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HUD CARES Act funding and affordable housing development

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This brief was written as part of our COVID-19 Housing Response plans series. Added: December 10, 2020.

Description

The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) authorized $5 billion in Community Development Block Grant (CDBG-CV) and $4 billion in Emergency Service Grants (ESG-CV) to states and local governments to support activities that prevent, prepare for, and respond to COVID-19 pandemic. These appropriations generally conform to the existing CDBG and ESG program structures and regulations, but the CARES Act authorized a series of rule changes to allow grantees greater ease to address the pandemic.

HUD has indicated that these resources can be used to support a range of services to create permanent housing opportunities for low- and moderate-income households and those experiencing homelessness including, in certain circumstances, housing construction, acquisition, and rehabilitation activities. These activities are critical tools in addressing the immediate need of ensuring the housing stability and safety of low-income renters and those experiencing homelessness during the COVID-19 pandemic, as well as expanding the supply of permanent affordable housing and non-congregate shelter to prepare local communities for future public health emergencies.

Potential housing development activities to promote public health

  • Acquire and renovate properties for the purpose of creating new permanent supportive housing for individuals experiencing homelessness who are at risk of contracting COVID-19
  • Renovate existing congregate facilities to allow for increased social distancing and isolation
  • Renovate vacant or underutilized facilities for the purpose of housing individuals who are experiencing homelessness or at risk of experiencing homelessness due to the COVID-19 pandemic
  • Reduce housing instability by increasing the supply of deed-restricted affordable housing

Approach

HUD CARES Act resources were allocated to states and localities in three tranches (a methodology for the allocation is included here; full-year allocation totals are included here). The CDBG-CV and ESG-CV resources have distinct program guidelines and eligibility requirements. Broadly, the rules governing a grantee’s use of traditional CDBG and ESG funds apply to these CARES Act resources. However, HUD has authorized certain waivers and alternative requirements to allow grantees greater ease to address coronavirus (described below).

CDBG-CV

Key Differences between CDBG-CV and CDBG Prior to the CARES Act

  • Suspension of CDBG’s 15% cap on the use of funds for public service activities. This change applies both for the CDBG-CV allocation and the FY19 and FY20 CDBG allocation
  • Grantees can utilize CDBG-CV to reimburse COVID-19 related costs regardless of when those were incurred, including prior to the passage of the CARES Act
  • Extension of deadlines for submitting action plans
  • Increased statutory flexibility for the use of CDBG-CV and CDBG FY19 and FY20 allocations to address COVID-19
  • Further details are available here

CDBG-CV Requirements for Housing Development

For the CDBG-CV allocation, HUD has designed certain housing development, rehabilitation, and property acquisition activities as allowable if the activities are “carried out to prevent, prepare for, and respond to coronavirus,” meet a National Objective, and do not duplicate benefits. To support grantees, HUD produced a table of example eligible activities and how they could be targeted to meet CDBG-CV requirements, which includes: rehabilitation of single and multi-unit residential, construction of housing (in limited cases), public housing modernization, development of homeless facilities, and acquisition of property.

ESG-CV

Key Differences between ESG-CV and ESG Prior to the CARES Act

  • Removes the 60% cap on the use of funds for emergency shelter and street outreach activities
  • Increase of income limit from 30% to 50% area median income for homelessness prevention activities
  • Allows deviation from applicable procurement standards when procuring goods and services to prevent, prepare for, and respond to coronavirus
  • Prohibits using any funds to require people experiencing homelessness to receive treatment or perform any other prerequisite activities as a condition for receiving shelter, housing, or other services
  • No citizen participation or consultation requirements
  • No minimum period of use for emergency shelters
  • Further details are available here

ESG-CV Requirements for Housing Development

HUD documentation states that it is allowable to use ESG-CV funds for the acquisition and renovation of property to create temporary emergency shelters for individuals and families experiencing homelessness in order to prevent, prepare for, and respond to coronavirus.” Per HUD 9/1/2020 guidance, acquisition of real property (e.g. hotels, ancillary structures, parking lots) is allowable, but ESG-CV funds used for acquisition must not exceed $2.5 million per real property. Additionally, renovation (including major rehabilitation and conversion) of real property (e.g., hotels) into temporary emergency shelters is allowable. However, to use ESG or ESG-CV funds for acquisition and/or rehabilitation, a shelter must be owned by a government or nonprofit.

Stakeholder involvement

Affordable housing developers, emergency homeless shelter operators and supportive service agencies, public housing authorities, landlords/real estate industry, tenant organizations

Considerations

  • Grantees should work in partnership with local stakeholders to identify unmet needs in the community as well as specific development and acquisition opportunities.
  • Across activities, grantees must document a “tie-back” (i.e., how does this activity relate to COVID-19).
  • Across activities, it is a best practice for a grantee to communicate with HUD field staff to confirm eligibility and program requirements.
  • CDGG-CV grantees must have policies and procedures to prevent the duplication of benefits (i.e., grant funds cannot be used to pay costs if another source of financial assistance is paying that cost). There are TA tools available to grantees for preventing duplication of benefits.
  • HUD has launched a $10 million technical assistance effort to support grantees in deploying CARES Act resources. The HUD Exchange portal includes information on webinars, TA tools, FAQs, On-Call TA services, peer-to-peer TA, and national conferences.

Examples in action

The City of Chattanooga, TN used over $1 million in CDBG-CV funds for the purchase and renovation of a hotel into an emergency homeless shelter. The City will contract with a local nonprofit to manage the shelter and plans to have the facility ready for occupancy by summer 2021.

In Newark, NJ, the Newark Housing Authority utilized HUD CARES Act funds to renovate 47 vacant units owned by the housing authority for “families who were homeless at one point during COVID-19 or right now… or either families that were financially affected due to COVID-19 issues or lost their jobs due to the pandemic.” These townhome units were vacant prior to the pandemic due to infrastructure issues.

The County of San Luis Obispo released an RFP for CDBG-CV funds that includes language on how a housing development project could meet HUD requirements:

“Housing – The project adds or improves permanent residential structures that will be/are occupied by low/moderate-income households upon completion. Note: Per HUD guidance, an application involving property acquisition must describe/document how the long-term use of the property (5, 10-15+ years) will meet the CARES Act requirements and objective of preventing, preparing for and /or responding to the COVID-19 outbreak.”

Complementary policy responses

Additional resources

HUD Resources

Non-HUD resources

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