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From: Ed Gramlich
email: mailto:gramliche@commchange.org
link: http://
date: 11/22/0 16:23
Date: 12/21/00
Time: 1:07:27 PM
Remote Name: 207.251.188.199
Given the recent HOPE VI use of CDBG and HOME, and given Judith Liben's experience, I decided to write up the "anti-displacement" provisions relating to the use of CDBG and HOME. As of November 22, 2000 I have only drafted the "one-for-one" replacement provisions. I still neee to write up the "relocation assistance" provisions. However, since the more immediate concerns are with the loss of affordable units, I have decided to post the "one-for-one" provisions for now. I intend to get to the other portion later in december. (If you would like a pretty Word version, I'll be glad to send you a copy.Or, it should be posted to the CCC web site soon at www.communitychange.org)
CDBG and "Displacement"
Partial First Draft, November 15, 2000
Ed Gramlich, Center for Community Change, 202.342.0567
I. BACKGROUND
The Housing and Community Development Act of 1987 improved the CDBG law by making it a little more expensive to use CDBG to reduce the stock of affordable housing for low income people and to remove them from their homes. "Section 104(d)" of the Act was improved, so the antidisplacement features are often called "the 104(d) requirements". They are also known as "the Barney Frank provisions", after the U.S. Rep. who succeeded in getting them into law.
The Committee Report of the House Banking Committee declared:
"It is particularly distressing to this Committee that a number of activities funded through CDBG have resulted in the dislocation of residents and businesses. It is not sufficient to bring productive life back to impoverished residential and commercial areas of a city if lower income residents that have struggled for years to survive in spite of adverse circumstances are neglected or harmed during the process of revitalization." [page 78, House Report 100-122]
In short, Section 104(d) requires that if CDBG (and according to later law, HOME) funds are used to demolish or convert lower income housing to some other use, then two things must happen:
1) There must be a one-for-one replacement of housing units lost (see p. 2); and,
2) Lower income people displaced must get adequate compensation (see p. 8).
There are loop holes and limitations in the law and regulations, so it is important to know just what is required and what is allowed. This paper goes into most of the important details. (In general, all remarks here also apply to the States and Small Cities CDBG program and to HOME, with only minor adjustments.)
URA, the Uniform Relocation Act, also applies to the use of CDBG and HOME. It too requires that people displaced get paid something. Generally, renters might get better compensation from the CDBG's "104(d)" provisions than from the URA provisions. People displaced can choose whichever is better for them. URA, however, does not have a requirement to replace lost housing stock. [URA is in the law at 42USC4601, and the regs at 24CFR24.]
II. IN GENERAL
Minimizing Displacement: Before getting CDBG money, a jurisdiction must have a proposed (draft) Annual Action Plan. Before that proposed Action Plan is presented for public review and comment, the jurisdiction must (among other things) give the public its plans for "minimizing displacement" due to the use of CDBG. [law, 5304(a)(2)(A); regs, 91.105(b)(1) & 42.325(b)]*
Antidisplacement Plan: Before CDBG money is received, jurisdictions must "certify" that they have and are following a "residential antidisplacement and relocation assistance plan".[law, 5304(d)(1); regs, 91.225(a)(2) & 42.325(a)(1)]
III. "ONE-FOR-ONE REPLACEMENT" OF LOST HOUSING
A. When Is "One-for-One" Replacement Required?
In the introduction to the regs [Federal Register, Vol. 55, No. 138, July 18, 1990],HUD declares that the purpose of the "one-for-one" replacement provisions is:
· "to maintain an adequate supply of housing available to lower income households." [page 29298]
· "…the maintenance of the housing stock available to lower income people" [page 29298]
· "…to ensure that activities sponsored under the CDBG Program will not result in a diminution of the existing housing supply." [page 29301]
Housing units affordable to lower income people must be replaced if they are lost because CDBG is used to either:
1. demolish them; or
2. "convert" them to something other than housing affordable to lower income people (for example housing only affordable to upper income people, or to non-housing uses, or to emergency shelter [regs, 42.305]).
[law, 5304(d)(2)(A)(i)); regs, 42.375(a)]
Key words in the law and regulations are "in connection with". So, if a housing unit is demolished or converted "in connection with an CDBG-assisted activity", the unit must be replaced. I'll go into more detail on pages 6 and 7.
*[The statutory language is at 42 USC 5304 (d). I will refer to 42 USC as "the law". The CDBG regulation is at 24 CFR 570.606(c). However, because the mayors hate this part of the law, in 1996 HUD decided to hide the "real" reg at 24 CFR 42. Also, some of the CDBG references were hidden in the ConPlan regs in 1995, at 24 CFR 91.225(a)(2).]
B. What Is Acceptable Replacement Housing?
The law and the regs spell out what is "acceptable" replacement housing:
1. Replacement housing must be a size that can house the same number of people that could have lived in the lost housing.
(For example, if a single person lived in a three bedroom house, then a three bed room replacement is called for. On the other hand, if five people were living in a one bedroom apartment, then only a one bedroom unit is required.) [law, 5304(d)(2)(A)(i); regs, 42.375(b)(2)]
· The regs say that the number of people who could have been housed shall be determined by local codes.
· The regs specifically say that smaller units can't replace larger units, in general. (For example, the regs say a 2-bedroom unit can't be replaced by two 1-bedroom units.) [regs, 42.375(b)(2)]
2. Replacement housing must remain affordable to lower income people for at least 10 years from the time it is first occupied. [law, 5304(d)(2)(A)(ii); regs, 42.375(b)(5)]
3. Replacement housing must be located in the same community.
[law, 5304(d)(2)(A)(i); regs, 42.375(b)(1)]
HUD's regs blur the intent of the law by implying that the definition of "community" is the entire jurisdiction, not the neighborhood or surrounding neighborhood. The regs, however, do throw you a bone saying that "to the extent feasible…the units shall be in the same neighborhood." [regs, 42.375(b)(1)]
4. Replacement housing must be "comparable" (See detailed discussion, page 5.) [law, 5304(d)(2)(A)(i); regs, 42.375(a)]
5. Replacement housing must be in "standard condition". [regs, 42.375(b)(3)]
C. Other Key Features
1. The "one-for-one replacement" provision applies to:
· All occupied lower income housing units, and
· All vacant "occupiable" lower income housing units.
[law, 5304(d)(2)(A)(i); regs, 42.375(a)]
· The regs define "vacant occupiable" as:
a) A vacant unit in standard condition; or,
b) A vacant unit in substandard condition, but able to be rehabbed; or,
c) A unit in any condition that has been occupied (except by a squatter) any time 3 months before the jurisdiction made an agreement to demolish or rehab the unit. (Under pressure from the mayors, HUD shrunk the time period from 12 months to 3, even though the Conference Committee Report expressly says one year. Report 100-426, page 228) [regs, 42.305]
2. The jurisdiction has up to 3 years to make replacement units available.
[regs, 42.375(b)(4)] 3. Two loop-holes:
a) The one-for-one replacement requirement does not apply if HUD finds ("based on objective data") that there is an adequate supply of "habitable" and affordable lower income housing in the area. [law, 5304(d)(3)]
The regs refine this by:
· Allowing the HUD field office to make the "objective" judgement;
· Stating the housing must be vacant and in standard condition; and,
· Stating the housing must be available on a nondiscriminatory basis.
(The regs initially contained examples of "objective data", including lower income housing vacancy rates, and public housing and Section 8 housing waiting lists. Congressional "report language" said that waiting lists must be considered. However, HUD dropped references to any examples.) [regs, 42.375.(d)(1)]
Jurisdictions must apply to the HUD field office for a waiver of the one-for-one requirements. At the same time, the jurisdiction must also show this application to the public and inform interested persons. The public only has 30 days to provide alternative information to HUD. [regs, 42.375.(d)(2)]
The law says that HUD's decision is final and not "reviewable".[law, 5304(d)(3)]
b) Replacement housing can be existing, Section 8 project-based units. [law, 5304(d)(2)(A)(i)]
The regs add public housing units to that. [regs, 42.375(5)]
D. Some More Definitions
1. Lower Income Unit: The market rent, including utilities, is less than the FMR (Fair Market Rent) set by HUD.
2. Standard Condition: The jurisdiction gets to define "standard condition". It must be stated in its ConPlan (Consolidated Plan).
3. Substandard Condition, Suitable For Rehabilitation: The jurisdiction gets to define. It must be stated in its ConPlan.
4. Comparable Replacement Unit:
a) The unit's monthly cost for rent plus utilities is less than the "Total Tenant Payment" (after adjusting for any rental assistance).
Total Tenant Payment is the highest of:
1. 30% of monthly adjusted income (described at 24CFR813.102) or
2. 10% of gross monthly income (described at 24CFR813.106) or
3. The allowance for rent/utility costs if person is receiving welfare.
[24CFR 5.628]
b) The unit meets the requirements in the URA regs at 49 CFR 24.2(d)(1) through (d)(6), which in short are:
1. Decent, safe, and sanitary [long definition at 24.2(f)];
2. Functionally equivalent to the lost unit. This means that the unit has the same "function", offers the same "utility", and can provide a "comparable living style".
3. Adequate size for the occupants.
4. In an area free from unreasonable environmental conditions.
5. In a location that is not less desirable when it comes to: access to work, public utilities, and commercial facilities.
6. The site the replacement unit is on must be a size typical for residential use, with normal "improvements" such as landscaping. (However, the site doesn't have to include swimming pools or greenhouses. Damn!)
E. Informing The Public
The regs require jurisdictions to provide basic information to the public and to HUD before signing a contract to provide CDBG funds for any activity that will directly result in demolition or conversion. The required information includes:
1. A description of the proposed activity.
2. The number of units (by size) that will be demolished or converted, and their location on a map.
3. A time schedule for beginning and completing the demolition or conversion.
4. The number of units (by size) that will be provided as replacement units, and their location on a map. (If this is not known at first, the jurisdiction must identify the general location of the replacement units, as well as give an estimate of their number and size. As soon as the jurisdiction knows specifics, it must disclose to the public the location, number, and size of replacement units.)
5. The source of funding for replacement units, and a time schedule for making them available.
6. The basis for thinking that the replacement units will remain "lower income" for at least 10 years after they are first occupied.
7. If a jurisdiction proposes to replace larger units with smaller units, it must provide information showing that this is consistent with the needs assessment in its Consolidated Plan.
[regs 42.375(c)]
F. Guidance from a HUD Handbook
HUD has a big, fat Handbook that goes into more detail about URA and Section 104(d). It is "Handbook 1378.0 CHG - 4", dealing with "Tenant Assistance, Relocation and Real Property Acquisition". Chapters 7 and 8 deal most specifically with CDBG and the Section 104(d) provisions. Most people won't need or want it. (If you do want a copy, it is on HUD's website at www.hudclips.org/sub_nonhud/… You can also call HUD to order a copy at 800.767.7468.)
The Section 104(d) obligations are triggered when units are demolished or converted "in connection with" a CDBG-assisted "project". The regs use the word "activity" instead of "project". [law, 5304(d)(2); regs, 42.375(a)]
The HUD Handbook defines the term "project" the way CDBG traditionally does:
"Project means an activity or series of activities that are integrally related, each essential to the others, whether or not all of the component activities get federal financial assistance." [Handbook, page 7-4, paragraph 7-10(a)]
"Displacement is considered to have occurred 'in connection with' a CDBG-assisted activity if the action [leading to displacement] and the CDBG-assisted activity are part of a single undertaking (that is, a single project)." [Handbook, page 7-4, paragraph 7-10 (b)]
HUD offers the following guidelines:
To figure out whether buying property, or rehabbing it, or demolishing it, or carrying out other construction activities is part of a "single undertaking", HUD will look at the extent to which the demolition or conversion AND the CDBG-assisted activity share the same:
1. Location. Are the activities on the same site? (Site is explained as any tracts that have the same or related ownership after they are
purchased.) 2. Developer or Owner. Are the activities carried out by or for a single entity or closely-related entity? 3. Timeframe. Do the individual activities take place within a reasonable time frame of each other? 4. Objective. Is the activity essential to the undertaking? Are the
activities interdependent? If one is unfinished, will the objective be incomplete? [Handbook, page 7-5, paragraph 7-10 (c)]
More Guidance in Chapter 8 of the Handbook
Chapter 8 spells out special relocation features for all of the HUD programs, including CDBG:
a) Generally, if CDBG funds are used to pay any part of the cost of buying property, or demolition, or construction, or rehabilitation for a project, then the project is subject to the one-for-one replacement obligations.
b) The one-for-one replacement obligations are triggered by the use of CDBG to pay any part of the cost of "rehabilitation activities" as described in the CDBG regs at Section 570.202(b). So, in addition to actual repair work, alterations, and additions to units, "rehab activities" includes "rehab services" such as rehab counseling, energy auditing, preparing work specs, loan processing, and property inspections.
[Handbook, page 8-6, paragraph 8-8]
Similar language pertaining to HOME can be found on page 8-20.
HUD Examples [Handbook, page 7-6]
Example 1. The city buys 14 parcels adjacent to each other in order to assemble a site to construct a new shopping mall. CDBG is used to pay for part of the cost of one parcel, while non-federal dollars are used to buy the other 13 parcels. In this case, HUD says that the purchase of the 14 parcels, the demolition of the housing on them, and the construction of the shopping mall cannot be separated -- they are "connected" to each other in a single "project". Therefore, lower income housing units on any of the 14 parcels must be replaced, and lower income people displaced from any of the 14 parcels are eligible for relocation compensation.
Example 2. The city buys and clears a site for a neighborhood center. There are six "lower income" houses [that is, houses with rents and utilities below the FMR] on the site. Four of these houses are actually occupied by lower income families. The City uses general revenues to buy the site and demolish the houses. CDBG is used to partially finance the construction of the neighborhood center. HUD says that purchasing the site, demolishing the houses, and constructing the neighborhood center make up a "single project". Therefore all six of the housing units must be replaced; but, only the four lower income households are covered by the Section 104(d) relocation compensation requirements.
Example 3. A 12-unit multifamily building is to be rehabbed. All 12 units are "lower income units". CDBG will be used to pay part of the rehab costs for five vacant units in the building; while private money will finance the rehab of the seven other units, which are occupied by lower income households. Once rehabbed, all 12 units will go for market rents, which will be greater than the FMR (and which will be greater than 30% of the incomes of the seven tenant-occupants). HUD says that the rehab of the building (all 12 units) is a "single project", so all 12 units must be replaced. Also, any lower income household that moves permanently is eligible for Section 104(d) relocation compensation.
IV. RENTAL ASSISTANCE FOR DISPLACED PEOPLE
TO BE CONTINUED....Ed