March 28, 2019

Enterprise Testifies in House Financial Services Hearing on Improving CDBG-DR

Marion McFadden

As natural disasters become more frequent and destructive, lawmakers in Washington are arriving at a bipartisan consensus that the disaster recovery framework is need of improvement. Members of Congress expressed this sentiment at a hearing on March 26 before the Housing Financial Services Subcommittee on Oversight and Investigations titled “The Administration of Disaster Recovery Funds in the Wake of Hurricanes Harvey, Irma, and Maria.”

In particular, lawmakers and witnesses advocated to permanently authorize the Community Development Block Grant – Disaster Recovery (CDBG-DR) Program at HUD in order to more quickly and fairly serve affected communities and households and to better mitigate the risk of future disasters.

Marion McFadden, senior vice president for Public Policy and senior advisor for Resilience at Enterprise, testified as an expert witness on the panel alongside Fernando Gil Enseñat, secretary of housing for Puerto Rico; Jeremy Kirkland, counsel to the inspector general at HUD; and Daphne Lemelle, executive director at the Harris County Community Services Department.

Read Marion’s full written testimony submitted to the Subcommittee.

CDBG-DR has become an increasingly important program following a string of especially destructive disasters in recent years. The program exists to address unmet needs for housing, infrastructure, and economic development following major natural disasters and primarily serves households and communities that have not received Federal Emergency Management Agency (FEMA) assistance, National Flood Insurance Program (NFIP) payouts, or Small Business Administration (SBA) loans.

Despite the program’s central role in long-term recovery, it has never been codified in statute. The current system of ad hoc guidance associated with individual appropriations causes unnecessary bureaucratic delays, unclear expectations from grantees, and creates opportunities for inappropriate or inequitable uses of funds.

A Government Accountability Office (GAO) report released on March 25 concluded that Congress should provide permanent statutory authority for a disaster recovery program at HUD to address issues such as these. According to an audit from the HUD office of Inspector General, as of September 2017, 59 grantees with 112 active CDBG-DR grants, totaling more than $47.4 billion, had to follow requirements contained in 61 different Federal Register notices to manage their rebuilding programs.

The audit also found that only 24 full-time HUD employees manage all open disaster recovery grants, which means that each employee oversees an average of $1.9 billion. For reference, HUD has 7,500 full-time employees for its annual allocations of $54 billion.

Read an Enterprise resource on CDBG-DR Federal Register notices since 2013.

Subcommittee Perspectives on CDBG-DR

Last Congress, Rep. Ann Wagner (R-MO-2) led a successful bipartisan bill out of the House Financial Services Committee that would have permanently authorized CDBG-DR, codified standards that prioritize funding for low- and moderate-income (LMI) disaster victims, and established a CDBG-DR Reserve Fund that would have been available for disaster-affected areas immediately after the President declares a major disaster, among other improvements. In the March 26 hearing, Rep. Wagner highlighted the need ensure accountability that grantees primarily allocate their disaster recovery funds to benefit disaster victims.

Oversight and Investigations Subcommittee Chair Al Green (D-TX-9) expressed the need to codify the CDBG-DR Program and stop reinventing the wheel on disaster recovery after each major storm. Ranking Member Andy Barr (R-KY-6) highlighted that despite ballooning disaster recovery costs and the growing importance of CDBG-DR, the program still operates on an ad hoc basis.

House Financial Services Chair Maxine Waters (R-CA-43) asserted that the CDBG-DR Program is in urgent need of reform and that through legislation and rulemaking, a codified program must address racial inequality in the way grantees allocate their recovery funds.

Enterprise applauds Reps. Wagner and Green’s continued leadership on CDBG-DR and look forward to continue working with them, along with Subcommittee Ranking Member Barr and full Committee Chairwoman Waters, during this Congress as the permanent authorization legislation is reintroduced.

Enterprise Policy Priorities for CDBG-DR

In her testimony, Marion explained that “[CDBG-DR] lacks standing authority. This means that HUD must write a new Federal Register notice for each appropriation that Congress provides. And shockingly, unlike permanently authorized FEMA and SBA disaster programs…CDBG-DR program has never gone through notice and comment rulemaking. The general public has not once been invited to offer comments on HUD’s rules for disaster recovery. It’s time to bring transparency to the post-disaster rulemaking process.”

She also emphasized that “low-income people are more likely to live in areas that have greater risk of natural disasters, and therefore, lower housing costs. Poor-quality homes are less stable in the high winds of hurricanes and tornadoes, posing additional risk to families who cannot afford something safer.” It is also well documented that disaster recovery programs have too often prioritized homeowners over renters, who are more likely to be lower-income and people of color.

Additionally, Marion stressed the need for investments in natural hazard mitigation in disaster rebuilding to make communities more resilient and ensure that the federal government does now throw good money after bad. She cited a FEMA-funded report from the National Institute of Building Science (NIBS) that found that on average every $1 spent by FEMA and HUD on mitigation saves $6 in future disaster recovery costs.

In CDBG-DR permanent authorization, Enterprise specifically urges Congress to:

  • Protect the 70 percent low and moderate-income (LMI) standard for future CDBG-DR appropriations, permitting waivers only upon demonstration of compelling need.
  • Require an equitable allocation of resources for renters, homeowners, persons experiencing homelessness, and infrastructure.
  • Require one-for-one replacement of federally-subsidized housing.
  • Require a dedicated technical assistance and capacity building set-aside for disaster-impacted communities in any CDBG-DR appropriation.
  • Authorize more permanent full-time disaster recovery staff at HUD, which will enable HUD to better administer the CDBG-DR Program.
  • Require resilient rebuilding standards, including provisions on elevations and buyouts.
  • Provide funds to jurisdictions outside the disaster area that receive displaced residents.

Through permanent authorization, Congress and HUD can fix the mistakes of the past, make the program more fair, implement best practices and lessons learned, and provide a clear and more efficient process for administering disaster recovery funds.

Marion's Comments on the Hearing

View the Full Hearing

Next Steps in Advocating for Permanent Authorization of CDBG-DR

Enterprise and other advocates are working with the House Financial Services and Senate Banking committees to introduce permanent authorization early this year. In early May, Enterprise will host a congressional briefing on improving disaster recovery through CDBG-DR reform and a policy convening on recommendations for the CDBG-DR formal rulemaking process. Stay tuned to Enterprise’s blog for more information.

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