CDBG Proposed Rule

On January 10, 2024, HUD published a Proposed Rule in the Federal Register which would enable much needed revisions and updates to the requirements governing the Community Development Block Grant (CDBG) and Indian CDBG (ICDBG) programs. All public comments were due by March 11, 2024. The Public Comment period has closed.

Key Information about the CDBG and ICDBG Proposed Rule
  • The CDBG Proposed Rule would revise the CDBG and related Section 108 loan guarantee program regulations to make it easier for recipients to promote economic development and economic recovery in low- and moderate-income communities, and support investments in underserved areas.  
  • This proposed rule also would revise provisions related to Consolidated Plan and citizen participation requirements for the CDBG program and institute quarterly reporting by HUD to improve performance with respect to timeliness.  
  • HUD is also proposing to make certain corresponding minor conforming changes to the ICDBG program regulations to align the ICDBG program with the revisions being made to the CDBG program regulations. Please note that HUD is currently undertaking a separate rulemaking process to revise the ICDBG regulations and is currently conducting Tribal consultation.  HUD intends to issue a separate proposed rule that will make more substantive changes to the ICDBG regulations later in 2024.
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Background

The CDBG program and its loan guarantee component, the Section 108 program, are two of the most potent federal tools for local governments to assist community and economic development. State and local governments nationwide – each state, more than 1,200 cities and counties, the District of Columbia, Puerto Rico, and four U.S. territories – rely on annual formula CDBG funds to develop meaningful projects and provide essential services that create sustainable, healthy, and prosperous communities, particularly for low- and moderate-income persons. Both programs have unique flexibilities, which allow grantees to use CDBG funds, as well as Section 108 guaranteed loan proceeds leveraged from their CDBG allocations, for projects and services that meet each community’s needs.  

However, certain limitations under the current regulations have deprived grantees of viable alternatives when developing programs that would best address their needs, and in some cases prevented communities from using CDBG funds to stimulate potentially transformative economic revitalization activities.

The insights gleaned from supplemental appropriations, such as CDBG-CV Program, informed this opportunity to update CDBG regulations to introduce pre-tested flexibilities. For example, CDBG-CV introduced flexibilities, waivers and alternative requirements for Economic Development Activities which enabled grantees to move quickly to help small businesses, particularly for underserved communities, while retaining sufficient regulatory controls to ensure program benefit is planned and delivered compliantly.

Broader Motivation
Through this proposed rule, HUD seeks to further benefit underserved communities, including historically marginalized communities of color experiencing disproportionate disinvestment and denial of economic opportunity. The changes proposed will incentivize investment in vulnerable communities, while signaling the Federal government’s willingness to support these investments. Recognizing the important role that CDBG plays in community development nationwide, HUD looks to enable state and local governments to encourage, build, and expand activities that revitalize communities.

Goals of the Proposed Rule
  • Overall, HUD seeks to improve the ability of CDBG grantees and Section 108 borrowers to implement funding more effectively and efficiently in their communities. 
  • Economic Development: The proposed changes would enhance the CDBG program’s goal of primarily benefiting low- and moderate-income persons, while removing obstacles that prevent the use of the program in targeted areas and for economic development activities.
    • The proposed changes streamline and improve mechanisms for greater flexibility of funds to flow to economically distressed communities. 
    • The changes would particularly benefit underserved communities, including historically marginalized communities of color experiencing disproportionate disinvestment and denial of economic opportunities.
  • Consolidated Plan: Changes proposed include additional methods of making the Consolidated Plan publicly accessible to persons with disabilities and provide meaningful access to persons with limited English proficiency. 
  • Timeliness: The proposed rule offers changes to the timeliness provisions to enable larger, transformational construction projects.  
  • Data Collection: The proposed rule also aims to improve data collection to measure effectiveness and improve program outcomes through more effective use of CDBG funds, while ensuring CDBG and Section 108 recipients use funds efficiently and in a timely manner to benefit their communities.
  • ICDBG: The proposed rule would make corresponding minor conforming changes to the ICDBG regulations, where appropriate, to ensure that the CDBG and ICDBG regulations continue to align.
  • Updates: The proposed rule would remove outdated provisions and make technical corrections.
Intended Impact of the Proposed Rule

The proposed rule would result in incentivizing investment in vulnerable communities, while signaling the Federal government’s willingness to support these investments. These investments would enable communities to encourage, build, and expand activities that revitalize communities.  

 

 

Content current as of March 12, 2024.