June 8, 2018

House Financial Services Approves Landmark CDBG-DR Permanent Authorization Bill

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CDBG-DR

The House Committee on Financial Services voted last week to approve the Reforming Disaster Recovery Act of 2018 (H.R. 4557), which would permanently authorize the Community Development Block Grant Disaster Recovery (CDBG-DR) Program. Sponsored by Representative Ann Wagner (R-MO-2), the bill passed the Committee with broad bipartisan support 53-3 and included provisions that will enable more efficient use of disaster recovery funds and increase accountability and transparency of how the funds are used and who they serve. Enterprise endorsed the bill and offered multiple recommendations that were ultimately included in the bill passed by the Committee.

Committee Perspectives

Rep. Wagner remarked: "the current CDBG-DR Program is broken. While HUD has become a primary provider of disaster recovery, the program is not law. Instead, HUD uses more than 60 Federal Register notices to issue clarifying guidance, waivers, and alternative requirements to the CDBG-DR Program." Codifying CDBG-DR would increase the efficiency of and accountability for taxpayer dollars and allow HUD to make rules that are consistent across disasters.

Committee Chairman Jeb Hensarling (R-TX-5) applauded the bill for requiring structures in special flood hazard area rebuilt using CDBG-DR funds to be elevated at least two feet above the base flood elevation and remarked that mitigation measures in the bill will help families get out of harm's way. Representative Sean Duffy (R-WI-7) remarked that H.R. 4557 is a common sense bill that will ensure that disaster recovery funds are targeted towards those with the greatest needs. Representative French Hill (R-AR-2) commended provisions in the bill that would improve accountability of taxpayer funds and target no less than 70 percent of funds towards low and moderate income households. Representative Dennis Ross (R-FL-15) voiced support for the bill so that HUD has the authority to ensure that funds are properly distributed in a timely manner to the disaster recovery victims for whom the funds are intended.

Representative Scott Tipton (R-CO-3) also supports H.R. 4557’s provisions to establish greater oversight and accountability of how CDBG-DR are used and to prevent duplication of benefits. He noted the program's importance in helping communities in Colorado recover after floods and wildfires. Representative Claudia Tenney (R-NY-22) also expressed gratitude for CDBG-DR funds that help communities recovering from frequent flooding in landlocked areas of upstate New York.

H.R. 4557 also addresses Committee members' concern that too much appropriated CDBG-DR funding has not expended by establishing measures for recapturing unused funds. Rep. Wagner noted that $11.5 billion in CDBG-DR funds dating back to 9/11 are still unspent. Funds that are not used within 6 years would be recaptured and then deposited in a CDBG-DR Reserve Fund. Grantees can extend their grants by no more than 3 years. The bill would also clamp down on duplication of benefits and tightens up procurement standards.

Committee Ranking Member Maxine Waters (D-CA-42) urged her colleagues to support the bill. Thanks to the bipartisan leadership of Ranking Member Waters, the bill passed out of committee with a manager's amendment that significantly strengthened the legislation.

Policy Provisions in H.R. 4557

In May, Enterprise Vice President for Public Policy Marion McFadden testified before the House Financial Services Oversight and Investigations Subcommittee on how to strengthen the CDBG-DR Program. In addition to our recommendation to permanently authorize the CDBG-DR Program, the bill that passed the Committee today include numerous Enterprise recommendations. Read more about the hearing and Enterprise's recommendations.

Enterprise recommended to:

  • Create a set-aside for technical assistance and capacity building for all CDBG-DR allocations. The bill would increase would create a set aside for capacity building and technical assistance of up 0.1 percent of available funds or $15 million, whichever is less. After disasters, all housing providers are needed to rebuild damaged homes, and even the highest capacity jurisdictions and nonprofits are overwhelmed by an influx of disaster funds that is many multiples greater than the amount of dollars made available through the annual grant program. Capacity building and technical assistance can help ease growing pains while agencies and nonprofits stand up rebuilding programs. Prohibit HUD from reducing the percentage of funds that must benefit low and moderate income people below the standard 70 percent absent 'compelling need.'
  • Require HUD to allocate not less than one-third of CDBG-DR funds within 60 days of enactment and for the remaining funds to be allocated to grantees within 180 days of enactment. The provision makes an exception for situations in which the Federal Emergency Management Administration (FEMA) has not provided HUD with sufficient data for HUD to make its allocations.
  • Increase funding for HUD to administer disaster recovery programs. The HUD Secretary could set aside up to 0.5 percent of any appropriation exceeding $1 billion for necessary costs, including information technology and oversight and administration of CDBG-DR funds.
  • Prohibit CDBG-DR funds from being used to pay back Small Business Administration (SBA) loans and require households earning over 120 percent of the Area Median Income to apply for SBA loans before applying for CDBG-DR. The legislation directs the SBA to notify all loan applicants on their eligibility for CDBG-DR due to taking out a SBA loan. Enterprise believes that disaster recovery funds are best used when directed towards those who need help the most and should serve those who do not have the resources to pay back an SBA loan.
  • Direct HUD to require that any structure located in special flood hazard areas shall be elevated at least two feet above the base flood elevation. The bill would allow HUD set alternative mitigation standards for multifamily housing buildings after consulting with FEMA. Elevation may be impossible or impractical in some situations, such as adjoining town homes where a neighbor refuses to elevate their home.

Enterprise also supports additional provisions in the bill, including:

  • Authority for the HUD Secretary to establish a sliding scale for the percentage of grant funds that a CDBG-DR grantee can use to cover administrative costs, capped at 10 percent of grant funds received. Grantees with smaller awards may need to use up to 10 percent of their disaster funds on administrative costs, but that amount is far more than is needed for multi-billion dollar awards.
  • Requirement of one-for-one replacement of all federally-assisted housing damaged in a major disaster.
  • Direction for HUD to collect and disaggregate data on race, geography and all other protected classes under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, the Americans with Disabilities Act, the Fair Housing Act, the Civil Rights Act, and other civil rights and nondiscrimination protections.

Next Steps

H.R. 4557 will now head to the floor for consideration by the full House. Enterprise strongly supports this bill and will advocate to build support in the House for this common-sense disaster recovery legislation, and we are currently seeking a Senate champion for a companion bill. Enterprise encourages advocates to reach out to their Representatives and urge passage by the full House. Check back to Enterprise's blog more information on H.R. 4557.