[Federal Register Volume 65, Number 225 (Tuesday, November 21, 2000)]
[Rules and Regulations]
[Pages 70214-70215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29675]
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Part IV
Department of Housing and Urban Development
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24 CFR Part 570
CDBG Program Regulations on Pre-Award Costs and New Housing
Construction; Final Rule
Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 /
Rules and Regulations
[[Page 70214]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 570
[Docket No. FR-4559-F-01]
RIN 2506-AC06
CDBG Program Regulations on Pre-Award Costs and New Housing
Construction
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Final rule.
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SUMMARY: This rule changes the Community Development Block Grant (CDBG)
program to permit a new CDBG grantee without a consolidated plan to be
reimbursed for costs for activities related to the development and
preparation of its first consolidated plan, and to permit homeownership
activities, to the extent authorized by statute, to be funded in
connection with new construction.
EFFECTIVE DATE: December 21, 2000.
FOR FURTHER INFORMATION CONTACT: Sue Miller, Entitlement Communities
Division, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410. Telephone: (202) 708-1577. (This is
not a toll-free number). Hearing-impaired or speech-impaired
individuals may access the voice telephone number listed above by
calling the Federal information relay service during working hours at
1-800-877-8339.
SUPPLEMENTARY INFORMATION: This rule makes three changes to the
regulations for the Community Development Block Grant (CDBG) program.
It permits a new CDBG grantee without a consolidated plan to incur
costs for activities related to the development and preparation of its
first consolidated plan, and to be reimbursed from CDBG funds for those
costs. The rule allows homeownership activities, to the extent
authorized by statute, to be funded in connection with new
construction. Finally, the rule makes a related technical correction by
removing the specific statutory reference for homeownership activities.
Costs for First Consolidated Plan
A CDBG grantee is allowed reimbursement from grant funds for costs
incurred prior to the effective date of the grant agreement when
certain requirements stated in the regulations are met. One of those
requirements is that the activity must be included in a consolidated
plan action plan, or an amended consolidated plan action plan, prior to
the costs being incurred. As a result, a new CDBG grantee that does not
yet have a consolidated plan cannot obtain reimbursement for costs
related to the development and preparation of its first consolidated
plan without obtaining a regulatory waiver. This outcome is an
unintended consequence of a previous rule regarding CDBG pre-award
costs (60 FR 56892, November 9, 1995). Grantees ordinarily are able to
fund their development and preparation costs for a future year's
consolidated plan by including that activity in the current year's
consolidated plan, but the 1995 change did not take into account the
special needs of new grantees. Failure to permit a new grantee to fund
these costs from CDBG funds could negatively impact the implementation
of its CDBG program and its ability to effectively carry out activities
that will benefit low- and moderate-income residents. Although HUD
could continue to address this problem through waivers, that is an
inefficient approach and one that leaves a new grantee uncertain of
funding until a waiver is granted. HUD and new grantees will benefit
from a regulations change to permit routine reimbursement for a new
grantee for its pre-award costs for development and preparation of its
first consolidated plan, and there will be no adverse effect from this
change.
Homeownership Activities for New Construction
In general, CDBG assistance is not available for new construction
activities. However, a statutory provision (discussed below) does allow
certain forms of direct homeownership assistance to low- and moderate-
income households. To date, HUD has applied a conservative
interpretation to this statutory provision that did not permit the use
of CDBG funds for homeownership assistance that directly assisted the
construction of new housing. We have reconsidered this interpretation,
in part because homeownership assistance (originally approved as an
eligible activity only for certain years) is now permanently
authorized, and because of the important role that CDBG assistance can
play in the development of new affordable housing with increased
opportunities for homeownership for low- and moderate-income persons.
HUD has concluded that neither the statutory text nor the legislative
history behind the provisions for CDBG homeownership assistance require
that the availability of homeownership assistance be affected by
whether or not the home was previously constructed. Therefore, the
regulations will now reflect this revised interpretation.
Revision to Statutory Reference
In connection with the change discussed above, we are revising the
current statutory reference for homeownership assistance that appears
in Sec. 570.201(n). It cites ``section 105(a)(25)'' of the Housing and
Community Development Act of 1974. However, due to intervening
statutory changes, a different provision regarding lead-based paint
hazard evaluation and reduction is now designated as section 105(a)(25)
and the correct citation for the homeownership assistance provision is
not completely certain. For example, the United States Code Annotated
designates the provision as 42 U.S.C. 5305(a)(24) [corresponding to a
section 105(a)(24) of the 1974 Act], but the current ``Basic Laws on
Housing and Community Development'' printed as Committee Print 106-1
for use of the House of Representatives' Committee on Banking and
Financial Services expressly states that there is no section
105(a)(24). Despite the uncertainty regarding correct citation, there
is no dispute over the fact that the homeownership assistance provision
is now permanently authorized as eligible activity for the CDBG
program. This rule thus revises the citation in Sec. 570.201(n) from
the current specific reference to section 105(a)(25) to a more general
reference to section 105(a).
Other Matters
Justification for Final Rulemaking
It is the general practice of the Department to provide a 60-day
public comment period on all rules in accordance with 24 CFR part 10.
However, a public comment procedure may be omitted under Sec. 10.1 if
the Department determines that is impracticable, unnecessary, or
contrary to the public interest. It may also be omitted for
interpretive rules. The Department has decided that public comment is
both unnecessary and contrary to the public interest regarding both the
change on pre-award costs for consolidated plan preparation and
development by first-time grantees, and eligibility for homeownership
assistance in connection with new construction. Delay is issuance of a
final rule could adversely affect first-time grantees and interfere
with the achievement of the purposes of the program, with no
corresponding public benefit because the changes are simple ones
without a substantive adverse effect on anyone. In addition, the change
regarding homeownership assistance qualifies as an interpretive rule
reflecting a revision in our interpretation of statutory limits. Public
comment regarding the third
[[Page 70215]]
change (deletion of an incorrect statutory reference) is clearly not
needed due to complete lack of substantive effect.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
for this rule has been made in accordance with HUD regulations at 24
CFR part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969. The Finding of No Significant Impact
is available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Office of the General
Counsel, Department of Housing and Urban Development, Room 10276, 451
Seventh Street, SW., Washington, DC 20410-0500.
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532)
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal governments and
the private sector. This rule does not impose a Federal mandate that
will result in the expenditure by State, local, or tribal governments,
in the aggregate, or by the private sector, or $100 million or more in
any one year.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule would not have a significant
economic impact on a substantial number of small entities. There are no
anti-competitive discriminatory aspects of the rule with regard to
small entities, and there are not any unusual procedures that would
need to be complied with by small entities.
Executive Order 13132, Federalism
This rule does not have Federalism implications and does not impose
substantial direct compliance costs on State and local governments or
preempt State law within the meaning of the Executive Order.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance program number is
14.218.
List of Subjects in 24 CFR Part 570
Administrative practice and procedure, American Samoa, Community
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Lead poisoning, Loan
programs--housing and community development, Low and moderate income
housing, New communities, Northern Mariana Islands, Pacific Islands
Trust Territory, Pockets of poverty, Puerto Rico, Reporting and
recordkeeping requirements, Small cities, Student aid, Virgin Islands.
Accordingly, the Department hereby amends 24 CFR part 570 as
follows:
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
1. The authority citation for part 570 continues to read as
follows:
Authority: 42 U.S.C. 3535(d) and 5301-5320.
2. Section 570.200 is amended by revising paragraph (h)(1)(i) to
read as follows:
Sec. 570.200 General policies.
* * * * *
(h) * * *
(1) * * *
(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 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;
* * * * *
2. Section 570.201 is amended by revising paragraph (n) to read as
follows:
Sec. 570.201 Basic eligible activities.
* * * * *
(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.
* * * * *
3. Section 570.207 is amended by revising paragraph (b)(3)(ii) to
read as follows:
Sec. 570.207 Ineligible activities.
* * * * *
(b) * * *
(3) * * *
(ii) As authorized under Sec. 570.201(m) or (n);
* * * * *
Dated: August 24, 2000.
Cardell Cooper,
Assistant Secretary for Community Planning and Development.
[FR Doc. 00-29675 Filed 11-20-00; 8:45 am]
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