Section 1: HOME and CDBG Basics

HOME and CDBG Basics

This section is a basic primer for housing practitioners who are new to the HOME or CDBG programs. It provides a general overview of the two programs, including their statutory intents and key program partners. For each program, the section describes basic eligible activities and highlights important administrative requirements. The subsequent sections provide more detail on each of the eligible affordable housing activities. This section concludes with a detailed chart that compares the key requirements of the two programs.

Part 1: HOME Investment Partnerships (HOME) Program

What is HOME?

Created by the National Affordable Housing Act of 1990 (NAHA), HOME is the largest Federal block grant available to communities to create affordable housing. The intent of the HOME Program is to:

• Increase the supply of decent, affordable housing to low- and very low-income households;
• Expand the capacity of nonprofit housing providers;
• Strengthen the ability of state and local governments to provide housing; and
• Leverage private sector participation.

Every year, the U.S. Department of Housing and Urban Development (HUD) determines the amount of HOME funds that states and local governments—also known as Participating Jurisdictions (PJs)—are eligible to receive using a formula designed to reflect relative housing need. After money has been set aside for America’s insular areasi and for nationwide HUD technical assistance, the remaining funds are divided between states (40 percent) and units of general local government (60 percent).

The HOME Program regulations are found at 24 CFR Part 92. The Final Rule was published on September 16, 1996 and was amended on March 30, 2004 to include ADDI. The HOME regulations may be found on HUD’s Office of Affordable Housing Programs website at: https://www.hud.gov/offices/cpd/affordablehousing/ lawsandregs/regs/home/index.cfm

HOME Program Partners

To ensure success in providing affordable housing opportunities, the HOME Program requires PJs to establish new partnerships and maintain existing partnerships. Partners play different roles at different times, depending upon the project or activity being undertaken with HOME funds. Key program partners include:

- PJs. A PJ is any state, local government, or consortium that has been designated by HUD to administer a HOME program.

      - State governments: States are given broad discretion in administering HOME funds. They may allocate funds to units of local government directly, evaluate and fund projects themselves, or combine the two approaches. States may also fund projects jointly with local PJs. They may use HOME funds anywhere within the state, including within the boundaries of local PJs.

      - Local governments and consortia: Units of general local government, including cities, towns, townships, and parishes, may receive PJ designation or they may be allocated funds by the state. Contiguous units of local government may form a consortium for the purpose of qualifying for a direct allocation of HOME funds. The local government or consortium then administers the funds for eligible HOME uses.

- Community Housing Development Organizations (CHDOs). A CHDO is a private, nonprofit organization that meets a series of qualifications prescribed in the HOME regulations. Each PJ must use a minimum of 15 percent of its annual allocation for housing that is owned, developed, or sponsored by CHDOs. PJs evaluateorganizations’ qualifications and designate them as CHDOs. CHDOs also may be involved in the program as subrecipients, but the use of HOME funds in this capacity is not counted towards the 15 percent set-aside.

- Subrecipients. A subrecipient is a public agency or nonprofit organization selected by a PJ to administer all or a portion of its HOME program. It may or may not also qualify as a CHDO. A public agency or nonprofit organization that receives HOME funds solely as a developer or owner of housing in not considered a subrecipient.

Other important partners in the HOME Program include:

- Developers, owners and sponsors. Developers, owners, and sponsors of housing developed with HOME funds may be for-profit or nonprofit entities. Developers are the entities responsible for the putting the housing deal together. Owners are the entities that hold title to the property after rehabilitation, construction, or acquisition. Sponsors work with other organizations—such as other nonprofits—to assist them to develop and

own housing. At project completion, they turn over title to the property to the other organization.

- Private lenders. Most HOME projects leverage or involve other financing, from for-profit lenders or other entities such as foundations or community groups.

- Third-party contractors. There is a range of other entities that might work on the HOME Program, such as architects, planners, construction managers, real estate agents, or consultants. These third-party contractors are responsible for specific, well-defined tasks that contribute to the PJ’s overall affordable housing activity, such as consolidated planning.

HOME Program Activities

• Homebuyer activities. PJs may finance the acquisition and/or rehabilitation, or new construction of homes for homebuyers.
• Rental housing. Affordable rental housing may be acquired and/or rehabilitated, or constructed.
• Tenant-based rental assistance (TBRA). Financial assistance for rent, security deposits and, under certain conditions, utility deposits may be provided to tenants. Assistance for utility deposits may only be provided in conjunction with a TBRA security deposit or monthly rental assistance program.

Eligible Costs

Eligible costs under the HOME Program depend on the nature of the program activity. Generally, HOME funds can be used for the following activities:

• New construction. HOME funds may be used for new construction of both rental and ownership housing. Any project that includes the addition of dwelling units outside the existing walls of a structure is considered new construction.
• Rehabilitation. This includes the alteration, improvement, or modification of an existing structure. It also includes moving an existing structure to a foundation constructed with HOME funds. Rehabilitation may include adding rooms outside the existing walls of a structure, but adding a housing unit is considered new construction.
• Reconstruction. This refers to rebuilding a structure on the same lot where housing is standing at the time of project commitment. HOME funds may be used to build a new foundation or repair an existing foundation. Reconstruction also includes replacing a substandard manufactured house with a new manufactured house. During reconstruction, the number of rooms per unit may change, but the number of units may not.

HOME funds can be used to support four general affordable housing activities:

• Homeowner rehabilitation. HOME funds may be used to assist existing owner-occupants with the repair, rehabilitation, or reconstruction of their homes.
• Conversion. Conversion of an existing structure from another use to affordable residential housing is usually classified as rehabilitation. If conversion involves additional units beyond the walls of an existing structure, the entire project is new construction. Conversion of a structure to commercial use is not eligible under HOME.
• Site improvements. Site improvements must be in keeping with improvements to surrounding standard projects. They include new, on-site improvements where none are present or the repair of existing infrastructure when it is essential to the development. Building new, off-site utility connections to an adjacent street is also eligible. Otherwise, off-site infrastructure is not eligible as a HOME expense, but may be eligible for match credit.
• Acquisition of property. Acquisition of existing standard property, or substandard property in need of rehabilitation, is eligible as part of either a homebuyer program or a rental housing project. After acquisition, rental units must meet HOME rental occupancy, affordability, and lease requirements.
• Capitalization of project reserves. HOME funds may be used to fund an operating deficit reserve for rental new construction and rehabilitation projects for the initial rent-up period. The reserve may be used to pay for project operating expenses, scheduled payments to a replacement reserve, and debt service for a period of up to 18 months.
• Project-related soft costs. These must be reasonable and necessary. Examples of eligible project soft costs include:
1. Finance-related costs;
2. Architectural, engineering, and related professional services;
3. Tenant and homebuyer counseling, provided the recipient of counseling ultimately becomes the tenant or owner of a HOME-assisted unit;
4. Project audit costs;
5. Affirmative marketing and fair housing services to prospective tenants or owners of an assisted project; and
6. PJ staff costs directly related to projects (not including TBRA).
• Acquisition of vacant land. HOME funds may be used for acquisition of vacant land only if construction will begin on a HOME project within 12 months of purchase. Land banking is prohibited.
• Demolition. Demolition of an existing structure may be funded through HOME only if construction will begin on the HOME project within 12 months.
• Relocation costs. The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (known as the “Uniform Relocation Act” or “URA”) and Section 104(d) of the Housing and Community Development Act of 1974, as amended (known as “Section 104(d)”) apply to HOME-assisted properties. Both permanent and temporary relocation assistance are eligible costs, for all those relocated, regardless of income. Staff and overhead costs associated with relocation assistance are also eligible. Note that homeownership undertaken with FY04 –FY07 American Dream Downpayment Initiative (ADDI) funds is not subject to the URA.
• Refinancing. HOME funds may be used to refinance existing debt on single family, owner-occupied properties in connection with HOME-funded rehabilitation. The refinancing must be necessary to reduce the owner’s overall housing costs and make the housing more affordable. Refinancing for the purpose of taking out equity is not permitted. HOME may be used to refinance existing debt on multifamily projects being rehabilitated with HOME funds, if refinancing is necessary to permit or continue long-term affordability, and is consistent with PJ-established refinancing guidelines, as outlined in the PJ’s consolidated plan.

Prohibited Activities and Costs

HOME funds may not be used to support the following activities and costs:

• Project reserve accounts. HOME funds may not be used to provide project reserve accounts (except for initial operating deficit reserves) or to pay for operating subsidies.
• Tenant-based rental assistance for certain purposes. HOME funds may not be used for certain mandated existing Housing Choice Voucher Program (formerly known as Section 8) uses, such as Housing Choice Voucher rent subsidies for troubled HUD-insured projects.
• Match for other Federal programs. HOME Program funds may not be used as the “nonfederal” match for other Federal programs except to match McKinney Act funds.
• Development, operations, or modernization of public housing:
1. HOME funds cannot be used alone or in conjunction with HUD-funded public housing program funds (e.g., Public Housing capital programs such as Development, Comprehensive Improvements Assistance Program (CIAP) or Comprehensive Grant Program (CGP)) to acquire, rehabilitate, or construct public housing units.
2. HOME funds cannot be used to operate public housing units under any circumstances.
• Properties receiving assistance under 24 CFR Part 248 (Prepayment of Low-Income Housing Mortgages). Properties receiving assistance through the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) or the Emergency Low-Income Preservation Act (ELIHPA) are not eligible for HOME assistance except if the HOME assistance is provided to priority purchasers. Note: these programs are no longer funded by HUD.
• Double-dipping. During the first year after project completion, the PJ may commit additional funds to a project. After the first year, no additional HOME funds may be provided to a HOME-assisted project during the relevant period of affordability, except that:
1. Tenant based rental assistance to families may be renewed.
2. Tenant based rental assistance may be provided to families that will occupy housing previously assisted with HOME funds.
3. A homebuyer may be assisted with HOME funds to acquire a unit that was previously assisted with HOME funds.
• Acquisition of PJ-owned property. A PJ may not use HOME Program funds to reimburse itself for property in its inventory or property purchased for another purpose. However, in anticipation of a HOME project, a PJ may use HOME funds to:
1. Acquire property; and
2. Reimburse itself for property acquired with other funds, specifically for a HOME project.
• Project-based rental assistance. HOME funds may not be used for rental assistance if receipt of funds is tied to occupancy in a particular project. Funds from another source, such as Housing Choice Voucher, may be used for this type of project-based assistance in a HOME-assisted unit. Further, HOME funds may be used for other eligible costs, such as rehabilitation, in units receiving project-based assistance from another source—for example, Housing Choice Voucher or state-funded project-based assistance.
• Pay for delinquent taxes, fees, or charges. HOME funds may not be used to pay delinquent taxes, fees, or charges on properties to be assisted with HOME funds.

HOME Program Requirements

The HOME Program is designed to provide affordable housing to low-income and very low-income families and individuals. Therefore, the program has some key restrictions that are designed to foster HUD’s commitment to long-term affordable housing, quality units and reasonable costs. These key restrictions are discussed below.

Income Eligibility and Verification

Beneficiaries of HOME funds—homebuyers, homeowners or tenants—must be low-income or very low-income. “Low-income” is defined as an annual income that does not exceed 80 percent of area median income, as adjusted by household size. “Very low-income” is defined as having an annual income that does not exceed 50 percent of area median income, as adjusted by household size. A household’s income eligibility is determined based on its annual income. Annual income is the gross amount of income anticipated by all adults in the household during the 12 months following the effective date of the determination. To calculate annual income, the PJ may choose among three definitions of income:

• Section 8 annual (gross) income. Annual income determinations are based on the Part 5 definition of annual income. Note that this definition is now known as Part 5.
• IRS adjusted gross income. The calculation for “adjusted gross income” outlined in the Federal income tax IRS Form 1040.
• Census long form annual income. Annual income is defined as annual income used for the Census long form, for the most recent decennial Census.

Having the flexibility to choose the definition of income facilitates the combination of HOME with other funds, from sources that use differing definitions of income. The PJ’s choice of definition may depend on the other sources of funds in a project. For example:

• The Community Development Block Grant (CDBG) Program allows the same three definitions of income; therefore, projects with both sources should use the same definition.
• The Low Income Housing Tax Credit (LIHTC) Program requires the use of the Part 5 definition of income; therefore, projects that use both HOME and LIHTCs can use the Part 5 definition and comply with the requirements of both programs.

Subsidy Limits

HOME establishes minimum and maximum amounts of HOME funds that may be invested in any project. The minimum amount of HOME funds is $1,000 multiplied by the number of HOME-assisted units in the project. The minimum only relates to the HOME funds, and not to any other funds that might be used for project costs. The minimum HOME investment does not apply to TBRA.

The maximum per-unit HOME subsidy limit varies by PJ. HUD determines the maximum amounts, which are based on the PJ’s Section 221(d)(3) program limits for the metropolitan area, each year. As above, those limits apply only to HOME funds and not other funds that may be invested in the project. These limits are available from the HUD Field Office, or information can be found online at https://www.hud.gov/offices/cpd/affordablehousing/programs/ home/limits/subsidylimits.cfm.

The maximum per-unit subsidy limit is:

• 100 percent of the dollar limits for a Section 221(d)(3) nonprofit sponsor, elevator-type development, indexed for base city high cost areas, and adjusted for the number of bedrooms.
• For some PJs, the 221(d)(3) limit has already been increased to 210 percent of the base limit. For these PJs, HUD will allow, upon request, an increase in the per-unit subsidy amount on a program-wide basis. However, the absolute maximum subsidy limit that HUD will allow is 240 percent of the base 221(d)(3) limits.

Affordability Periods

To ensure that HOME investments yield affordable housing over the long term, HOME imposes rent and occupancy requirements over the length of an affordability period. For homebuyer and rental projects, the length of the affordability period depends on the amount of HOME assistance to the project or buyer, and the nature of the activity funded. Table 1-1 provides the affordability periods.

Table 1-1: Determining the HOME Period of Affordability

HOME Assistance per Unit or Buyer	Length of the Affordability Period
Less than $15,000	5 years
$15,000 - $40,000	10 years
More than $40,000	15 years
New construction of rental housing	20 years
Refinancing of rental housing	15 years




Throughout the affordability period, income-eligible households must occupy the HOME-assisted housing.

• Rental housing. When units become vacant during the affordability period, subsequent tenants must be income eligible and must be charged the applicable HOME rent.
• Homebuyer assistance. If a home purchased with HOME assistance is sold during the affordability period, resale or recapture provisions apply to ensure the continued provision of affordable homeownership.

Maximum Value

HOME investments are for modest housing. Thus, HOME imposes maximum value limits on owner occupied and homebuyer units. The maximum purchase price may not exceed 95 percent of the median purchase price of homes purchased in the area. In the case of a purchase-rehabilitation project, the value of the property after rehabilitation may not exceed 95 percent of the area median purchase price for that type of housing. The after-rehabilitation value estimate should be completed prior to investment of HOME funds.

There are two options that PJs have for determining the 95 percent of the median purchase price. Most PJs opt to use the FHA Section 203(b) Mortgage Limits. These limits are available online at https://www.hud.gov/offices/cpd/affordablehousing/programs/ home/limits/maxprice.cfm.

PJs also have the option of conducting a specialized market analysis that meets certain requirements established by HUD. (These can be found in the HOME Final Rule at 24 CFR 92.254 (a)(2)(iii).)

Property Standards

HOME-funded properties must meet certain minimum property standards.

• State and local standards. State and local codes and ordinances apply to any HOME-funded project regardless of whether the project involves acquisition, rehabilitation, or new construction.
• Model codes. For rehabilitation or new construction projects where there are not state or local building codes, the PJ must use one of three national model codes.ii
• Housing quality standards. For acquisition-only projects, if there are no state or local codes or standards, the PJ must enforce Housing Choice Voucher Housing Quality Standards (previously Section 8 HQS).
• Rehabilitation standards. Each PJ must develop written rehabilitation standards to apply to all HOME-funded rehabilitation work. These standards are similar to work specifications, and generally describe the methods and materials to be used when performing rehabilitation activities.

HOME Administrative Requirements

Administrative and Planning Costs

Each PJ may use up to 10 percent of each year’s HOME allocation for reasonable administrative and planning costs. In addition, up to 10 percent of program income deposited in a PJ’s local HOME account during a program year may be used for administrative and planning costs. PJs, state recipients and subrecipients may incur administrative and planning costs.

Eligible administrative and planning costs include expenditures for salaries, wages, and related costs of PJ staff persons responsible for HOME Program administration. In addition to staff salaries and related costs, other planning and administrative costs could include:

• Goods and services necessary for administration (for example, utilities, office supplies, etc.);
• Administrative services under third party agreements (for example, legal services);
• Administering a tenant-based rental assistance (TBRA) program;
• Providing public information;
• Fair housing activities;
• Indirect costs under a cost allocation plan prepared in accordance with applicable Office of Management and Budget (OMB) Circular requirements;
• Preparation of the Consolidated Plan; and
• Complying with other Federal requirements.

Match

The HOME Program requires that PJs contribute an amount equal to no less than 25 percent of the total HOME funds drawn down for project costs as a permanent contribution to affordable housing. PJs incur a match obligation only for project funds, not for administrative, operating, or capacity building expenditures. Although the obligation is incurred based on per dollar expended in project, match credit can be invested in any HOME-eligible project, whether the project receives HOME funds or not. Match can be contributed in many different forms, including cash; value of waived taxes or fees; value of donated land or property; donated goods, services, materials or equipment.

Commitment and Expenditure Deadlines

The HOME Program encourages PJs to expend their affordable housing funds expeditiously by imposing two deadlines. HOME funds for a given program year must be committed to a HOME project within two years of signing the HOME Investment Partnerships Agreement. For the CHDO set-aside funds, PJs must reserve funds for use by CHDOs within that 24-month period. In addition, HOME funds must be expended within five years of receipt of funds. The Integrated Disbursement and Information System (IDIS) tracks each PJ’s progress toward meeting these deadlines. Failure to meet these deadlines may result in a return of HOME funds to HUD.

Program Income

Program income is the income received by a PJ, state recipient, or subrecipient directly generated from the use of HOME funds or matching contributions. Program income must follow all of the HOME rules and must be used before drawing down new HOME funds. Program income includes, but is not limited to:

• Proceeds from the sale or long-term lease of real property acquired, rehabilitated, or constructed with HOME funds or matching contributions;
• Income from the use or rental of real property owned by a PJ, state recipient or subrecipient that was acquired, rehabilitated, or constructed with HOME funds or matching contributions, minus the costs incidental to generating that income;
• Payments of principal and interest on loans made  with HOME or matching funds, and proceeds from the sale of loans or obligations secured by loans made with HOME or matching contributions;
• Interest on program income; and
• Any other interest or return on the investment of HOME and matching funds.

All HOME program income must be used in accordance with the HOME Program rules. Where program income is concerned, there is an important distinction between subrecipients/state recipients and CHDOs. Specifically:

• Program income received by subrecipients or state recipients, such as rental income, repayment of loans, interest on loans, fees, and payments for services, is considered program income subject to HOME regulations.
• However, project proceeds received and retained by CHDOs are not considered program income. PJs have the option of permitting project proceeds to be retained by CHDOs or they may require CHDOs to return these proceeds to the PJ. If the project proceeds are returned to the PJ, they are program income. Use of funds must be specified in the CHDO written agreement and limited to either HOME-eligible activities or other housing activities that benefit low-income families.

Pre-Award Costs

PJs may incur eligible costs prior to the effective date of their annual HOME Investment Partnerships Agreement, subject to certain conditions. Both administrative and project costs may be incurred. Only costs eligible under the HOME Program rules in effect at the time the costs are incurred are included. Expenditures must meet all regulatory requirements, including environmental review regulations.

Pre-award project costs may not exceed 25 percent of the current HOME grant without written approval from HUD. PJs may authorize subrecipients and state recipients to incur pre-award costs, but authorization must be in writing. Citizen participation and all other applicable HOME requirements must be met.

What is CDBG?

Authorized under Title I of the Housing and Community Development Act of 1974 (HCDA), as amended, the Community Development Block Grant (CDBG) is an annual grant to localities and states to assist in the development of viable communities. These viable communities are achieved by providing the following, principally for persons of low- and moderate-income:

• Decent housing;
• A suitable living environment; and
• Expanded economic opportunities.

“Principally” means that, at a minimum, 70 percent of the CDBG funds expended by a state or entitlement grantee should be used to benefit low- and moderate-income people. This 70 percent can be measured over the course of a one-, two- or three-year time period, selected by the grantee.

Every year, each city in a metropolitan area with at least 50,000 people, principal cities (designated by OMB) of metropolitan areas, and each county with more than 200,000 in population (excluding metropolitan cities therein) receive CDBG funds. These cities and urban counties are called “entitlement grantees”—they are entitled to CDBG by virtue of their size. Each state also receives a CDBG grant. The CDBG grant amounts are determined by the higher of two formulas:

• U.S. Census data based on overcrowded housing, population, and poverty; or
• U.S. Census data based on age of housing, population growth lag, and poverty.

Entitlement communities receive the largest portion of CDBG funding (70 percent) and states receive the other 30 percent. Each state receives CDBG to pass along to its smaller towns and rural counties (non-entitlement communities), which usually compete with one another for the funds. Every state has its own procedures for operating the CDBG Program.

The CDBG regulations can be found at 24 CFR Part 570. Information about the Entitlement Program and its regulations are found at: https://www.hud.gov/offices/cpd/communitydevelopment/programs/entitlement/index.cfm.

Under the State CDBG Program, states follow the HCDA as supplemented by the State CDBG regulations, as applicable. In exercising its obligation to review a state’s performance under the program, HUD gives maximum feasible deference to the state’s interpretation of these statutory and regulatory requirements. HUD will accept the state’s interpretations, provided these are not clearly inconsistent with the Act or the regulation.

Information about the State CDBG Program and its regulations can be found at the following website: https://www.hud.gov/offices/cpd/ communitydevelopment/ programs/stateadmin/index.cfm.

CDBG Program Partners

The CDBG Program relies primarily on several key partners to plan and implement eligible program activities. These partners include:

• CDBG Grantee. In the Entitlement Program, local governments are known as grantees. In the State CDBG Program, the state is the grantee.
• Unit of General Local Government (UGLG). In the State CDBG program, a unit of general local government is the community funded by the state to undertake CDBG activities. It is always a local government such as a town, county, or village. In the State CDBG Program, these are often referred to as state grant recipients.
• Subrecipient. A subrecipient is a nonprofit or public entity that assists the grantee to implement and administer all or part of its CDBG Program. Subrecipients are generally public or private nonprofit organizations that assist the grantee to undertake a series of activities, such as administering a home rehabilitation loan pool. Public agencies that are not a part of the grantee’s legal government entity can also be subrecipients, such as a water and sewer authority.
• Community-Based Development Organization (CBDO). CBDOs are organizations that undertake

CDBG-funded activities as part of a neighborhood revitalization, energy conservation, or community economic development project. CBDOs can be nonprofit or some for-profit organizations, but cannot be government entities. Note that the State CDBG Program has a somewhat more broad definition of the organizations that may qualify to do these activities and it generally calls these organizations “nonprofit development organizations working under Section 105(a)(15) of the statute”. This guide will generally call these types of organizations CBDOs but states are encouraged to review the Guide to National Objectives and Eligible Activities for State CDBG Programs for additional information. This guide is available on the HUD website at https://www.HUD.gov/offices/cpd/communitydevelopment/ library/stateguide/index.cfm.

• Contractor. A contractor is an entity paid with CDBG funds in return for a specific service (for example, construction). Contractors must be selected through a competitive procurement process.

CDBG Program Activities

There is a wide range of more than twenty activities that are eligible under the CDBG Program. Grantees are free to select those activities that best meet the needs of their communities. However, in order to ensure that the primary objective of the CDBG Program is met—the benefit to low- and moderate-income persons—grantees must ensure that all activities meet a national objective. It is important for grantees to remember that activities must meet this “two-prong test”—activities must be both eligible and meet a national objective.

Described below are the types of eligible and ineligible CDBG activities. These activities have been very loosely grouped into general categories since this guidebook focuses specifically on eligible and ineligible housing-related activities.

Eligible CDBG Activities

This section lists basic eligible activities under the CDBG Program. Generally, CDBG funds can be used for the following types of activities:

• Activities related to housing, including but not limited to:
• Homeownership assistance;
• Rental rehabilitation activities;
• Homeowner rehabilitation activities;
• Housing services in connection with the HOME Program; and
• Lead-based paint testing and abatement.
• Other real property activities such as:
• Acquisition;
• Disposition;
• Clearance and demolition;
• Code enforcement; and
• Historic preservation.
• Public facilities, including infrastructure, special needs facilities, or community facilities.
• Activities related to economic development, including microenterprise assistance, commercial rehabilitation, and special economic development activities.
• Activities related to public services, including but not limited to:
• Job training and employment services;
• Health care and substance abuse services;
• Child care;
• Crime prevention; and
• Fair housing counseling.
• Assistance to CBDOs—CDBG grantees may provide grants or loans to CBDOs to carry out CDBG-assisted activities as part of the following types of projects:
• Neighborhood revitalization;
• Community economic development; and
• Energy conservation.
• Other Types of Activities—Certain other types of activities are also eligible under CDBG, including:
• Payment of non-Federal share of Federal grant-in-aid programs for activities that are CDBG-eligible activities;
• Relocation assistance;
• Loss of rental income (related to relocation);
• Technical assistance to public or private nonprofit entities to increase the capacity of such entities to carry out eligible neighborhood revitalization, or economic development activities; and
• Assistance to institutions of higher education with the capacity to carry out CDBG-eligible activities.

Ineligible CDBG Activities

In general, any activity that is not specifically authorized under the CDBG regulations and statute is ineligible. In addition, the regulations stipulate that the following activities may not be assisted with CDBG funds:

• Buildings for the general conduct of government (e.g., city hall);
• General government expenses; and
• Political activities.

The following activities may not be assisted with CDBG funds unless authorized as a special economic development activity or when carried out by a CBDO:

• Purchase of construction equipment or furnishings and personal property;
• Operating and maintenance expenses (of public facilities, improvements, and services), except for operating and maintenance expenses associated with public service activities, interim assistance, and office space for program staff employed in carrying out the CDBG Program;
• New housing construction, except under certain conditions or when carried out by a CBDO; and
• Income payments.

CDBG National Objectives

CDBG grantees are responsible for ensuring that each eligible activity meets one of three national objectives:

• Benefit low- and moderate-income persons;

• Aid in the prevention or elimination of slums or blight; and

• Meet a need having a particular urgency (referred to as urgent need) that the grantee is unable to finance on its own.

  Grantees must be able to show that every CDBG-funded activity fits into one of these categories. The chart below graphically demonstrates the CDBG national objectives.

  Benefit Low- and Moderate-Income Persons

  Under this national objective, CDBG-assisted activities must benefit low- and moderate-income persons using one of the following categories:

  • Area benefit activities;
    • Illiterate adults;

    • Persons living with AIDS; and

    • Migrant farm workers.

  • Require documentation on household size and income in order to show that at least 51 percent of the clientele are low- and moderate-income.

  • Limited clientele activities;

  • Housing activities; or

  • Job creation or retention activities.

  A moderate-income person is one whose gross annual income is at or below 80 percent of the area median income, as determined by HUD. A low-income person is one whose income is at or below 50 percent of the area median income.

  Area Benefit. Area benefit is the most commonly used category for community-wide activities. To qualify under area benefit, an activity must benefit all residents in a particular area (i.e., the service area) where at least 51 percent of the residents are low- and moderate-income persons. The service area must be primarily residential and the activity must meet the identified needs of low- and moderate-income persons.

  Street improvements, water and sewer lines, neighborhood facilities, and façade improvements in a commercial district that serves a low- and moderate-income neighborhood are all examples of activities that have an area benefit.

  Limited Clientele. Limited clientele activities benefit a limited number of people and are eligible, as long as at least 51 percent of those served are low- and moderate-income persons. The grantee must do one of the following to demonstrate a benefit to a limited clientele:

  • Be designed to exclusively serve one or more groups of clientele that are presumed to be principally low- and moderate-income:
    • Abused children;

    • Battered spouses;
    • Elderly persons;
    • Adults meeting the U.S. Census definition of severely disabled;
    • Homeless persons;
  • Have income eligibility requirements limiting the activity to low- and moderate-income persons only.
  • Provide the benefit that is of such a nature and in such a location that it can be concluded that clients are primarily low- and moderate-income.

  In addition, the following activities may qualify under the limited clientele national objective:

  • Removal of architectural barriers to mobility for elderly persons or severely disabled adults;
  • Microenterprise activities carried out in accordance with the HUD regulations when the person owning or developing the microenterprise is low- or moderate-income; or
  • Activities that provide training and other employment support services when the percentage of persons assisted is less than 51 percent low- and moderate-income:
  • If the proportion of total cost borne by CDBG is no greater than the proportion of low- and moderate-income persons assisted; and
  • When the service assists businesses, CDBG is only used in the project to pay for the job training and/or supportive services.

  Examples of limited clientele activities include construction of a senior center; public services for the homeless; meals on wheels for the elderly; and construction of job training facilities for the disabled.

  Housing Activities. This is an eligible activity undertaken for the purpose of providing or improving permanent residential structures that, upon completion, will be occupied by low- and moderate-income households. Structures with one unit must be occupied by a low- and moderate-income household. Two-unit structures must have at least one unit occupied by a low- and moderate-income household. In structures with three or more units, low- and moderate-income households must occupy at least 51 percent of the units.

  Under the following limited circumstances, structures with less than 51 percent low- and moderate-income households may be assisted:

  • Assistance is for an eligible activity that reduces the development cost of new construction of non-elderly, multifamily rental housing project; and
  • At least 20 percent of the units will be occupied by low- and moderate-income households at an affordable rent; and
  • The proportion of cost borne by CDBG funds is no greater than the proportion to be occupied by low-and moderate-income households.

  Examples of housing activities include acquisition; downpayment assistance to a homebuyer; and assistance to owners to rehabilitate their homes. Note that housing assistance activities (such as rehabilitation or homebuyer assistance) may not be categorized under any other low- and moderate-income national objective other than the housing national objective. Thus, housing activities cannot be documented under the Area Benefit, Limited Clientele or Job Creation/Retention national objectives.

  Job Creation or Retention Activities. These are eligible activities designed to create or retain permanent jobs, at least 51 percent of which (computed on a full-time equivalent basis) will be made available to, or held by, low- and moderate-income persons.

  Potentially eligible activities include construction by the grantee of a business incubator; loans to pay for the expansion of a plant or factory; and assistance to a business to prevent closure and a resultant loss of jobs for low- and moderate-income persons.

  Elimination of Slum and Blight

  These are activities that help to prevent or eliminate slums and blighted conditions. The activities must meet the criteria of one of the three following categories:

  • Prevent or eliminate slums and blight on an area basis;
  • Prevent or eliminate slum and blight on a spot basis; or
  • Be in an urban renewal area (entitlements only).

  Area Slum/Blight. These activities aid in the prevention or elimination of slums or blight in a designated area. Specifically:

  • The delineated area in which the activity occurs must meet a definition of a slum, blighted, deteriorated, or deteriorating area under state or local law;
  • In addition, there must be a substantial number of deteriorated or deteriorating buildings or public improvements in the area, and the activity must address one or more of the conditions that contributed to the deterioration of the area; and
  • Documentation must be maintained by the grantee on the boundaries of the area and the conditions that qualified the area at the time of its designation.

  Examples of area slum/blight activities might include assistance to commercial or industrial businesses, housing rehabilitation for non low and moderate income persons, public facilities or improvements, and code enforcement when these activities are conducted in a blighted area.

  Spot Slum/Blight. These are activities that eliminate specific conditions of blight or physical decay on a spot basis not located in a designated slum or blighted area. In addition:

  • Only acquisition, clearance, relocation, historic preservation, and building rehabilitation activities qualify for this national objective; and
  • Rehabilitation is limited to the extent necessary to eliminate specific conditions detrimental to public health and safety.

  Examples of spot basis include elimination of faulty wiring, falling plaster or other similar conditions that are detrimental to all potential occupants; historic preservation of a public facility; and demolition of a vacant, deteriorated building.

  Urban Renewal Area. These are activities located within an Urban Renewal project area or Neighborhood Development Program action area that are necessary to complete an Urban Renewal Plan, pursuant to Title I of the Housing Act of 1949. A copy of the Urban Renewal Plan in effect at the time the CDBG activity is carried out, including maps and supporting documentation, must be maintained for recordkeeping purposes. Note that this national objective is not applicable to the State CDBG Program.

  Urgent Need

  Use of this category is rare. It is designated only for activities that alleviate emergency conditions. Urgent need activities must meet the following qualifying criteria:

  • The existing conditions must pose a serious and immediate threat to the health or welfare of the community; and
  • The existing conditions must be of recent origin, or must have recently become urgent (generally within the past 18 months); and
  • The grantee is unable to finance the activity on its own; and
  • Other sources of funding are not available.

  An example of urgent need may be when a coastal city is struck by a major hurricane and does not have any other resources to demolish severely damaged structures that pose a danger to occupants of neighboring structures.

  For more information on CDBG national objectives and activity eligibility

  Two HUD publications provide excellent guidance on issues of activity eligibility and meeting national objectives.

  • For states, see Guide to National Objectives and Eligible Activities for State CDBG Programs, available online at https://www.hud.gov/offices/cpd/communitydevelopment/library/ stateguide/index.cfm
  • For entitlement communities, see Community Development Block Grant Program Guide to National Objectives and Eligible Activities for Entitlement Communities, available online at https://www.hud.gov/offices/cpd/communitydevelopment/library/ deskguid.cfm

  CDBG Administrative Requirements and Caps

  Under the Entitlement Program, up to 20 percent of each year’s CDBG grant plus program income can be obligated for planning and administrative costs. Program administration costs are costs related to the overall planning and execution of CDBG-assisted community development activities. Planning and administration costs subject to the cap do not include staff and overhead costs directly related to carrying out eligible activities since these costs are eligible as part of those activities.

  The administrative cap is applied differently in the State CDBG Program. Under this program, a state may use $100,000 plus up to 3 percent of its grant and program income for the state’s administrative and technical assistance costs. All costs within the 3 percent that are used for administration must be matched by the state. Note that the CDBG statute was changed on January 23, 2004 to combine the state administrative, planning, and technical assistance caps and allow states to expend up to 3 percent for these costs. States are encouraged to review Section 106(d) of the Housing and Community Development Act of 1974 (42 U.S.C. 5306(d)) as amended for more information on this change.

  The state may also allow units of local government to charge administrative and planning costs. Local activity delivery costs can, at the State’s option, be classified as administrative or project delivery costs. The sum of the state’s administrative expenses and the unit of local government administrative expenses may not exceed 20 percent of the state’s grant and program income.

  Note that while the Entitlement Program bases its administrative and planning cap on obligations, the State Program bases its cap on expenditures of CDBG funds. Also note that timeframe for the cap is calculated differently for the State CDBG Program than for the Entitlement Program. While the Entitlement Program considers obligations during the 12-month program year, the State CDBG Program considers expenditures as a percentage of each annual grant allocation.

  Low- and Moderate-Income Benefit Expenditures

  Low- and moderate-income persons are those with incomes below 80 percent of the median income for the entire metropolitan area. Entitlement grantees may use one of the following three definitions of income; state grantees may choose to follow one of these definitions or they can choose their own income definition. HUD will give maximum feasible deference to the state’s choice.

  • Part 5 annual (gross) income;
  • IRS adjusted gross income; or
  • Census long form annual income.

  As noted above, the primary objective of the CDBG Program is the development of viable communities principally for low- and moderate-income persons. To meet the primary objective, the CDBG regulations require that grantees expend not less than 70 percent of CDBG funds for activities that benefit low- and moderate-income persons. In addition:

  • Planning and administrative costs are excluded from the low- and moderate-income benefit calculation.
  • Activities meeting this requirement are those that qualify under one of the four low- and moderate-income Benefit National Objective categories:
  • Area basis;
  • Limited clientele;
  • Housing activities; or
  • Job creation and retention

  Program Income

  Program income is the gross income received by the grantee and its subrecipients directly generated from the use of CDBG funds. In general, program income must be used prior to drawing down additional funds from the line of credit. One exception to this rule is funds in a revolving loan fund. Program income includes:

  • Proceeds from the sale or lease of property purchased or improved with CDBG funds;
  • The percentage calculation is based on aggregate CDBG expenditures over a period specified by the grantee (up to three years) in a certification to HUD.
  • Proceeds from the sale or lease of equipment purchased with CDBG funds;
  • Gross income from the use or rental of real or personal property acquired, constructed, or improved by the grantee (or a subrecipient), less costs incidental to the generation of income;
  • Payments of principal and interest on loans made using CDBG funds;

  Public Services Cap

  The CDBG statute and regulations limit the amount of funding that can be used for public service activities. The limit is based on obligations for public services for a given program year and cannot exceed:

  • 15 percent of that program year’s entitlement grant; plus
  • 15 percent of the preceding year’s program income.

  Under the State CDBG Program, the public services cap is calculated differently. States may not expend more than 15 percent of a given fiscal year’s annual allocation plus 15 percent of the program income distributed by the state. Note that the 15 percent cap applies to the state, not to the individual local governments receiving State CDBG funds. A state could make a grant to a town solely for public service activities.

  Public services carried out by subrecipients or units of general local government are subject to the grantee’s 15 percent cap. However, some public services may qualify in another CDBG eligible activities category. For example, job training for a specific position within a company where jobs are being created may be counted as economic development, rather than public service.

  • Proceeds from the sale of loans or obligations secured by loans made with CDBG funds;
  • Interest earned on program income pending its disposition (Note, interest earned on revolving loan funds must be remitted to the U.S. Treasury at least annually); and
  • Funds collected through special assessments on properties not owned and occupied by low- and moderate-income households in order to recover the CDBG portion of a public improvement.

  Note that program income does not include income earned on grant advances from the U.S. Treasury, except interest on lump sum draw downs. The following types of income earned on grant advances must be remitted to the U.S. Treasury: interest earned from the investment of the initial proceeds of a grant advance; interest earned on activities determined to be ineligible; and interest earned on the investment of amounts reimbursed to the CDBG program account prior to the use of the reimbursed funds for eligible purposes. Also, for the purposes of calculating the program income for the recipient as a whole, payments made by subrecipients of principal and/or interest on CDBG-funded loans received from grantees shall be excluded if such payments are made using program income received by the subrecipient. The amount of program income derived from this calculation shall be used for reporting purposes and in determining the limitations on CDBG planning/administration and public service activities.

  Program income also does not include:

  • Any income received in a single program year by the grantee and its subrecipients, that does not exceed $25,000. For the state CDBG program this is based upon whether no more than $25,000 is retained by a unit of general local government and its subrecipients;
  • Income generated by certain Section 108 activities (refer to 24 CFR 570.500(a)(4)(ii) or 570.489(e)(2(iii));
  • Proceeds from subrecipient fundraising activities;
  • Funds collected through special assessments to recover non-CDBG outlays of capital improvements; and
  • Proceeds from the disposition of real property that was acquired or improved by a subrecipient with CDBG funds and disposed five years or more after the expiration or closeout of the grantee’s agreement with the subrecipient. In the subrecipient agreement, the grantee may choose a longer timeframe during which any CDBG related proceeds to the subrecipient would remain program income. (Certain conditions apply. See 24 CFR 570.503(b)(8) for more information on entitlement programs. See 24 CFR 570.489 for more information on program income for State CDBG Programs.) Unless a grantee closes out its participation in the CDBG program, proceeds to a grantee from the disposition of real property are considered program income in perpetuity. (See 24 CFR 570.505 and 570.489(e)(3)(i) for additional information.) Note that the State CDBG requirements are comparable to the entitlement requirements except that there is no explicit requirement for a subrecipient agreement.

  Timely Use of Funds

  It has become increasingly important for grantees to spend CDBG funds in a timely manner. Timely use of funds, in times of tight budgets, demonstrates that CDBG funds are being used to address unmet community development needs. Under the provisions of 24 CFR 570.902(a) of the CDBG regulations, an entitlement grantee is considered to be timely, if 60 days prior to the end of the grantee's program year, the balance in its U.S. Treasury Department line-of-credit does not exceed 1.5 times the annual grant for its current program year. An entitlement grantee that is “newly untimely” (i.e., met the 1.5 standard at its last 60-day test) has 12 months to become timely. If that grantee is not timely at its next 60-day test, there are two possible exceptions:

  • It is currently spending at a 12-month rate that, if continued, would bring it into compliance by the following 60-day test, or
  • HUD determines that the untimeliness resulted from factors beyond the grantee’s reasonable control.

  If a grantee does not meet the first possible exception, it will have the opportunity, at an informal consultation, to provide information as to why its lack of timeliness is for reasons beyond its reasonable control. After that consultation, HUD will consider the information provided by the grantee and, if a determination is made that, in fact, conditions were not beyond the grantee’s reasonable control, the grantee will be subject to a reduction of the total amount by which it exceeded the 1.5 threshold.

  States’ timeliness is currently based on its timely distribution of funds to units of general local government. In accordance with 24 CFR 570.494(b)(1), a state is considered timely if it obligates and announces all of its grant within 15 months of the state’s execution of its grant agreement.

  Pre-Award Costs

  Under certain conditions, CDBG grantees and their subrecipients may incur costs prior to the effective date of their CDBG grant agreement with HUD. The effective date of the grant agreement is the program year start date, or the date that HUD receives the Consolidated Plan, whichever is later. Costs may be incurred as of the date that the final Consolidated Plan is made public.

  Grantees can incur any eligible cost provided it meets certain conditions:

  • The activity for which the costs are being incurred is included in a consolidated plan action plan or an amended consolidated plan action plan prior to the costs being incurred;
  • Citizens are advised of the extent to which these pre-award costs will affect future grants;
  • The costs and activities funded are in compliance with the CDBG regulations and the environmental review requirements;
  • The State CDBG Program places no restrictions on pre-award costs. States can authorize pre-award costs for their state grant recipients.
  • The activity for which payment is being made complies with the statutory and regulatory provisions in effect at the time the costs are paid for with CDBG funds;
  • CDBG payment will be made during a time no longer than the next two program years following the effective date of the grant agreement or amendment in which the activity is first included, unless otherwise excepted by the HUD Field Office; and
  • The total amount of pre-award costs to be paid during any program year is no more than 25 percent of grant amount for that year or $300,000, whichever is greater, unless otherwise excepted by the HUD Field Office.

  Part 3: General Program Comparison—HOME versus CDBG

  Table 1-2 provides a general comparison between the HOME and CDBG programs so that grantees are able to identify the similarities and differences between the two programs. Note that this chart provides a summary of the requirements and jurisdictions should refer to the detailed sections of the guide and to the program regulations and statutes for more information.

   

  Table 1-2: A Comparison of HOME and CDBG

  		HOME	CDBG
  	Organizational Issues
  Recipient		PJs (States, counties, localities, consortia).	Grantees (States, metropolitan cities, urban counties).
  Key Partners		CHDOs, nonprofit and for-profit housing developers, private lenders.	CBDOs, nonprofit and public organizations, nonprofit and for-profit housing developers, nonprofit organizations serving the development needs of non-entitlement areas, private lenders. (24 CFR 570.204, 570.300, 570.420, 570.480, 570.500(c), 570.700)
  Projects Under State Programs		States can directly undertake projects or they can work through local governments or nonprofits. States can fund projects anywhere in the state, including in PJs.	States must fund projects via units of general local government. States cannot make grants to local governments that are Entitlements.
  Nonprofit Set-Aside		PJs must spend at least 15% of their annual allocations on development projects undertaken by CHDOs.	None.
  		HOME	CDBG
  Special Nonprofits		Community Housing Development Organizations (CHDOs): nonprofit development organizations with a board that is at least 1/3 representative of low-income residents.	Community Based Development Organizations (CBDOs) and nonprofit organizations serving the development needs of non-entitlement areas. These organizations undertake community economic development, neighborhood revitalization, and/or energy conservation. Under the Entitlement Program, the CBDO board is at least 51% representative of low-income residents.
  Subrecipients		Any nonprofit or outside public entity that administers all or part of a HOME activity on the PJ’s behalf.	A public or private nonprofit agency, authority, or organization, not including CBDOs. A for-profit entity carrying out microenterprise activities under 24 CFR 570.201(o).
  	Funding Issues
  Timelines		2-year commitment, 5-year expenditure deadlines. (24 CFR 92.500(d))	Entitlement grantee must have no more than 1.5 times the amount of the current year’s formula grant 60 days prior to end of program year. (24 CFR 570.902(a)). States should obligate and announce all grant funds within 15 months of the execution of grant agreement
  Match		HOME PJs must contribute at least 25¢ for every $1 of HOME funds expended during the federal fiscal year. (24 CFR 92.218-92.222)	Not required, unless imposed by grantee. (Note: some state impose a match.) States are required to match their administrative costs, capped at 3% (plus $100,000, which is not required to be matched.)
  	Eligible Activities
  Eligible Activities		HOME funds can only be used to support affordable housing activities and projects. (24 CFR 92.1 and 92.2)	CDBG funds can be used to support affordable housing activities, along with other community and economic development activities and public services. (24 CFR 570.201-.206, statutory sections 105(a)(1)–(a)(25))
  Housing-Related Eligible and Ineligible Activities		Acquisition, rehabilitation and new construction of rental and homeownership housing, direct homebuyer assistance (loans, grants, downpayment and closing costs assistance), tenant-based rental assistance. No non-housing related activities. No assistance to public housing.	Acquisition, rehabilitation of rental and homeownership housing, direct homebuyer assistance, new construction of rental or homeownership housing when carried out by a CBDO pursuant to 24 CFR 570.204 or 105(a)(15) of the statute. Can assist public or private buildings.

  Table 1-2: A Comparison of HOME and CDBG

  		HOME	CDBG
  Refunding of Assisted Projects		No assistance to projects already funded with HOME during the affordability period after the first year.	Can provide assistance to project already assisted with CDBG, as long as new activity is CDBG-eligible.
  Tenant-Based Rental Assistance		Eligible. TBRA rent subsidy formula caps tenant contribution to 30% of household’s monthly adjusted income. (24 CFR 92.209(h)).	Direct rental assistance to families is prohibited, except under limited circumstances. (24 CFR 570.207(b)(4)).
  Administrative Costs		Eligible under 24 CFR 92.207. Capped at 10% of annual allocation plus program income received.	Eligible under 24 CFR 570.205 and 206. Capped at 20%. A state may use $100,000 plus up to 50% the costs it incurs for program administration, up to a maximum of 3 percent of its CDBG allocation. The State may expend up to 3% of its CDBG allocation on technical assistance activities. However, the total the State spends on both administrative and technical assistance expenses may not exceed 3% of the State's allocation. (see 570.489(a) and Section 106(d) of the statute.)
  	Low-Income Targeting
  Income Definition		Can choose from among three definitions of income: Part 5; IRS; Census long form.	Can choose from among three definitions of income: Part 5; IRS; Census long form. State CDBG grantees can choose one of these three or their own definition.
  Income Targeting— Households Served		HOME funds exclusively serve low-income households (<80% area median income). (24 CFR 92.216 and 217)	The primary objective of CDBG is to principally assist low- and moderate-income persons (<80% area median income). All activities must meet one of three national objectives: low/moderate income benefit; elimination of slum and blight; or urgent need. Aggregate benefits across all activities for 1-3 year period: at least 70% of funds must assist low- and moderate-income persons. 24 CFR 570.200(a)(3) and 570.484(a))

  Table 1-2: A Comparison of HOME and CDBG

  		HOME	CDBG
  Income Targeting --Rental Units		HOME allows assistance to be targeted toward particular units. Thus the HOME units could be a small percentage of the entire units within a project. Rental projects assisted with HOME have deeper income targeting requirements with specific requirements related to renting units to very low-income households and to ensuring that initially 90% of the households assisted with rental or TBRA funds are at 60% of median and below. (24 CFR 92.216).	Unless the project meets the slum/blight national objective criteria, the low and moderate-income housing national objective will be used. For multifamily housing, 51% of the units must be occupied by low- or moderate-income households. For one-unit structures, each household must be low- or moderate-income. For two unit structures, one of the two households must be low- or moderate-income. (24 CFR 570.208(a)(3) and 570.483(b)(3)). CDBG assistance applies to an entire multifamily project regardless of the amount of CDBG assistance. So, 51% of all units within the project must be occupied by low- and moderate-income households unless the project meets a specific exception related to certain activities designed to reduce the cost of new construction. (24 CFR 570.208(a)(3) and 570.483(b)(3)). In general, CDBG does not allow for proportional funding where the number of units is based upon the amount of CDBG funds (unless the 51% target is reached or the above-noted exception is triggered).
  	Affordability
  Affordability Period		Applies to homebuyer and rental projects. 5–20 years depending on activity type and funding amount. (24 CFR 92.252, 92.254)	Not required. However, some projects are required to meet change of use restrictions. See 24 CFR 570.505 and 24 CFR 570.489.
  Rents		High and Low HOME Rents are specified for HOME rental projects. (24 CFR 92.252(a) and (b))	If using low- and moderate-income national objective, no direct requirement for specific rent schedule, other than at least 51% of units in multifamily project are affordable to low- and moderate-income tenants. (24 CFR 570.208(a)(3) and 570.483(b)(3)). Rents must be affordable, as determined by the jurisdiction.

  Table 1-2: A Comparison of HOME and CDBG

  		HOME	CDBG
  	Unit Requirements
  Unit Quality		HOME property standards: Local rehabilitation standards (for rehabilitation), and State/local codes or standards, or if none exists, one of three national model codes, and Model Energy Code (for new construction). (24 CFR 92.251)	No specific property standards required.
  Minimum Investment		Minimum HOME investment is an average of $1,000 per unit for project.	No minimum required.
  Subsidy Limit		Capped at the 221(d)(3) limits. Costs must be reasonable.	Costs must be reasonable. No maximum subsidy.
  Maximum Property Value		Applies to homebuyer homes and is typically based on 203(b) limits.	No maximum property value.
  	Ongoing Compliance
  Ongoing Monitoring		Must monitoring compliance with program rules and terms of written agreement. Must also monitor rental properties during the affordability period. Must ensure that homebuyer properties meet resale or recapture provisions.	Must document compliance with national objective and terms of written agreement. Otherwise, no ongoing monitoring. However, some projects are required to meet change of use restrictions. See 24 CFR 570.505 and 24 CFR 570.489.
  Re-examinations of Income		Incomes need to be re-examined for HOME-assisted units annually, and re-verified with source documentation every five years—all new tenants in HOME units must be low-income (80 percent or lower of the area median income).	Not required under CDBG. Income is documented at the time of initial occupancy.
  Unit Inspections		Rental units must be inspected during the affordability period; inspection schedule is based on size of the project. TBRA units must be inspected annually.	None required.