promote the purposes of section 2007;
    (7) Provide that the nominating governments or corporations agree to 
make available all information requested by HUD to aid in the evaluation 
of progress in implementing the strategic plan and reporting on the use 
of Empowerment Zone/Enterprise Community Social Service Block Grant 
funds; and
    (8) Provide assurances that the nominating State(s) agrees to 
distribute the Empowerment Zone/Enterprise Community Social Service 
Block Grant funds in accordance with the strategic plan submitted for 
the designated Zone or Community.
    (c) Maps and area description. Maps and a general description of the 
nominated urban area shall accompany the nomination request.



                      Subpart D_Designation Process



Sec.  597.300  HUD action and review of nominations for designation.

    (a) Establishment of submission procedures. HUD will establish a 
time period and procedures for the submission of nominations for 
designation as Empowerment Zones or Enterprise Communities, including 
submission deadlines and addresses, in a Notice Inviting Applications, 
to be published in the Federal Register.
    (b) Acceptance for processing. (1) HUD will accept for processing 
those nominations for designation as Empowerment Zones or Enterprise 
Communities which HUD determines have met the criteria required by this 
part. HUD will notify the State(s) and local government(s) whether or 
not the nomination has been accepted for processing. The criteria for 
acceptance for processing are as follows:
    (2) The nomination for designation as an Empowerment Zone or 
Enterprise Community must be received by HUD on or before the time on 
the date established by the Notice Inviting Applications published in 
the Federal Register. The nomination for designation as an Empowerment 
Zone or Enterprise Community must be complete and must be accompanied by 
a strategic plan, as required bySec. 597.200(c), and the 
certifications required bySec. 597.202(b).
    (c) Evaluation of nominations. In the process of reviewing each 
nomination accepted for processing, HUD may undertake a site visit(s) to 
any nominated area to aid in the process of evaluation.
    (d) Modification of the strategic plan, boundaries of nominated 
urban areas, and/or period during which designation is in effect. 
Subject to the limitations imposed bySec. 597.100, HUD may negotiate 
reasonable modifications of the strategic plan, the proposed boundaries 
of a nominated urban area, or the term for which a designation is to 
remain in full effect, to ensure maximum efficiency and fairness in the 
provision of assistance to such areas.
    (e) Publication of designations. Announcements of those nominated 
urban areas designated as Empowerment Zones or Enterprise Communities 
will

[[Page 341]]

be made by publication of a Notice in the Federal Register.



Sec.  597.301  Selection factors for designation of nominated urban areas.

    (a) Selection factors. In choosing among nominated urban areas 
eligible for designation, the Secretary shall consider:
    (1) The effectiveness of the strategic plan in accordance with the 
key principles and evaluative criteria set out inSec. 597.201;
    (2) The effectiveness of the assurances made pursuant toSec. 
597.200(a)(2) that the strategic plan will be implemented;
    (3) The extent to which an application proposes activities that are 
creative and innovative in comparison to other applications; and
    (4) Such other factors established by HUD. Such factors include, but 
are not limited to, the degree of need demonstrated by the nominated 
area for assistance under this part. If other factors are established by 
HUD, a Federal Register notice will be published identifying such 
factors, along with an extension of the application due date if 
necessary.
    (b) Geographic diversity. HUD, in its discretion, may choose to 
select for designation a lower rated approvable application over a 
higher rated application in order to increase the level of geographic 
diversity of designations approved under this part.



                 Subpart E_Post-Designation Requirements



Sec.  597.400  Reporting.

    HUD will require periodic reports for the Empowerment Zones and 
Enterprise Communities designated pursuant to this part. These reports 
will identify the community, local government and State actions which 
have been taken in accordance with the strategic plan. In addition to 
these reports, such other information relating to designated Empowerment 
Zones and Enterprise Communities as HUD shall request from time to time, 
including information documenting nondiscrimination in hiring and 
employment by businesses within the designated Empowerment Zone or 
Enterprise Community, shall be submitted promptly.



Sec.  597.401  Periodic performance reviews.

    HUD will regularly evaluate the progress of the strategic plan in 
each designated Empowerment Zone and Enterprise Community on the basis 
of performance reviews to be conducted on site and other information 
submitted. HUD will also commission evaluations of the Empowerment Zone 
program as a whole by an impartial third party, at such intervals as HUD 
may establish.



Sec.  597.402  Validation of designation.

    (a) Reevaluation of designations. On the basis of the performance 
reviews described inSec. 597.401, and subject to the provisions 
relating to the revocation of designation appearing atSec. 597.403, 
HUD will make findings on the continuing eligibility for and the 
validity of the designation of any Empowerment Zone or Enterprise 
Community. Determinations of whether any designated Empowerment Zone or 
Enterprise Community remains in good standing shall be promptly 
communicated to all Federal agencies providing assistance or 
administering programs under which assistance can be made available in 
such Zone or Community.
    (b) Modification of designation. Based on an urban area's success in 
carrying out its strategic plan, and subject to the provisions relating 
to revocation of designation appearing atSec. 597.403 and the 
requirements as to the number, maximum population and other 
characteristics of urban Empowerment Zones set forth inSec. 597.3, the 
Secretary may modify designations by reclassifying urban Empowerment 
Zones as Enterprise Communities or Enterprise Communities as Empowerment 
Zones.



Sec.  597.403  Revocation of designation.

    (a) Basis for revocation. The Secretary may revoke the designation 
of an urban area as an Empowerment Zone or Enterprise Community if the 
Secretary determines, on the basis of the periodic performance review 
described atSec. 597.401, that the State(s) or local government(s) in 
which the urban area is located:

[[Page 342]]

    (1) Has modified the boundaries of the area;
    (2) Has failed to make progress in achieving the benchmarks set 
forth in the strategic plan; or
    (3) Has not complied substantially with the strategic plan.
    (b) Letter of warning. Before revoking the designation of an urban 
area as an Empowerment Zone or Enterprise Community, the Secretary will 
issue a letter of warning to the nominating State(s) and local 
government(s):
    (1) Advising that the Secretary has determined that the nominating 
local government(s) and/or State(s) has:
    (i) Modified the boundaries of the area; or
    (ii) Is not complying substantially with, or has failed to make 
progress in achieving the benchmarks set forth in the strategic plan 
prepared pursuant toSec. 597.200(c); and
    (2) Requesting a reply from all involved parties within 90 days of 
the receipt of this letter of warning.
    (c) Notice of revocation. After allowing 90 days from the date of 
receipt of the letter of warning for response, and after making a 
determination pursuant to paragraph (a) of this section, the Secretary 
may issue a final notice of revocation of the designation of the urban 
area as an Empowerment Zone or Enterprise Community.
    (d) Notice to affected Federal agencies. HUD will notify all 
affected Federal agencies providing assistance in an urban Empowerment 
Zone or Enterprise Community of its determination to revoke any 
designation pursuant to this section or to modify a designation pursuant 
toSec. 597.402(b).



                         Subpart F_Special Rules



Sec.  597.500  Indian Reservations.

    No urban Empowerment Zone or Enterprise Community may include any 
area within an Indian reservation.



Sec.  597.501  Governments.

    If more than one State or local government seeks to nominate an 
urban area under this part, any reference to or requirement of this part 
shall apply to all such governments.



Sec.  597.502  Nominations by economic development corporations or
the District of Columbia.

    Any urban area nominated by an Economic Development Corporation 
chartered by the State in which it is located or by the District of 
Columbia shall be treated as nominated by a State and local government.



Sec.  597.503  Use of census data.

    Population and poverty rate data shall be determined by the most 
recent decennial census data available.



PART 598_URBAN EMPOWERMENT ZONES: ROUND TWO AND THREE DESIGNATIONS--
Table of Contents



                      Subpart A_General Provisions

Sec.
598.1 Applicability and scope.
598.2 Objective and purpose.
598.3 Definitions.
598.4 Period of designation.

                   Subpart B_Eligibility Requirements

598.100 Eligibility requirements.
598.105 Data used for eligibility determinations.
598.110 Tests of pervasive poverty, unemployment and general distress.
598.115 Poverty rate.

                     Subpart C_Nomination Procedure

598.200 Who nominates an area for designation?
598.205 What are the requirements for nomination?
598.210 What certifications must governments make?
598.215 What are the purpose and content of the strategic plan?

                      Subpart D_Designation Process

598.300 Procedure for submitting a nomination.
598.305 Designation factors.

                 Subpart E_Post-Designation Requirements

598.400 HUD grants for planning activities.
598.405 Environmental review.
598.408 Lead-based paint requirements.
598.410 Public access to materials and proceedings.
598.415 Reporting.
598.420 Periodic progress determinations.
598.425 Validation of designation.
598.430 Revocation of designation.

[[Page 343]]

                         Subpart F_Special Rules

598.500 Indian reservations.
598.505 Governments.
598.510 Nominations by Economic Development Corporations or the District 
          of Columbia.
598.515 Alaska and Hawaii.

                    Subpart G_Empowerment zone grants

598.600 Applicability.
598.605 Implementation plan.
598.610 Resident benefit standards.
598.615 Economic development standards.
598.620 Evaluation, monitoring, and enforcement.

    Authority: 26 U.S.C. 1391; 42 U.S.C. 3535(d).

    Source: 63 FR 19155, Apr. 16, 1998, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  598.1  Applicability and scope.

    (a) This part establishes policies and procedures applicable to the 
second and third rounds of designations of urban Empowerment Zones, 
authorized under Subchapter U of the Internal Revenue Code of 1986 (26 
U.S.C. 1391, et seq.), as amended. Any reference to, or requirement of, 
Round II in this part is also a reference to, or requirement of, Round 
III.
    (b) This part contains provisions relating to area requirements, the 
nomination process for urban Empowerment Zones, and the designation and 
evaluation of these Zones by HUD. Provisions dealing with the nomination 
and designation of rural Empowerment Zones are issued by the Department 
of Agriculture.

[63 FR 19155, Apr. 16, 1998, as amended at 66 FR 35855, July 9, 2001]



Sec.  598.2  Objective and purpose.

    The purpose of this part is to provide for the establishment of 
Empowerment Zones in urban areas, to stimulate the creation of new 
jobs--empowering low-income persons and families receiving public 
assistance to become economically self-sufficient--and to promote 
revitalization of economically distressed areas.



Sec.  598.3  Definitions.

    In addition to the definitions of ``HUD'' and ``Secretary'' found in 
24 CFR 5.100, the following definitions apply to this part.
    Census tract means a census tract, as the term is used by the Bureau 
of the Census, or, if census tracts are not defined for the area, a 
block numbering area.
    Designation means the process by which the Secretary designates 
urban areas as Empowerment Zones eligible for tax incentives and credits 
established by Subchapter U of the Internal Revenue Code of 1986, as 
amended (26 U.S.C. 1391, et seq.) and for special consideration for 
programs of Federal assistance.
    Developable site means a parcel of land in a nominated area that may 
be developed for commercial or industrial purposes.
    Empowerment Zone means an urban area so designated by the Secretary 
in accordance with this part.
    HHS means the U.S. Department of Health and Human Services.
    Local government means any county, city, town, township, parish, 
village, or other general purpose political subdivision of a State, and 
any combination of these political subdivisions that is recognized by 
the Secretary.
    Nominated area means an area nominated by one or more local 
governments and the State or States in which it is located for 
designation in accordance with this part.
    Revocation of designation means the process by which the Secretary 
may revoke the designation of an urban area as an Empowerment Zone . 
(See subpart E of this part.)
    State means any State of the United States.
    Urban area means:
    (1) An area that lies inside a Metropolitan Statistical Area (MSA), 
as designated by the Office of Management and Budget; or
    (2) An area outside an MSA if the jurisdiction of the nominating 
local government documents:
    (i) The urban character of the area, or
    (ii) The link between the area and the proposed area in the MSA.

[63 FR 19155, Apr. 16, 1998, as amended at72 FR 71016, Dec. 13, 2007]

[[Page 344]]



Sec.  598.4  Period of designation.

    The designation of an urban area as an Empowerment Zone will remain 
in full effect during the period beginning on the date of designation 
and ending on the earliest of:
    (a) The close of the tenth calendar year beginning on the date of 
designation;
    (b) The termination date designated by the State and local 
Governments in their application for nomination; or
    (c) The date the Secretary modifies or revokes the designation.



                   Subpart B_Eligibility Requirements



Sec.  598.100  Eligibility requirements.

    A nominated urban area is eligible for designation in accordance 
with this part only if the area:
    (a) Has a maximum population that is the lesser of:
    (1) 200,000; or
    (2) The greater of 50,000 or ten percent of the population of the 
most populous city located within the nominated area;
    (b) Is one of pervasive poverty, unemployment and general distress, 
as described inSec. 598.110;
    (c) Does not exceed twenty square miles in total land area, 
excluding up to three noncontiguous developable sites that are exempt 
from the poverty criteria;
    (d) Has a continuous boundary, or consists of not more than three 
non-contiguous parcels meeting the poverty criteria, and not more than 
three noncontiguous developable sites exempt underSec. 598.115(c)(1) 
from the poverty rate criteria;
    (e) Is located entirely within the jurisdiction of the unit or units 
of general local government making the nomination, and is located in no 
more than two contiguous States; and
    (f) 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 
poverty rate for each census tract in the district is not less than 35 
percent.



Sec.  598.105  Data used for eligibility determinations.

    (a) Source of data. The data to be used in determining the 
eligibility of an area is from the 1990 Decennial Census, and from 
information published by the Bureau of the Census and the Bureau of 
Labor Statistics. Specific information on appropriate data to be 
submitted will be provided in the application.
    (b) Use of statistics on boundaries. The boundary of an urban area 
nominated for designation as an Empowerment Zone must coincide with the 
boundaries of census tracts, as defined inSec. 598.3.



Sec.  598.110  Tests of pervasive poverty, unemployment and general
distress.

    (a) Pervasive poverty. Pervasive poverty is demonstrated by evidence 
that:
    (1) Poverty, as indicated by the number of persons listed as being 
in poverty in the 1990 Decennial Census, is widespread throughout the 
nominated area; or
    (2) Poverty, as described above, has become entrenched or 
intractable over time (through comparison of 1980 and 1990 census data 
or other relevant evidence).
    (b) Unemployment. Unemployment is demonstrated by:
    (1) The most recent data available indicating that the annual rate 
of unemployment for the nominated area is not less than the national 
annual average rate of unemployment; or
    (2) Evidence of especially severe economic conditions, such as 
military base or plant closings or other conditions that have brought 
about significant job dislocation within the nominated area.
    (c) General distress. General distress is evidenced by describing 
adverse conditions within the nominated urban area other than those of 
pervasive poverty and unemployment. Below average or decline in per 
capita income, earnings per worker, number of persons on welfare, per 
capita property tax base, average years of school completed, substantial 
population decline, and a high or rising incidence of crime, narcotics 
use, homelessness, high incidence of AIDS, abandoned housing, 
deteriorated infrastructure, school dropouts, teen pregnancy, incidence 
of domestic violence, incidence of certain health conditions and 
illiteracy are examples of

[[Page 345]]

appropriate indicators of general distress.



Sec.  598.115  Poverty rate.

    (a) General. In order to be eligible for designation, an area's 
poverty rate must satisfy the following criteria:
    (1) In each census tract within a nominated urban area, the poverty 
rate must be not less than 20 percent; and
    (2) For at least 90 percent of the census tracts within the 
nominated urban area, the poverty rate must be not less than 25 percent.
    (b) Special rules relating to the determination of poverty rate--(1) 
Census tracts with populations of less than 2,000. A census tract that 
has a population of less than 2,000 is treated as having a poverty rate 
that meets the requirements of paragraphs (a)(1) and (a)(2) of this 
section if more than 75 percent of the tract is zoned for commercial or 
industrial use, and the tract is contiguous to one or more other census 
tracts that have an actual poverty rate of not less than 25 percent.
    (2) Rounding up of percentages. In making the calculations required 
by this section, the Secretary will round all fractional percentages of 
one-half percent or more up to the next highest whole percentage figure.
    (c) Noncontiguous parcels. (1) Noncontiguous parcels that are 
developable sites are exempt from the poverty rate criteria of paragraph 
(a) of this section, for up to three developable sites.
    (2) The total area of the noncontiguous parcels that are developable 
sites exempt from the poverty rate criteria of paragraph (a) of this 
section must not exceed 2,000 acres.
    (3) A nominated urban area must not contain a noncontiguous parcel 
unless such parcel separately meets the criteria set forth at paragraphs 
(a)(1) and (2) of this section, except for up to three developable 
sites.
    (4) There must not be more than three noncontiguous parcels, except 
that up to three developable sites are not included in this limit.



                     Subpart C_Nomination Procedure



Sec.  598.200  Who nominates an area for designation?

    Applicants for empowerment zone designation must be nominated by the 
State or States and one or more local government(s) in which the area is 
located, except as provided in Sec.Sec. 598.500, 598.510, and 598.515. 
The nomination must be submitted in a form to be prescribed by HUD in 
the application and in the document announcing the initiation of the 
designation process, and must contain complete and accurate information.

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998]



Sec.  598.205  What are the requirements for nomination?

    (a) General. No urban area may be considered for designation in 
accordance with subpart D of this part unless:
    (1) The urban area is within the jurisdiction of a State or States 
and local government(s) that have the authority to nominate the urban 
area for designation and that provide written assurances satisfactory to 
the Secretary that the strategic plan described inSec. 598.215 will be 
implemented, and these governments submit its nomination;
    (2) All information furnished by the nominating State(s) and local 
government(s) is determined by the Secretary to be reasonably accurate; 
and
    (3) The application for designation is complete, as described in 
paragraph (b) of this section.
    (b) Contents of application for designation. The application for 
designation of an urban area as an Empowerment Zone must do the 
following:
    (1) Demonstrate that the nominated urban area satisfies the 
eligibility criteria set forth in subpart B of this part;
    (2) Include a strategic plan, as described inSec. 598.215;
    (3) Include the certifications described inSec. 598.210;
    (4) Include the 1990 census maps showing the following:
    (i) The boundaries of the local government(s): and

[[Page 346]]

    (ii) The boundaries of the nominated area, including any developable 
sites; and
    (5) Include such other information as may be required by HUD in the 
application or in the document announcing the initiation of the 
designation process.

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998]



Sec.  598.210  What certifications must governments make?

    Certifications must be submitted by the State(s) and local 
government(s) requesting designation stating that:
    (a) The nominated urban area satisfies the boundary tests ofSec. 
598.100(d);
    (b) The nominated urban area is one of pervasive poverty, 
unemployment and general distress, as prescribed bySec. 598.110;
    (c) The nominated urban area contains no portion of an area that is 
included in an Empowerment Zone or any other area currently nominated 
for designation as an Empowerment Zone (but it may include an Enterprise 
Community);
    (d) Each nominating governmental entity has the authority to:
    (1) Nominate the urban area for designation as an Empowerment Zone;
    (2) Make the commitments required of nominating entities bySec. 
598.215(b); and
    (3) Provide written assurances satisfactory to the Secretary that 
the strategic plan will be implemented.
    (e) Provide that the nominating governments or corporations agree to 
make available all information requested by HUD to aid in the evaluation 
of progress in implementing the strategic plan; and
    (f) Provide assurances that the nominating governments will 
administer the Empowerment Zone program in a manner that affirmatively 
furthers fair housing on the basis of race, color, national origin, 
religion, sex, disability, and familial status (presence of children).

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998; 72 
FR 71016, Dec. 13, 2007]



Sec.  598.215  What are the purpose and content of the strategic plan?

    (a) Principles of strategic plan. The strategic plan, which 
accompanies the application for designation, must be developed in 
accordance with four key principles:
    (1) Strategic Vision for Change, which identifies what the community 
will become and a strategic map for revitalization. The vision should 
build on assets and coordinate a response to community needs in a 
comprehensive fashion. It also should set goals and performance 
benchmarks for measuring progress and establish a framework for 
evaluating and adjusting the revitalization plan;
    (2) Community-Based Partnerships, involving the participation of all 
segments of the community, including the political and governmental 
leadership, community groups, local public health and social service 
departments and nonprofit groups providing similar services, 
environmental groups, local transportation planning entities, public and 
private schools, religious organizations, the private and nonprofit 
sectors, centers of learning, and other community institutions and 
individual citizens;
    (3) Economic Opportunity, including job creation within the 
community and throughout the region, entrepreneurial initiatives, small 
business expansion, job training and other important job readiness and 
job support services, such as affordable child care and transportation 
services, that may enable residents to be employed in jobs that offer 
upward mobility;
    (4) Sustainable Community Development, to advance the creation of 
livable and vibrant communities through comprehensive approaches that 
coordinate economic, physical, environmental, community and human 
development. These approaches should preserve the environment and 
historic landmarks, address ``brownfields''

[[Page 347]]

clean-up and redevelopment, explore the economic development advantages 
of energy efficiency and use of renewable energy resources, and improve 
transportation, education, public safety, and enhanced access to 
information and technology among all segments of the community.
    (b) Elements of strategic plan. The strategic plan must include the 
following elements:
    (1) Vision and values: The community's strategic vision for change--
a statement of what the community believes its future should be, and a 
statement of the community's values that guided the creation of the 
vision. Explain how the vision creates economic opportunity, encourages 
self-sufficiency and promotes sustainable community development.
    (2) Community assessment: A comprehensive assessment of existing 
conditions and trends within the community, which includes, as a 
minimum:
    (i) Assessment of problems and opportunities. A description and 
assessment of the trends and conditions within the community and of the 
surrounding region that form the basis of the strategic plan. The 
assessment will include an analysis of the strengths and assets of the 
community and region, as well as needs and problems, and should include 
a description of poverty and general distress, barriers to economic 
development and barriers to human development; and
    (ii) Resource analysis. An assessment of the resources available to 
the community, including potential resources outside the nominated area, 
to address identified problems and needs, and maximize opportunities 
that exist within the community. Such resources may include financial, 
technical, human, cultural, educational, leadership, volunteerism, 
communications, transportation and commerce centers, rail and mass 
transit linkages, redevelopable land (including land, such as ports, 
that can be designated as ``developable sites'' under the additional 
2,000 acres available), public space, infrastructure, and other 
community and regional assets that form the basis for the formulation 
and implementation of the strategic plan.
    (3) Goals: A statement of a comprehensive and holistic set of goals 
to be achieved through implementation of the strategic plan throughout 
the 10-year implementation period, and a statement of the strategies the 
community proposes to use to achieve the strategic plan goals, and the 
identification of priority objectives.
    (4) Implementation plan: A detailed plan that outlines how the 
community will implement its strategic plan. The plan will include:
    (i) Projects and programs. Provide, for the first two-year 
implementation period, the following:
    (A) A narrative outlining the specific projects and programs that 
will be implemented that will result in the achievement of the 
community's goals;
    (B) Proposed timelines for implementing identified projects and 
programs;
    (C) Identification of lead implementers of identified projects and 
programs, along with innovative partnerships that will be utilized to 
insure maximum community participation and project sustainability;
    (D) Proposed budgets for each identified project or program, 
including projected costs, and sources of funding. Information on 
sources of funding will include whether the funding is anticipated or 
committed, and whether funding is conditioned upon the designation of 
the community as an Empowerment Zone. Evidence of committed funding is 
required, and may include letters of commitment, resolutions of support, 
or similar documentation as outlined in paragraph (b)(6) of this 
section. Funding may include cash and in-kind support from Federal, 
State and local governments, non-profit organizations, foundations, 
private businesses and other entities that will assist in the 
implementation of the strategic plan.
    (E) Baselines and proposed measurable outputs;
    (ii) Tax incentive utilization plan. A plan for integrating the new 
business tax incentives that are available to designated Empowerment 
Zones into

[[Page 348]]

the nominated area's business development efforts. The Round II tax 
incentives include Tax-Exempt Bond Financing, Increased Section 179 
Deduction, Welfare-to-Work Credit, Environmental Cleanup Cost Deduction 
(i.e., ``Brownfields Tax Incentive''), and the Work Opportunity Tax 
Credit. For a description of the tax incentives, see IRS Publication 
954, ``Tax Incentives for Empowerment Zones and Other Distressed 
Communities'';
    (iii) Developable sites plan. If the nominated area is to include 
developable sites, a plan to describe how the use of these parcels would 
benefit residents and businesses of the nominated area;
    (iv) Governance plan. A Governance Plan for the administration of 
the strategic plan implementation process, which will include the 
following:
    (A) The name of the proposed lead implementing entity, and other 
major administrative entities and their proposed or actual legal status 
and authority to receive and administer Federal funds. The strategic 
plan may be implemented by the local governments(s) and/or by the 
State(s) nominating an urban area for designation and/or by 
nongovernmental entities identified in the strategic plan;
    (B) Evidence that the lead implementing entity and other key 
entities participating in the strategic plan implementation have the 
capacity to implement the plan;
    (C) Proposed composition and date of establishment of any governance 
boards, advisory boards, commissions or similar bodies that will be 
established to manage the implementation of the strategic plan. Specific 
information will be included regarding representation of residents and 
businesses of the proposed Empowerment Zone area, and how members of the 
boards or commissions will be selected;
    (D) The relationship between any governance structure created and 
local governments and other major community or regional organizations, 
such as a metropolitan planning organization, operating in the same 
geographic area;
    (E) The methods by which stakeholders within the Zone will be kept 
informed about Zone activities and progress in implementing the 
strategic plan, including a description of plans for meetings open to 
the public. The community should utilize modern communication techniques 
and incorporate the Internet in order to enhance the communication and 
access to information among all stakeholders and participants; and
    (F) The methods and procedures that will ensure continuing community 
and grassroots participation in the implementation of the strategic plan 
and in the governance of the Zone's activities.
    (v) Community performance assessment. Methods the community will use 
to assess its own performance in implementing the strategic plan, and 
the process it will use to continually review the plan and amend as 
appropriate.
    (5) Strategic planning process documentation: A description of the 
process the community used to select the boundaries of the proposed 
Empowerment Zone, including the developable sites, and to prepare the 
Strategic Plan. The documentation will:
    (i) Explain how the community participated in choosing the area that 
is being nominated and why the area was nominated;
    (ii) Indicate and briefly describe the specific groups, 
organizations, and individuals participating in the production of the 
plan and describe the history of these groups in the community;
    (iii) Explain how participants were selected and provide evidence 
that the participants, taken as a whole, broadly represent the racial, 
cultural, gender, and economic diversity of the community;
    (iv) Describe the role of the participants in the creation, 
development and future implementation of the plan; and
    (v) Identify two or three topics addressed in the plan that caused 
the most serious disagreements among participants and describe how those 
disagreements were resolved; and
    (6) Documentation of commitments: Letters of commitment, resolutions 
committing public or private resources, and other documentation that 
will demonstrate the level of public and private resources, both inside 
and outside the nominated area, that will be available to implement the 
Strategic Plan and increase economic opportunity in the nominated 
Empowerment Zone.

[[Page 349]]

    (c) Prohibition against business relocation. The strategic plan may 
not include any action to assist any establishment in relocating from 
one area outside the nominated urban area to the nominated urban area, 
except that assistance for the expansion of an existing business entity 
through the establishment of a new branch, affiliate, or subsidiary is 
permitted if:
    (1) The establishment of the new branch, affiliate, or subsidiary 
will not result in a decrease in employment in the area of original 
location or in any other area where the existing business entity 
conducts business operations; and
    (2) There is no reason to believe that the new branch, affiliate, or 
subsidiary is being established with the intention of closing down the 
operations of the existing business entity in the area of its original 
location or in any other area where the existing business entity 
conducts business operations.

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998; 72 
FR 71016, Dec. 13, 2007]



                      Subpart D_Designation Process



Sec.  598.300  Procedure for submitting a nomination.

    (a) Establishment of submission procedures. HUD will establish a 
time period and procedures for the submission of nominations for 
designation as Empowerment Zones, including submission deadlines and 
addresses, in a document announcing the initiation of the designation 
process.
    (b) Acceptance for processing. HUD will accept for processing those 
nominations for designation as Empowerment Zones that HUD determines 
have met the criteria required by this part.
    (c) Publication of designations. Announcements of those nominated 
urban areas designated as Empowerment Zones will be made by publication 
in the Federal Register.



Sec.  598.305  Designation factors.

    In choosing among nominated urban areas eligible for designation, 
the Secretary will consider:
    (a) Quality of strategic plan. The quality of the strategic plan 
(seeSec. 598.215(b));
    (b) Quality of commitments. The quality and breadth of the 
commitments made in connection with the strategic plan (seeSec. 
598.215(b)); and
    (c) Other factors. Other factors established by HUD, as specified in 
a Federal Register notice.



                 Subpart E_Post-Designation Requirements



Sec.  598.400  HUD grants for planning activities.

    (a) HUD will award planning grants up to $100,000 to each of the 
Empowerment Zones designated in accordance with this part.
    (b) Eligible recipients for these grants are the lead unit of 
general local government that received designation under this part, or 
its designee. These recipients may subgrant all or part of the planning 
grant to qualified subgrantees, such as community organizations, 
agencies of local government, regional planning authorities, or planning 
consultants.
    (c) Eligible planning activities include: hiring and development of 
staff, consulting services, publication of materials, community outreach 
and participation, governing board training, and similar activities that 
are intended to:
    (1) Expand the planning capacity of the designee local government, 
the governing board, and/or participating entities, such as community 
organizations;
    (2) Help the designee plan the implementation of the strategic plan; 
and
    (3) Help the designee to develop its performance measurement 
process.
    (d) The document announcing the initiation of the designation 
process describes the procedures for award of these planning grants, 
post-award reporting requirements with respect to the grants, and the 
uniform requirements applicable to all Federal grants.



Sec.  598.405  Environmental review.

    Where any EZ's strategic plan or any revision thereof proposes the 
use of HUD EZ Grant Funds for activities

[[Page 350]]

that are not excluded from environmental review under 24 CFR 50.19(b), 
the EZ shall supply HUD with all available, relevant information 
necessary for HUD to perform any environmental review required by 24 CFR 
part 50.

[72 FR 71016, Dec. 13, 2007]



Sec.  598.408  Lead-based paint requirements.

    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 the lead-based paint requirements set forth at part 35, 
subparts A, B, J, K, and R of this title apply to the activities funded 
by HUD under this program.

[69 FR 34275, June 21, 2004]



Sec.  598.410  Public access to materials and proceedings.

    After designation, an area designated an EZ must make available to 
the public copies of the strategic plan and supporting documentation and 
must conduct its meetings in accordance with applicable open meetings 
statutes. HUD may make the strategic plan and supporting documentation 
available to members of the public.



Sec.  598.415  Reporting.

    (a) Empowerment Zones designated in accordance with this part must 
submit periodic reports to HUD. These reports must identify the 
community, local government and State actions that have been taken in 
accordance with the strategic plan and provide notice of updates and 
modifications to the strategic plan. In addition to these reports, such 
other information relating to designated Empowerment Zones as HUD 
requests from time to time, including information documenting 
nondiscrimination in hiring and employment by businesses within the 
designated Empowerment Zone, must be submitted promptly.
    (b) The States must submit periodic reports to HUD, demonstrating 
compliance with the certifications it is required to submit in 
accordance with this part.

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998]



Sec.  598.420  Periodic progress determinations.

    HUD will regularly evaluate the progress of implementation of the 
strategic plan in each designated Empowerment Zone on the basis of 
available information. HUD also may commission evaluations of the 
Empowerment Zone program as a whole by an impartial third party, at such 
intervals as HUD may establish.



Sec.  598.425  Validation of designation.

    (a) On the basis of the periodic progress determinations described 
inSec. 598.420, and subject to the provisions relating to the 
revocation of designation inSec. 598.430, HUD will make findings on 
the continuing eligibility for and the validity of the designation of 
any Empowerment Zone.
    (b) HUD may approve an Empowerment Zone's request for boundary 
modification, subject to the requirements specified in subpart B of this 
part.



Sec.  598.430  Revocation of designation.

    (a) Basis for revocation. The Secretary may revoke the designation 
of an urban area as an Empowerment Zone if the Secretary determines, on 
the basis of the periodic progress determination described atSec. 
598.420, that the State(s) or local government(s) in which the urban 
area is located:
    (1) Has modified the boundaries of the area without written approval 
from HUD;
    (2) Has failed to make progress in implementing the strategic plan; 
or
    (3) Has not complied substantially with the strategic plan.
    (b) Letter of warning. Before revoking the designation of an urban 
area and an Empowerment Zone, the Secretary will issue a letter of 
warning to the nominating State(s) and local government(s), with a copy 
to all affected Federal agencies of which the Secretary is aware;

[[Page 351]]

    (1) Advising that the Secretary has determined that the nominating 
local government(s) and/or State(s) has:
    (i) Modified the boundaries of the area without written approval 
from HUD; or
    (ii) Is not complying substantially with, or has failed to make 
progress in implementing the strategic plan; and
    (2) Requesting a reply from the nominating entities within 90 days 
of the receipt of this letter of warning.
    (c) Notice of revocation. To revoke the designation, the Secretary 
must issue a final notice of revocation of the designation of the urban 
area as an Empowerment Zone, after allowing 90 days from the date of 
receipt of the letter of warning for response, and after making a 
determination in accordance with paragraph (a) of this section.
    (d) Notice to affected Federal agencies. HUD will notify all 
affected Federal agencies of which it is aware, of its determination to 
revoke any designation in accordance with this section.
    (e) Effect of revocation. Upon revocation of an EZ's designation, 
the designation and remaining benefits may be awarded to the next 
highest ranked Round II applicant.
    (f) Publication. The final notice of revocation of designation will 
be published in the Federal Register, and the revocation will be 
effective on the date of publication.

(Approved by the Office of Management and Budget under Control Number 
2506-0148)

[63 FR 19155, Apr. 16, 1998, as amended at 63 FR 53262, Oct. 2, 1998]



                         Subpart F_Special Rules



Sec.  598.500  Indian reservations.

    (a) An area within an Indian reservation (as defined in section 
168(j)(6) if the Internal Revenue Code, 26 U.S.C. 168(j)(6)) may be 
included in an area nominated as an Empowerment Zone by State and local 
governments. An area completely within an Indian reservation may be 
nominated by the reservation governing body and, in that case, the area 
is treated as if it also were nominated by a State and a local 
government. Where two (or more) governing bodies have joint jurisdiction 
over an Indian reservation, the nomination of a reservation area must be 
a joint nomination.
    (b) For purposes of paragraph (a) of this section, a reservation 
governing body must be the governing body of an Indian entity recognized 
and eligible to receive services from the Bureau of Indian Affairs, 
United States Department of Interior.



Sec.  598.505  Governments.

    If more than one State or local government seeks to nominate an 
urban area under this part, any reference to or requirement of this part 
applies to all such governments.



Sec.  598.510  Nominations by Economic Development Corporations or
the District of Columbia.

    Any urban area nominated by an Economic Development Corporation 
chartered by the State in which it is located or by the District of 
Columbia shall be treated as nominated by a State and local government.



Sec.  598.515  Alaska and Hawaii.

    A nominated area in Alaska or Hawaii is deemed to satisfy the 
criteria of distress, size, and poverty rate detailed inSec. 
598.100(b), (c), (d), and (f), andSec. 598.110 if, for each census 
tract or block numbering area within the area, 20 percent or more of the 
families have income that is 50 percent or less of the statewide median 
family income (as determined under section 143 of the Internal Revenue 
Code).



                    Subpart G_Empowerment Zone Grants

    Source: 72 FR 71016, Dec. 13, 2007, unless otherwise noted.



Sec.  598.600  Applicability.

    This subpart applies to a project or activity proposed by an 
Empowerment Zone after January 14, 2008 to be undertaken with funds 
appropriated by Congress and made available by HUD specifically for use 
by the EZ. These funds are referred to as ``HUD EZ Grant Funds.''

[[Page 352]]



Sec.  598.605  Implementation plan.

    (a) Implementation plan content. An EZ must submit an implementation 
plan for HUD approval that addresses each project or activity proposed 
to be undertaken by the EZ with HUD EZ Grant Funds. The implementation 
plan must:
    (1) Describe the project or activity;
    (2) Identify the completion date or duration of the project or 
activity;
    (3) Provide the total cost of the project or activity;
    (4) Identify the amount of HUD EZ Grant Funds to be used for the 
project or activity; and
    (5) Include a narrative description of how the project or activity 
meets the resident benefit and economic development standards of this 
subpart.
    (b) Proposed funded project or activity. The project or activity 
proposed in the implementation plan is subject to the following 
requirements:
    (1) The Federal requirements listed in 24 CFR 5.105;
    (2) The governmentwide, Uniform Administrative Requirements for 
Grants and Cooperative Agreements to State, Local and Federally 
Recognized Indian Tribal Governments at 24 CFR part 85;
    (3) The requirements of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601 et 
seq.);
    (4) The environmental review and approval requirements of 24 CFR 
part 50;
    (5) The provisions of the Memorandum of Agreement (MOA) setting 
forth the obligations and requirements that the state and local 
governments, as Empowerment Zone designees, have agreed to meet as 
signatories of the agreement.
    (6) Recipients of the HUD EZ Grant Funds also must adhere to the 
requirements set forth in the provisions of the grant agreement for HUD 
EZ Grant Funds.



Sec.  598.610  Resident benefit standards.

    The project or activity described in an implementation plan 
submitted for HUD approval by an EZ to describe the planned use of HUD 
EZ Grant Funds must meet one of the following three standards of 
resident benefit for determining the amount of HUD EZ Grant Funds that 
may be used to fund a particular project or activity:
    (a) Principal benefit standard--(1) Benefits other than jobs. If a 
majority (51 percent) of the direct beneficiaries of the project or 
activity described in the implementation plan reside within the EZ, the 
project or activity may be fully assisted with HUD EZ Grant Funds.
    (2) Jobs benefit. In any case where the direct benefits to be 
provided by a project or activity described in an implementation plan 
will be in the form of jobs, the project may be fully assisted with HUD 
EZ Grant Funds if at least 35 percent of the jobs are taken by, or made 
available to, EZ residents. A job satisfies this 35 percent requirement 
if the EZ resident is employed by the employer for at least 90 days 
during the year. For purposes of this 35 percent requirement, an 
employer may rely on a certification by the employee that provides to 
the employer the address of the employee's principal residence, and 
requires the employee to notify the employer of a change of the 
employee's principal residence.
    (3) Presumed benefit. Certain commercial revitalization activities 
that are located and undertaken in an EZ and that provide services to 
both EZ residents and non-residents (e.g., supermarkets, drug stores) 
will presume to meet the 51 percent principal benefit standard in 
paragraph (a)(1) of this section, provided that the EZ maintains written 
documentation that briefly describes the activity, its service area, and 
the rationale for presuming that the activity meets the 51 percent 
principal benefit standard.
    (b) Proportional benefit standard. If a project or activity 
described in an implementation plan cannot meet the principal benefit 
standard of paragraph (a) of this section, the percent of the cost of 
the project or activity that may be assisted with HUD EZ Grant Funds may 
not be greater than the percent of all persons benefiting directly from 
the project or activity who reside within the EZ.
    (c) Exception criterion. In any case where a proposed project or 
activity, including activities outside of the designated area, would not 
meet the standards of paragraph (a) or paragraph (b) of this section, 
HUD EZ

[[Page 353]]

Grant Funds may be used where HUD determines that an implementation 
plan, accompanied by the facts that the EZ requests HUD to review and 
consider as justifying the exception, demonstrates substantial benefits 
to the EZ that would result from the project or other compelling reasons 
justifying the appropriateness of the implementation plan to the EZ's 
strategic plan. A request by an EZ for an exception under paragraph (c) 
of this section will receive a response by HUD no later than 60 days 
from the date of the EZ's request provided that the EZ's request with 
all relevant information is considered complete no later than 45 days 
from the date of the EZ's request.



Sec.  598.615  Economic development standards.

    (a) Economic development standards. The project or activity in an 
implementation plan submitted for HUD approval by an EZ to describe the 
planned use of HUD EZ Grant Funds must meet one of the following 
economic development standards:
    (1) Business development assistance. An activity that involves 
assisting a business in the EZ meets the standard, whether or not the 
business will create any new jobs. Any such activity must also meet the 
standards for benefiting a sufficient portion of EZ residents as 
required underSec. 598.610. Qualifying activities include the use of 
HUD EZ Grant Funds to:
    (i) Assist in establishing a business;
    (ii) Expand a business, including efforts to stimulate the 
development or expansion of microenterprises; and
    (iii) Assisting businesses that provide goods or services within the 
EZ to remain within the EZ.
    (2) Employment training and assistance. An activity that assists a 
person to take, or remain in, a job, subject to meeting the standards 
for benefiting a sufficient proportion of EZ residents as required under 
Sec.  598.610, including:
    (i) Job training;
    (ii) Provision of child care;
    (iii) Transportation to or from the place of employment or the place 
where job training is taking place; or
    (iv) Counseling persons on job-related skills, such as how to 
interview successfully for a job, and dress and act appropriately in the 
conduct of a job.
    (3) Educational assistance. The provision of educational assistance 
meets the economic development standard only if the EZ's implementation 
plan demonstrates that such education will be provided to persons who 
cannot qualify for available jobs because of the lack of some specific 
knowledge that would be given them through the course(s) to be provided. 
Any educational assistance provided must also meet the standard for 
benefiting a sufficient portion of EZ residents as required underSec. 
598.610.
    (4) EZ administrative capacity. An activity that increases the 
capacity of governance board members or staff of the EZ's lead agency to 
carry out their roles with respect to economic development projects 
expected to be assisted in support of the EZ's strategic plan is 
eligible. This includes the cost of attending a conference on economic 
development. The use of HUD EZ Grant Funds for capacity building under 
this paragraph is deemed to provide adequate benefit to EZ residents.
    (5) Public improvements. The provision of public improvements, such 
as extension of water or sewer capacity, or street widening, meets the 
economic development standard only if it is shown in the implementation 
plan that the lack of the improvements clearly is an impediment to the 
establishment, expansion or retention of one or more businesses in the 
EZ, and that the provision of the proposed public improvement would be 
limited as much as feasible to assisting the business or businesses. Any 
public improvements must also meet the standard for benefiting a 
sufficient portion of EZ residents as required underSec. 598.610.
    (b) Exception request. HUD may approve a project or activity that 
does not fall within any of the previous review standards of this 
section if the EZ provides evidence that, in some way, the project or 
activity can reasonably be seen as meeting the economic development 
standard. Such a project or activity must also meet the standards for 
benefiting a sufficient portion of EZ residents as required underSec. 
598.610. All requests for such an exception must be in writing, 
accompanied by the facts

[[Page 354]]

that the EZ wants HUD to review and consider as justification. A request 
by an EZ for an exception under this paragraph (b) will receive a 
response by HUD no later than 60 days from the date of the EZ's request 
provided that the EZ's request with all relevant information is 
considered complete no later than 45 days from the date of the EZ's 
request.



Sec.  598.620  Evaluation, monitoring, and enforcement.

    (a) Progress, evaluation, and monitoring. HUD will review the 
performance of an EZ's use of HUD EZ Grant Funds for compliance with 
this subpart as part of its regular evaluation process under 24 CFR 
598.420, through on-site monitoring under 24 CFR 85.40(e), and by other 
appropriate means.
    (b) Warning letter. If HUD has reason to believe that an EZ is not 
carrying out its funded activities in accordance with any applicable 
requirements, including the resident benefit and economic development 
standards of this subpart, HUD may forward a warning letter to the EZ 
informing it of a potential violation and recommending action to avoid a 
violation. A warning letter is not a prerequisite for any other action 
HUD may take.
    (c) Notice of violation. If HUD determines that there appears to be 
a violation in the use of HUD EZ Grant Funds, it will notify the EZ of 
the alleged violation and the action HUD proposes to take under 24 CFR 
85.43 or its successor regulation or if appropriate, 24 CFR 598.430.
    (d) Response to notice. A notice sent to an EZ under paragraph (c) 
of this section will provide the EZ with at least 30 calendar days from 
the time HUD sends the notice to respond with any information to rebut 
or mitigate the alleged violation.
    (e) Final action. If the EZ does not respond within the period 
specified pursuant to paragraph (d) of this section, HUD will make a 
final determination of the violation and may proceed to take the action 
proposed in the notice. If the EZ responds, HUD will consider the 
information received from the EZ and may request additional information. 
After considering the information received from the EZ, HUD will notify 
the EZ of HUD's final determination and action, affirming, modifying, or 
repealing HUD's initial determination of an alleged violation and 
proposed action.



PART 599_RENEWAL COMMUNITIES--Table of Contents



                      Subpart A_General Provisions

Sec.
599.1 Applicability and scope.
599.3 Definitions.
599.5 Data used for eligibility determinations.

Subpart B_Eligibility Requirements for Nomination of Renewal Communities

599.101 Eligibility to submit nominations.
599.103 Geographic and population requirements for a nominated area.
599.105 Economic condition requirements for a nominated area.
599.107 Required State and local commitments.

       Subpart C_Procedures for Nomination of Renewal Communities

599.201 Initiation of application process.
599.203 Basic application submission requirements.

   Subpart D_Evaluation of Applications Nominating Renewal Communities

599.301 Initial determination of threshold requirements.
599.303 Rating of applications.

    Subpart E_Selection of Nominated Areas To Be Renewal Communities

599.401 Ranking of applications.
599.403 Number of Renewal Communities to be designated.
599.405 Selection of Renewal Communities.
599.407 Notification of Renewal Community designations.

                 Subpart F_Post-Designation Requirements

599.501 Period for which Renewal Community designation is in effect.
599.503 Effect of Renewal Community designation on an EZ/EC.
599.505 Coordinating responsible authority (CoRA).
599.507 Tax incentives utilization plan.
599.509 Modification of commitments and plans.
599.511 Reports and other information.
599.513 Revocation of designation.


[[Page 355]]


    Authority: 26 U.S.C. 1400E; 42 U.S.C. 3535(d).

    Source: 66 FR 35855, July 9, 2001, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  599.1  Applicability and scope.

    (a) This part establishes requirements and procedures applicable to 
the designation of Renewal Communities (RCs) through December 31, 2001, 
authorized under Subchapter X of the Internal Revenue Code of 1986 (26 
U.S.C. 1400E, et seq.). HUD may choose to use these requirements and 
procedures in whole or in part for any future Renewal Community 
designations that may be authorized.
    (b) This part contains provisions relating to area requirements, the 
nomination process for Renewal Communities, and the evaluation and 
designation of nominated areas by HUD.



Sec.  599.3  Definitions.

    In addition to the definitions of ``HUD'' and ``Secretary'' found in 
24 CFR 5.100, the following definitions apply to this part:
    Census tract means a census tract, as the term is used by the Bureau 
of the Census, or, if census tracts are not defined for the area, a 
block numbering area.
    Designation means the process by which the Secretary designates 
areas as Renewal Communities eligible for tax incentives and credits 
established by Subchapter X of the Internal Revenue Code of 1986, as 
amended (26 U.S.C. 1400E, et seq.) and for any additional assistance 
that may be made available.
    Empowerment Zone (EZ) means an area so designated by the Secretary 
in accordance with 24 CFR part 597 or 24 CFR part 598.
    Enterprise Community (EC) means an area so designated by the 
Secretary in accordance with 24 CFR part 597.
    Local government means any county, city, town, township, parish, 
village, or other general purpose political subdivision of a State, and 
any combination of these political subdivisions that is recognized by 
the Secretary.
    Metropolitan Area (MA) means an area as defined to be a Metropolitan 
Statistical Area or Primary Metropolitan Statistical Area by the Office 
of Management and Budget on June 30, 1999.
    Nominated area means an area with a population of not more than 
200,000 that is nominated by one or more local governments and the State 
or States in which it is located, or the governing body of the Indian 
reservation in which it is located, for designation in accordance with 
this part.
    Renewal Community (RC) means an area so designated by HUD in 
accordance with this part.
    Rural area means a nominated area:
    (1) Which is within a local government jurisdiction or jurisdictions 
with a population of less than 50,000; or
    (2) Which is outside of an MA; or
    (3) Which is determined by HUD, after consultation with the 
Secretary of Commerce, to be a rural area. An area may qualify as a 
rural area under this paragraph (3) of this definition if:
    (i) It is a nominated area that crosses jurisdictional boundaries;
    (ii) The total population of the nominated area does not exceed 
200,000;
    (iii) The nominated area as a whole would not satisfy the 
requirements of either paragraph (1) or (2) of this definition;
    (iv) Each portion of the nominated area that is located within a 
separate jurisdiction meets the requirements of either paragraph (1) or 
(2) of this definition; and
    (v) The area is specifically nominated as a rural area; or
    (4) Which does not meet the requirements of either paragraph (1), 
(2), or (3) of this definition but which is determined by HUD on a case-
by-case basis, after consultation with the Secretary of Commerce, to be 
a rural area based on information submitted to demonstrate that the 
nominated area should be considered as a rural area.
    State means any State of the United States.
    Urban area means a nominated area that is not a rural area.



Sec.  599.5  Data used for eligibility determinations.

    (a) Source of data. The data to be used in determining the 
population, poverty rate, unemployment rate and household income 
distribution information

[[Page 356]]

of an area is from the 1990 Decennial Census.
    (b) Geographic boundaries. The boundary of an area that is nominated 
for designation as an Renewal Community must coincide with the 
boundaries of census tracts, as defined inSec. 599.3 except in the 
case of Indian reservation areas where the use of census tracts would 
tend to include areas outside the jurisdiction of the reservation 
governing body and such body is not making the nomination in concert 
with another jurisdiction.



Subpart B_Eligibility Requirements for Nomination of Renewal Communities



Sec.  599.101  Eligibility to submit nominations.

    (a) In general. Except as provided in paragraph (b) of this section, 
a nomination for the designation of an area as a Renewal Community must 
be submitted by one or more local governments and the State or States in 
which the nominated area is located.
    (b) Nominated areas on Indian reservations. In the case of a 
nominated area on an Indian reservation, the reservation governing body 
(as determined by the Secretary of the Interior) must submit the 
nomination and shall be treated as being both the State and local 
governments with respect to the area for purposes of this part.
    (c) Responsible official. The submission of an application, and any 
other action required of a nominating government under this part, such 
as the submission of a certification, must be performed by an official 
or employee authorized to act on behalf of the government for that 
purpose.



Sec.  599.103  Geographic and population requirements for a 
nominated area.

    (a) Geographic requirements. A nominated area must meet the 
following geographic requirements to be eligible for designation as a 
Renewal Community:
    (1) The area must be within the jurisdiction of one or more local 
governments.
    (2) The boundary of the area must be continuous.
    (i) The boundary line of the nominated area may be interrupted by 
jurisdictional boundaries, such as State or county lines, or natural 
boundaries, such as rivers, as long as the resulting area is entirely 
within the boundary line except for the interruptions.
    (ii) The nominated area may enclose an area or areas that are 
excluded from the nominated area, as long as each enclosed area to be 
excluded is within a continuous boundary line.
    (3) The nominated area may be any size, as long as it meets all of 
the requirements of this part.
    (b) Population requirements--(1) In general. Except as provided in 
paragraph (b)(2) of this section, a nominated area must have a 
population of not more than 200,000 and at least:
    (i) 4,000 if any portion of the area (other than a nominated rural 
area) is located within an MA which has a population of 50,000 or 
greater; or
    (ii) 1,000 in any other case.
    (2) Nominated areas on Indian reservations. A nominated area that is 
entirely within an Indian reservation (as determined by the Secretary of 
the Interior) is not subject to the population requirements of paragraph 
(b)(1) of this section.



Sec.  599.105  Economic condition requirements for a nominated area.

    (a) Certification for economic requirements. An official or 
officials authorized to do so by the nominating State and local 
governments must certify in writing for HUD's acceptance that the 
nominated area is an area of pervasive poverty, unemployment, and 
general distress, and that the nominated area meets the requirements of 
paragraphs (b), (c) and, in the case of urban areas, paragraph (d) of 
this section. HUD's acceptance of the certification is subject to a 
review of data supporting the certification, as provided in paragraph 
(e) of this section.
    (b) Unemployment requirement. A nominated area meets the 
unemployment requirement if the unemployment rate in the nominated area 
taken as a whole was at least one and one-half times (150% of) the 
national unemployment rate for the period to which such data relate.

[[Page 357]]

    (c) Poverty requirement. A nominated area meets the poverty 
requirement if the poverty rate for each population census tract within 
the nominated area is at least 20 percent. In the case of a nominated 
area that is within an Indian reservation, and cannot equivalently be 
described with census tracts, the poverty rate of the nominated area 
taken as a whole is considered for purposes of making this 
determination.
    (d) Income requirement for urban areas. In the case of a nominated 
urban area, at least 70 percent of the households living in the 
nominated area must have incomes below 80 percent of the median income 
of households within the jurisdiction of the local government or 
governments in which the nominated area is located. The number of 
households below 80 percent of the median income in each census tract 
shall be the number of households with incomes below 80 percent of the 
Household Adjusted Median Family Income (HAMFI) in each census tract as 
determined by HUD.
    (e) HUD review of supporting data--(1) Unemployment, poverty and 
income. HUD will review 1990 census data to determine whether to accept 
a certification that a nominated area meets the requirements of 
paragraphs (b), (c) and (d) of this section.
    (2) Pervasive poverty, unemployment and general distress--(i) 
Pervasive poverty. Pervasive poverty is demonstrated by evidence that:
    (A) Poverty, as indicated by the number of persons listed as being 
in poverty in the 1990 Decennial Census, is widespread throughout the 
nominated area; or
    (B) Poverty, as described in paragraph (e)(2)(i)(A) of this section, 
has become entrenched or intractable over time (through comparison of 
1980 and 1990 census data or other relevant evidence).
    (ii) Unemployment. Unemployment is demonstrated by:
    (A) The most recent data available indicating that the annual rate 
of unemployment for the nominated area is not less than the national 
annual average rate of unemployment; or
    (B) Evidence of especially severe economic conditions, such as 
military base or plant closings or other conditions that have brought 
about significant job dislocation within the nominated area.
    (iii) General distress. General distress is evidenced by describing 
adverse conditions within the nominated urban area other than those of 
pervasive poverty and unemployment. Below average or decline in per 
capita income, earnings per worker, number of persons on welfare, per 
capita property tax base, average years of school completed, substantial 
population decline, and a high or rising incidence of crime, narcotics 
use, homelessness, high incidence of AIDS, abandoned housing, 
deteriorated infrastructure, school dropouts, teen pregnancy, incidence 
of domestic violence, incidence of certain health conditions and 
illiteracy are examples of appropriate indicators of general distress.



Sec.  599.107  Required State and local commitments.

    (a) Commitment to a course of action--(1) Agreement of State and 
local governments. The nominating State and local governments must agree 
in writing that, for any period during which the area is a Renewal 
Community, the governments will follow a specified course of action 
which meets the requirements of paragraph (a)(2) of this section. If 
each nominating State and local government is a signatory to a course of 
action under paragraph (a)(2) of this section, a separate written 
agreement is not necessary to meet the requirements of this paragraph.
    (2) Course of action requirements--(i) In general. A course of 
action is a written document, signed by the nominated area's State and/
or local governments and community-based organizations which commits 
each signatory to undertake and achieve measurable goals and actions 
within the nominated area upon its designation as a Renewal Community.
    (ii) Community-based organizations. For purposes of the course of 
action, ``community-based organizations'' includes for-profit and non-
profit private entities, businesses and business organizations, 
neighborhood organizations, and community groups. Community-based 
organizations are not required to be located in the nominated area as

[[Page 358]]

long as they commit to achieving the goals of the course of action in 
the Renewal Community.
    (iii) Timetable. The course of action must include a timetable that 
identifies the significant steps and target dates for implementing the 
goals and actions.
    (iv) Performance measures. The course of action must include a 
description of how the performance of the course of action will be 
measured and evaluated.
    (v) Required goals and actions. The course of action must include at 
least four of the following:
    (A) A reduction of tax rates or fees applying within the Renewal 
Community;
    (B) An increase in the level of efficiency of local services within 
the Renewal Community, such as services for residents funded through the 
Federal Temporary Assistance for Needy Families program and related 
Federal programs including, for example, job support services, child 
care and after school care for children of working residents, employment 
training, transportation services and other services that help residents 
become economically self-sufficient;
    (C) Crime reduction strategies, such as crime prevention, including 
the provision of crime prevention services by nongovernmental entities;
    (D) Actions to reduce, remove, simplify, or streamline governmental 
requirements applying within the Renewal Community, such as:
    (1) Density bonus. Permission to develop or redevelop real property 
at a higher density level than otherwise permitted under the zoning 
ordinance, e.g., increased height or increased number of residential or 
business units;
    (2) Incentive zoning. Providing a density bonus or other real 
property-related incentive for the development, redevelopment, or 
preservation of a parcel in the designated area;
    (3) Comprehensive or one-stop permit. Streamlining construction or 
other development permitting processes, rather than requiring multiple 
applications for multiple permits, e.g., for demolition, site 
preparation, and construction, the developer or redeveloper submits a 
single application that is circulated for the necessary reviews by the 
various planning, engineering, and other departments in the county or 
municipality;
    (4) Variance and exception policies. Counties or municipalities may 
pass ordinancesthat permit variances to or exceptions from certain 
zoning or other land use limitations. Examples include a reduced 
building set-back requirement or a reduced requirement for the provision 
of parking. Thepolicy may be limited to a particular geographic area;
    (5) Voluntary environmental compliance program. A shared or limited 
environmental liability program, with limited liability from certain 
legal or administrative action in exchange for undertaking an approved 
program of environmental investigation, hazard control, and on-going 
risk reduction activities. Typically, the liability limitation is for 
future environmental cleanup (and not against lawsuit for damages). Risk 
of cleanup may be shared by the developer or property owner and the 
government;
    (E) Involvement in economic development activities by private 
entities, organizations, neighborhood organizations, and community 
groups, particularly those in the Renewal Community, including a 
commitment from such private entities to provide jobs and job training 
for, and technical, financial, or other assistance to, employers, 
employees, and residents from the Renewal Community;
    (F) The gift or sale at below fair market value of surplus real 
property held by State or local governments, such as land, homes, and 
commercial or industrial structures in the Renewal Community to 
neighborhood organizations, community development corporations, or 
private companies.
    (3) Certification requirement for crime incidence. If preference 
points are being sought for the nominated area because it qualifies for 
preference points in accordance withSec. 599.303(c)(1), the course of 
action must contain a certification by each nominating State and local 
government of the 1999 Local Crime Index rate per 100,000 inhabitants 
(LCI) determined for the nominated area. The offenses used in 
determining the LCI are the violent crimes of murder

[[Page 359]]

and nonnegligent manslaughter, forcible rape, robbery, and aggravated 
assault, and the property crimes of burglary, larceny-theft, and motor 
vehicle theft.
    (b) Economic growth promotion requirements--(1) Required 
certification. The State and local governments in which a nominated area 
is located must certify in writing that they have repealed or reduced, 
will not enforce, or will reduce within the nominated area at least four 
of the following:
    (i) Licensing requirements for occupations that do not ordinarily 
require a professional degree;
    (ii) Zoning restrictions on home-based businesses which do not 
create a public nuisance;
    (iii) Permit requirements for street vendors who do not create a 
public nuisance;
    (iv) Zoning or other restrictions that impede the formation of 
schools or child care centers; and
    (v) Franchises or other restrictions on competition for businesses 
providing public services, including taxicabs, jitneys, cable 
television, or trash hauling.
    (2) Exception. The requirements of paragraph (b)(1) of this section 
do not apply to the extent that a regulation of businesses and 
occupations is necessary for and well-tailored to the protection of 
health and safety. The certifications required under paragraph (b)(1) of 
this section may be limited to exclude or include specific businesses 
and occupations.
    (c) Recognition of past efforts. The course of action and economic 
growth requirements under paragraphs (a) and (b), respectively, of this 
section are not limited to future goals and actions. Past efforts within 
the previous eight years, either completed or on-going, of the 
nominating State or local governments to undertake any of the goals or 
actions listed in paragraph (a)(2)(v) or (b)(1) of this section qualify 
to meet these requirements. If past efforts are used, the nominating 
governments must identify which of the required goals and actions listed 
in paragraph (a)(2)(v) or (b)(1) of this section they address; the 
timetable for their continued implementation, if on-going; and the 
community-based organizations involved, if any.

[66 FR 35855, July 9, 2001, as amended at 66 FR 52675, Oct. 17, 2001]



       Subpart C_Procedures for Nomination of Renewal Communities



Sec.  599.201  Initiation of application process.

    (a) Federal Register notice. To initiate the nomination process for 
Renewal Communities, HUD will publish a notice inviting applications for 
the designation of Renewal Communities in the Federal Register.
    (b) Contents. The notice inviting applications will include specific 
information as to due dates and submission requirements.



Sec.  599.203  Basic application submission requirements.

    The basic application submission requirements for nominating an area 
as a Renewal Community are:
    (a) Identification of the nominated area. An application must 
identify the census tracts that constitute the nominated area. The 
nominated area must meet all of the eligibility requirements of subpart 
B of this part.
    (b) State and local commitments. An application must include the 
documents evidencing compliance with State and local commitments 
required bySec. 599.107.
    (c) Public notice certification. An application must include a 
certification, signed by a responsible official or employee of each 
nominating State and local government, that the public was provided 
notice of, and an opportunity to participate in, the application 
development process. Notice and opportunity to participate may include 
procedures such as placing announcements in newspapers or other media, 
holding public meetings, and soliciting comments.

[[Page 360]]



   Subpart D_Evaluation of Applications Nominating Renewal Communities



Sec.  599.301  Initial determination of threshold requirements.

    (a) Two threshold requirements. Before rating and ranking an 
application, HUD will review it to determine if the application meets 
both of the following thresholds:
    (1) Eligibility of the nominated area. This threshold is met if HUD 
determines that the nominated area as identified in the application 
meets all of the area eligibility requirements of subpart B of this 
part.
    (2) Adequacy of State and local commitments. This threshold is met 
if HUD determines that the documents in the application evidencing 
compliance with the required State and local commitments meet all of the 
course of action and economic growth promotion requirements ofSec. 
599.107.
    (b) Failure to meet threshold requirements--(1) No rating or 
ranking. An application that does not meet both of the threshold 
requirements by the application due date specified in the published 
notice inviting applications will not be rated or ranked for further 
Renewal Community consideration.
    (2) Opportunity to correct failure. HUD will notify an applicant of 
the threshold deficiencies in its application. An applicant may submit 
additional information and take any other action required to correct the 
deficiencies and meet the threshold requirements until the due date for 
applications specified in the published notice inviting applications.



Sec.  599.303  Rating of applications.

    (a) In general. Each application that qualifies by meeting the 
threshold requirements will receive a score based on its ranking, as 
described in paragraph (b) of this section, plus any preference points, 
as described in paragraph (c) of this section.
    (b) Ranking score. Each nominated area meeting the minimum 
thresholds will be ranked from highest to lowest according to the area 
poverty rate, area unemployment rate, and for urban areas, the 
percentage of families below 80 percent of area median income. Urban 
nominated areas will be ranked separately from rural nominated areas. 
The percentile rank will be determined by dividing these rankings by the 
total number of nominated areas ranked and multiplying the result by 
100. The average ranking will be determined by computing the simple 
average of the percentile ranks for each nominated area. To create a 100 
point scale, the average rankings will be subtracted from 100.
    (c) Preference points--(1) Incidence of crime. A nominated area may 
receive a maximum of 1, 2, or 4 crime incidence preference points as 
follows:
    (i) Number of points awarded. A nominated area will receive 1 
additional point if its 1999 Local Crime Index (LCI), as determined on 
the basis of data from each State and local law enforcement authority 
with jurisdiction in the nominated area, does not exceed by more than 
25% the nation-wide 1999 Crime Index rate per 100,000 inhabitants (CI) 
prepared as part of the FBI's Uniform Crime Reporting (UCR) Program. A 
preference of 2 points will be added to the score of a nominated area 
with an LCI that does not exceed the CI by more than 10 percent. A 
nominated area that has an LCI that is less than the CI will receive 4 
preference points.
    (ii) Qualifying for preference points. To qualify for preference 
points based on the incidence of crime, the nominating governments must 
determine and then certify to the LCI determined for the nominated area, 
in accordance withSec. 599.107(a)(3)
    (2) Preference points for certain census tracts. A nominated area 
will receive one preference point if any of its census tracts is a 
census tract identified in GAO Report RCED-98-158R, dated May 12, 1998. 
(The GAO Report is available from U.S. General Accounting Office, P.O. 
Box 37050, Washington, DC 20013 or http://www.gao.gov.)



    Subpart E_Selection of Nominated Areas To Be Renewal Communities



Sec.  599.401  Ranking of applications.

    (a) Ranking order. Rural and urban applications will be ranked 
according to their final scores as determined in

[[Page 361]]

accordance withSec. 599.303, with the highest scoring applications 
ranked first.
    (b) Separate ranking categories. After initial ranking, both rural 
and urban applications will be separated into two ranking categories:
    (1) Category 1. Applications for designation of nominated areas that 
are Enterprise Communities or Empowerment Zones will be placed into 
Category 1 in rank order.
    (2) Category 2. Applications for designation of nominated areas that 
are not placed into or selected from Category 1 will be placed into 
Category 2 in rank order.



Sec.  599.403  Number of Renewal Communities to be designated.

    (a) In general. Except as provided in paragraph (b) of this section, 
the total number of Renewal Communities to be designated and the 
distribution of designations between urban and rural areas are as 
follows:
    (1) Total number. The total number of nominated areas to be selected 
for designation as Renewal Communities is 40.
    (2) Rural areas. HUD will select at least 12 rural areas for 
designation as Renewal Communities. If HUD does not receive at least 12 
eligible rural area applications for Renewal Community designation, the 
number of rural area designations will be the number of eligible rural 
area applications received by HUD.
    (3) Urban areas. The number of urban areas selected for designation 
as Renewal Communities will be the number remaining after subtracting 
the number of rural areas selected from 40.
    (b) Less than 40 eligible applications. If HUD receives fewer than 
40 eligible applications nominating areas, the total number of nominated 
areas to be selected for designation as Renewal Communities will be the 
total number of eligible applications.



Sec.  599.405  Selection of Renewal Communities.

    (a) Selection of Category 1 applications--(1) Six or less rural 
nominations. If there are six or fewer Category 1 rural area 
nominations, HUD will select all of the nominated rural areas in 
Category 1 for designation as Renewal Communities. HUD will then select 
the highest ranking Category 1 urban area nominations, but will not 
exceed a total of 20 Category 1 designations.
    (2) More than six rural nominations. If there are more than six 
Category 1 rural area nominations, HUD will select the six highest 
ranked Category 1 rural applications, and will then select, in rank 
order, the highest ranking Category 1 area nominations, whether urban or 
rural, until not more than a total of 20 Category 1 designations is 
made.
    (b) Selection of Category 2 applications. After not more than 20 
Category 1 designations are made in accordance with paragraph (a) of 
this section, any remaining Category 1 applications will be placed back 
in rank order into Category 2, with selections for a combined Category 1 
and Category 2 total of not more than 40 designations made as follows:
    (1) Less than six Category 1 rural applications. If the number of 
rural area applications selected in Category 1 is less than six, HUD 
will select the highest ranking rural area applications in Category 2 
until the total number of rural areas selected is 12. The remaining 
designations will be made from both rural and urban areas in rank order. 
If there are fewer than 12 eligible rural applications overall, counting 
both Category 1 and Category 2, all of the eligible rural applications 
will be selected.
    (2) Six or more Category 1 rural applications. If the number of 
rural area applications selected in Category 1 is six or more, HUD will 
select the six highest Category 2 rural applications. The remaining 
designations will be made from both rural and urban areas in rank order.
    (c) Effective date of designation. The effective date of designation 
as a Renewal Community is the date a nominated area is selected in 
accordance with this section.



Sec.  599.407  Notification of Renewal Community designations.

    (a) Notification of applicant. HUD will notify each applicant of the 
designation of its nominated area as a Renewal Community.

[[Page 362]]

    (b) Federal Register publication. In addition to any other form of 
notification, HUD will publish a notice of the designation of Renewal 
Communities in the Federal Register.



                 Subpart F_Post-Designation Requirements



Sec.  599.501  Period for which Renewal Community designation 
is in effect.

    Any designation of an area as a Renewal Community will remain in 
effect during the period beginning on January 1, 2002, and ending on the 
earliest of:
    (a) December 31, 2009;
    (b) The termination date designated by the State and local 
governments in their nomination application, if any; or
    (c) The date HUD revokes the designation.



Sec.  599.503  Effect of Renewal Community designation on an EZ/EC.

    The designation of any area as an Empowerment Zone or Enterprise 
Community shall cease to be in effect as of the date that the 
designation of any portion of such area as a Renewal Community takes 
effect.



Sec.  599.505  Coordinating responsible authority (CoRA).

    Within 30 days of the Renewal Community designation, the State and 
local governments in which the area is located must submit to HUD 
information identifying the coordinating responsible authority (CoRA), 
which is the entity, organization or persons with the responsibility and 
authority to achieve the State and local government commitments made at 
the time of application as required bySec. 599.107 and to undertake 
the development and administration of policies, procedures and 
activities to implement and maximize the Federal, State and local 
benefits made available in the Renewal Community.



Sec.  599.507  Tax incentives utilization plan.

    (a) Preliminary plan. Within six months of designation, the CoRA 
must prepare and submit to HUD a preliminary tax incentives utilization 
plan for achieving the State and local commitments made at the time of 
application as required bySec. 599.107 and implementing and maximizing 
the Federal, State and local benefits made available in the Renewal 
Community.
    (b) Final plan. Within twelve months of designation, the CoRA must 
prepare and submit to HUD the final tax incentives utilization plan for 
achieving the State and local commitments made at the time of 
application as required bySec. 599.107 and implementing and maximizing 
the Federal, State and local benefits made available in the Renewal 
Community.
    (c) Community participation. The CoRA must ensure that the 
preliminary and final tax incentives utilizations plans are developed 
with the participation of the residents and community organizations in 
the Renewal Community.
    (d) Coordination with Consolidated Plan and Indian Housing Plan. The 
tax incentives utilization plan must include a certification that it is 
consistent with the Consolidated Plan prepared in accordance with 24 CFR 
part 91 or the Indian Housing Plan prepared in accordance with 24 CFR 
part 1000, as applicable.
    (e) HUD technical assistance. HUD will provide technical assistance 
as authorized to assist the CoRA in preparing the required tax 
incentives utilization plans.



Sec.  599.509  Modification of commitments and plans.

    The CoRA may submit requests to HUD to modify the State and local 
commitments made at the time of application as required bySec. 599.107 
and the tax incentives utilization plans required bySec. 599.505. 
Requests must provide evidence to support the proposed modifications. 
HUD will review the proposed modification for consistency with 
regulatory and statutory requirements and approve, suggest additional or 
alternate modifications or deny the request within 30 days.



Sec.  599.511  Reports and other information.

    The CoRA and the State or local governments in which the Renewal 
Community is located must submit such

[[Page 363]]

periodic reports and provide such additional information as HUD may 
require.



Sec.  599.513  Revocation of designation.

    (a) Basis for revocation. HUD may revoke the Renewal Community 
designation of an area if HUD determines that the CoRA or the State or 
local governments in which the area is located:
    (1) Have modified the boundaries of the area; or
    (2) Are not complying substantially with, or fail to make progress 
in achieving the State and local commitments made at the time of 
application as required bySec. 599.107.
    (b) Letter of warning. Before revoking the Renewal Community 
designation of an area, HUD will issue a letter of warning to the CoRa 
and the State and local governments in which the area is located, with a 
copy to all affected Federal agencies of which HUD is aware:
    (1) Advising that HUD has determined that the CoRA and/or State and/
or local governments in which the area is located have:
    (i) Modified the boundaries of the area without written approval 
from HUD; or
    (ii) Are not complying substantially with, or have failed to make 
progress in achieving the State and local commitments made at the time 
of application as required bySec. 599.107; and
    (2) Requesting a reply from the CoRa and State and local governments 
in which the area is located within 90 days of the receipt of this 
letter of warning.
    (c) Notice of revocation. To revoke the designation, HUD must issue 
a final notice of revocation of the designation of the area as a Renewal 
Community, after allowing 90 days from the date of receipt of the letter 
of warning for response, and after making a determination in accordance 
with paragraph (a) of this section.
    (d) Notice to affected Federal agencies. HUD will notify all 
affected Federal agencies of which it is aware, of its determination to 
revoke any designation in accordance with this section.
    (e) Effect of revocation. Upon revocation of a Renewal Community 
designation, the designation and applicable benefits cease to be 
available in the area.
    (f) Publication. The final notice of revocation of designation will 
be published in the Federal Register, and the revocation will be 
effective on the date of publication.



  CHAPTER VI_OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND 
DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, PARTS 600-699 
                               [RESERVED]



[[Page 365]]



                              FINDING AIDS




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

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 367]]



                    Table of CFR Titles and Chapters




                      (Revised as of April 1, 2012)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Circulars and Guidance 
                (200--299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300-- 
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)

[[Page 368]]

       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)
        II  Recovery Accountability and Transparency Board (Parts 
                200--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600-- 3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)

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    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
    LXXXII  Special Inspector General for Iraq Reconstruction 
                (Parts 9200--9299)

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     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--99)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)

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       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

[[Page 372]]

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
         X  Bureau of Consumer Financial Protection (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

[[Page 373]]

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

[[Page 374]]

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

[[Page 375]]

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)

[[Page 376]]

         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

[[Page 377]]

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)

[[Page 378]]

     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense

[[Page 379]]

       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education [Reserved]
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)

[[Page 380]]

        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

[[Page 381]]

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
    62-100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
   103-104  [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
   129-200  [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--599)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

[[Page 382]]

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899) 
                [Reserved]
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)

[[Page 383]]

     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Health and Human Services (Parts 300--399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)

[[Page 384]]

        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)

[[Page 385]]

       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 387]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of April 1, 2012)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I

[[Page 388]]

Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Bureau of Ocean Energy Management, Regulation,    30, II
     and Enforcement
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazardous Investigation       40, VI
     Board
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Court Services and Offender Supervision Agency    5, LXX
     for the District of Columbia
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Office                                  37, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
   for the District of Columbia
[[Page 389]]

Customs and Border Protection                     19, I
Defense Contract Audit Agency                     32, I
Defense Department                                2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV

[[Page 390]]

  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX

[[Page 391]]

Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A,
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 6, I; 8, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV

[[Page 392]]

Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department                               2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Bureau of Ocean Energy Management, Regulation,  30, II
       and Enforcement
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
Iraq Reconstruction, Special Inspector General    5, LXXXVII
     for
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII

[[Page 393]]

  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Office of Workers' Compensation Programs        20, VII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
  Copyright Royalty Board                         37, III
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          29, X

[[Page 394]]

National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III, IV
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Natural Resource Revenue, Office of               30, XII
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Offices of Independent Counsel                    28, VI
Office of Workers' Compensation Programs          20, VII
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Recovery Accountability and Transparency Board    4, II
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L

[[Page 395]]

Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII

[[Page 396]]

United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 397]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 
11 separate volumes.

                                  2001

24 CFR
                                                                   66 FR
                                                                    Page
Chapter V
574.310 (d)(1) and (3) revised......................................6225
    Regulation at 66 FR 6225 eff. date delayed to 4-20-01...........8174
582.310 Revised.....................................................6225
    Regulation at 66 FR 6225 eff. date delayed to 4-20-01...........8174
583.315 (a) revised.................................................6225
    Regulation at 66 FR 6225 eff. date delayed to 4-20-01...........8174
598 Heading revised; interim.......................................35855
598.1 (a) revised; interim.........................................35855
599 Added; interim.................................................35855
599.107 (a)(3) amended; interim....................................52675

                                  2002

24 CFR
                                                                   67 FR
                                                                    Page
Chapter V
570.201 (d) revised................................................47213
570.489 (l) revised................................................15112
580 Interpretation.................................................46109

                                  2003

24 CFR
                                                                   68 FR
                                                                    Page
Chapter V
570.3 Amended; interim.............................................69582
570.4 (c) introductory text and (3) introductory text revised; 
        interim....................................................69582
570.200 (j) revised................................................56404
570.307 (e)(1) amended; interim....................................69582
570.503 (b)(6) removed; (b)(7) and (8) redesignated as (b)(6) and 
        (7); new (b)(7)(ii) amended................................56405
570.607 Revised....................................................56405
572.405 (d) revised................................................56405
574.300 (c) revised................................................56405
574.510 Revised....................................................56130
576.23 Revised.....................................................56406
582.115 (c) revised................................................56407
582.230 Revised....................................................56130
583.150 (b) revised................................................56407
583.230 Revised....................................................56131
585.406 Revised....................................................56407
598 Regulation at 66 FR 35855 confirmed............................57606
598.1 Regulation at 66 FR 35855 confirmed..........................57606
599 Regulation at 66 FR 35855 confirmed............................57606

                                  2004

24 CFR
                                                                   69 FR
                                                                    Page
Chapter V
570.1 (a)(2) revised; interim......................................32778
570.3 Amended; interim.............................................32778
    Regulation at 68 FR 69582 confirmed............................70865
570.4 (a) revised; interim.........................................32778
    Regulation at 68 FR 69582 confirmed............................70865
570.200 (a)(2) and (3) introductory text revised; interim..........32778
570.206 (f) amended; interim.......................................32778
570.307 Regulation at 68 FR 69582 confirmed........................70865

[[Page 398]]

570.420--570.432 (Subpart F) Heading revised; interim..............32779
570.420 Revised; interim...........................................32779
570.422 Removed; interim...........................................32780
570.423 Removed; interim...........................................32780
570.424 Removed; interim...........................................32780
570.425 Removed; interim...........................................32780
570.428 Removed; interim...........................................32780
570.440 Added; interim.............................................32780
570.441 Added; interim.............................................32780
570.480 (e) added..................................................41718
570.704 (a)(1)(v) revised; interim.................................32781
570.705 (a)(2)(iii) introductory text revised; interim.............32782
598.408 Added......................................................34275

                                  2005

24 CFR
                                                                   70 FR
                                                                    Page
Chapter V
570.1 Regulation at 69 FR 32778 confirmed...........................8707
570.3 Regulation at 69 FR 32778 confirmed...........................8707
570.4 Regulation at 69 FR 32778 confirmed...........................8707
570.200 Regulation at 69 FR 32778 confirmed.........................8707
    570.200 (e) revised; interim...................................76369
570.206 Regulation at 69 FR 32778 confirmed.........................8707
570.210 Added; interim.............................................76369
570.420--570.432 (Subpart F) Regulation at 69 FR 32779 confirmed 
                                                                    8707
570.420 Regulation at 69 FR 32779 confirmed.........................8707
570.422 Regulation at 69 FR 32780 confirmed.........................8707
570.423 Regulation at 69 FR 32780 confirmed.........................8707
570.424 Regulation at 69 FR 32780 confirmed.........................8707
570.425 Regulation at 69 FR 32780 confirmed.........................8707
570.428 Regulation at 69 FR 32780 confirmed.........................8707
570.440 Regulation at 69 FR 32780 confirmed.........................8707
570.441 Regulation at 69 FR 32780 confirmed.........................8707
570.482 (h) added; interim.........................................76370
570.506 (c) revised; interim.......................................76370
570.704 Regulation at 69 FR 32781 confirmed.........................8707
570.705 Regulation at 69 FR 32782 confirmed.........................8707

                                  2006

24 CFR
                                                                   71 FR
                                                                    Page
Chapter V
570.200 Regulation at 70 FR 76369 confirmed........................30027
570.201 (d) revised................................................30034
570.202 (a)(3), (b)(2) and (f) revised; (b)(7)(vi) removed.........30035
570.203 Introductory text revised..................................30035
570.204 (a)(2) amended...