Regulatory Analysis

CARES Act Implementation
COSCDA continues to monitor and support state administration of CDBG, ESG, and related funds in response to the current pandemic.  More information including state-specific resources can be found on COSCDA’s COVID-19 resource page.

Recent waivers provided by HUD – Community Planning and Development in response to COVID-19:

Community Planning and Development programs were appropriated funds through the CARES Act with HUD allocating resources as follows:

  • Community Development Block Grant (CDBG) ($5 billion total) (3 Rounds)
    • $2 billion (April 2)
    • $1 billion (May 22)
    • $1.990 billion (Sep 11)
    • $10 million reserved for technical assistance
  • Emergency Solutions Grant (ESG) ($4 billion total) (2 Rounds)
    • $1 billion (April 1)
    • $2.96 billion (June 9)
    • $40 million reserved for technical assistance
  • Housing Opportunities for Persons Living with AIDS (HOPWA) ($65 million total)
    • $53.7 million (formula) (April 2)
    • $10 million (competitive) (April 2)
    • $1.3 million reserved for technical assistance

Click here for detailed allocations.

Proposed Rule on Affirmatively Furthering Fair Housing

On August 7, HUD published a rule repealing the 2015 Affirmatively Furthering Fair Housing Rule (AFFH).  Titled Preserving Neighborhood and Community Choice, the new rule returns AFFH compliance to its initial interpretation with grantees meeting certification if steps are taken to ensure fair housing.  COSCDA supports activities to ensure fair housing and will partner with HUD and other stakeholders to promote adequate state response.

COSCDA issued comments to last year’s proposed AFFH rule on March 16, 2019.  While noting the importance of access and availability of quality housing, COSCDA outlines the limited ability of states to meet HUD standards in the 2015 rule especially in comparison to entitlement jurisdictions.  With few resources, large-scale service areas,  insufficient data, and varying oversight of local governments, states cannot adequately ensure AFFH as established.  Additionally, without a state-based tool to facilitate AFFH implementation, grantees will remain ill-equipped to pursue the policy’s directives.

Environmental Review Recommendations to HUD
In spring 2019, COSCDA formed a working group to examine ways to improve HUD’s environmental review process.  The group suggested several recommendations to update administrative procedures.  Comments were developed and sent to HUD in June 2019.  COSCDA’s letter is available here.  Issues highlighted include state participation in HEROS, and application of USDA and EPA reviews and categorical exclusions to HUD-funded projects.

COSCDA has since connected with HUD Office of Environment and Energy to further explore key issues.  The working group reconvened before the end of the year to compile additional information.  Comments including specific project water and wastewater upgrade examples, were shared with HUD.  COSCDA also hosted HUD staff at the 2020 Program Managers Conference to engage on ER issues, including HUD Environmental Review Online System (HEROS) status and the proposed update of the National Environmental Policy Act (NEPA) on HUD programs.

Section 3 Final Rule
A final rule on Section 3 of the Housing and Community Development Act was published on September 29.  The rule (available here) aims to improve economic conditions for low- and very low-income persons residing in close proximity to HUD investments.  Several recommendations included in the April 4, 2019 proposed rule were upheld in the final version, including counting hours instead of new hires towards meeting Sec. 3 goals, introducing a new order of priority categories for Sec. 3 hires and businesses, and creating a new subcategory of Sec. 3 worker.

COSCDA submitted comments regarding the proposed update on May 30, 2019, and will partner with HUD moving forward to improve Section 3 compliance.  Community Planning and Development (CPD) is expected to release agency-wide guidance to facilitate policy implementation.

The Section 3 final rule establishes the following requirements:

  • The final rule applies hours instead of new hires as benchmarks for employers to meet Section 3 standards of hiring low and very low income employees.
  • HUD is establishing a $200,000 minimum project amount with an option for the agency to revise this threshold every three years.
  • A revised definition of a Section 3 worker is applied as either a low or very low-income person, or a Youthbuild participant; the Census-tract qualification is removed from consideration.
  • A Section 3 business concern is also established as those entities with over 75% of labor hours from low and very low-income persons over the last three months.
    • HUD clarifies a Public Housing Authority (PHA) resident-owned business as those entities with at least 51% of the business owned and controlled by a PHA resident.
  • HUD also updates its standard on delivering professional services; non-construction services requiring advanced degrees or professional licensing are excluded from Section 3.
  • HUD allows that for purposes of reporting the labor hours for Section 3 workers and Targeted Section 3 workers, employers may choose a worker defined as Section 3 for a five-year period at the time of a worker’s hire, or the worker can first be certified as meeting Section 3 worker definition.
  • HUD is providing a transition period for grantees and other recipients of HUD funds to comply with the new requirements by July 1, 2021.

In noting comments received to the proposed Section 3 Rule, HUD addresses statements made by COSCDA and state housing and community development agencies.  The agency states that it recognizes challenges involved in meeting Section 3 requirements in small and rural communities.  Specifically, HUD cites the ability for funding recipients to address targeted section 3 workers beyond a one-mile radius.  Recipients and contractors are instead able to identify workers through a circular range that encompasses 5,000 people.  If the benchmark cannot be addressed, HUD explains that recipients have the ability as well to share their efforts to meet the standard through qualitative details.  Guidance on qualitative reporting will be provided by HUD in the near future.  The agency also encourages grantees to collaborate with workforce development boards and training providers, and plans guidance and technical assistance promoting career and education training.

HUD and Opportunity Zones
On April 17, 2019, HUD issued a notice seeking input on the agency’s involvement in supporting Opportunity Zones.  The request for comments follows HUD Secretary Ben Carson’s appointment to chair the White House Opportunity and Revitalization Council.  The council will examine how current federal policies and regulations, or reforms therein, can facilitate further investments into distressed and underperforming areas.  Select areas have been designated as “Opportunity Zones” using a process where states identified eligible census tracts to receive investments through special tax-incentive channels known as Opportunity Funds.

Following this notice, David Woll – Acting Assistant Secretary for Community Planning and Development – released a letter asking for feedback on HUD’s potential actions and tools to facilitate development in underperforming areas.  Specifically, CPD seeks comments on the following: 1) how HUD can currently reduce administrative costs and burdens that discourage public and private investment in distressed areas, and 2) how HUD can utilize tools to make stakeholders better aware of federal programs and incentivizes available to projects in distressed areas.

COSCDA replied to the notice for comments on May 17, 2019.  As outlined in the letter here, COSCDA recommends alignment of environmental reviews across HUD programs and recognition of environmental reviews from other federal agencies.  To enhance federal assistance, COSCDA suggests utilizing existing resources across federal government, advancing peer-to-peer training, and upgrading technology including data collection systems.