Lesson 5: Slum and blight, and urgent need

Two objectives that do not count toward your 70 percent, and that attract more monitoring attention than any other part of 570.208. (A note on sources: 570.208 is the Entitlement rule. TxCDBG runs under Subpart I, where the parallel rules sit at 570.483(c) for slum and blight and 570.483(d) for urgent need. Where the two differ, this lesson says so.) Both exist for real situations. Both are routinely stretched to cover activities that simply did not fit under low and moderate income benefit, and monitors know it.

Slum and blight on an area basis, 570.208(b)(1)

The area must meet a state or local definition of slum, blighted, deteriorated or deteriorating. That definition is not supplied by the federal regulation, which means the first document in your file is the local ordinance or state law you are relying on.

On top of that definition, one of two things must also be true:

(A) At least 25 percent of properties throughout the area show one or more of: physical deterioration of buildings or improvements; abandonment; chronic high occupancy turnover or chronic high vacancy rates in commercial or industrial buildings; significant declines in property values or abnormally low values relative to other areas; or known or suspected environmental contamination.

(B) The public improvements throughout the area are in a general state of deterioration.

Note "throughout the area" in both. A blighted block inside an otherwise sound neighbourhood does not make the neighbourhood an area. If that is your situation, you are looking at the spot basis instead.

The recipient must also keep documentation of the area's boundaries and the conditions and standards that qualified it. The area designation must be redetermined every 10 years (570.208(b)(1)(iii); 570.483(c)(1)(iv) for States). A designation made in 2014 and never revisited is not a live designation, and an activity resting on it is exposed.

Housing rehabilitation under slum and blight

This has a stricter test than most people expect. Each building must be substandard before rehabilitation, and the deficiencies that made it substandard must be eliminated. Under the Entitlement rule (570.208(b)(1)(iv)) that means all of them. Not the ones you could afford. All of them. The State rule (570.483(c)(1)(iii)) says all deficiencies making the building substandard must be eliminated if less critical work on the building is also undertaken.

There is a floor on the local definition under the Entitlement rule. It must be at minimum strict enough that a building it calls substandard would also fail 24 CFR 5.703, HUD's physical condition standard for HUD housing. If the local definition is looser than 5.703, it cannot carry this objective. The State rule has no 5.703 floor. Instead the State must ensure the local government has developed minimum standards for building quality, so a TxCDBG file needs the local standard the county or city adopted.

Slum and blight on a spot basis, 570.208(b)(2)

Outside a designated area, only a closed list of activities can use this objective:

• acquisition
• clearance
• relocation
• historic preservation
• remediation of environmentally contaminated property
• rehabilitation of buildings or improvements

And the rehabilitation is sharply narrowed: it must be limited to eliminating conditions detrimental to public health and safety. That is a much smaller scope than ordinary rehabilitation. New siding because the old siding is ugly does not qualify. Removing a collapsing porch roof does.

Acquisition or relocation on a spot basis must be a precursor to another eligible activity that directly eliminates the blight. Buying a blighted property and holding it is not eliminating anything.

Urban renewal, 570.208(b)(3)

An activity within an urban renewal project area or Neighborhood Development Program action area under title I of the Housing Act of 1949, where the activity is necessary to complete the urban renewal plan then in effect. This is a narrow and increasingly rare route, and it appears only in the Entitlement rule. The State rule at 570.483(c) lists the area basis, the spot basis, and a third category for planning-only activities that are for a slum or blighted area or are necessary for an activity that would itself meet a slum and blight criterion.

Urgent need, 570.208(c)

Three things must all be true, and all must be certified:

1. The condition poses a serious and immediate threat to the health or welfare of the community.
2. The recipient is unable to finance the activity on its own.
3. Other sources of funding are not available.

Then the timing condition that does most of the filtering. The condition is "generally considered to be of recent origin if it developed or became critical within 18 months preceding the certification."

Under the State rule (570.483(d)) the local government certifies and the State determines that the three conditions are met, and the 18 months runs from when the condition developed or became urgent. Eighteen months is the number to remember. A road that has been failing for six years is not of recent origin, however urgent it feels to the people driving on it. Deferred maintenance is not an emergency, it is deferred maintenance.

Urgent need is the narrowest of the three objectives and the most misused. It is not a catch all for activities that could not be squeezed under low and moderate income benefit or slum and blight. The three certifications are substantive statements about the recipient's finances and the availability of other funding, and a recipient that certifies it could not finance an activity itself while sitting on unobligated reserves has a problem beyond CDBG.

Where these fit in the portfolio

Remember lesson 2. Neither of these objectives contributes anything to the 70 percent primary objective. Every dollar spent here is a dollar that some other activity has to carry on the low and moderate income side. That is the planning consequence, and it should be part of the decision before the activity is approved rather than a discovery at the end of the certification period.