Grant Administration: Section 9.8 Section 104(d) One-for-One Unit Replacement (Project Requirements)The basic concept behind the Section 104(d) requirements (also known as the “Barney Frank Amendments”) is that CDBG funds may not be used to reduce a municipality’s stock of affordable housing. These requirements supplement and overlap the provisions of URA both for the grantee’s activities in undertaking a project and relocation benefits provided to displaced persons.
This section focuses on requirements imposed as part of the acquisition, design, and resulting construction of any project that was previously available as residential units for low- and moderate-income households. Section 104(d) also imposes additional requirements regarding relocation of tenants. Chapter 10: Relocation addresses those relocation requirements.
The 104(d) regulations state that: “All occupied and vacant occupiable low- and moderate-income dwelling units that are demolished or converted to a use other than as low- and moderate-income dwelling units in connection with an assisted activity must be replaced with comparable low-income dwelling units.” 24 CFR 42.375(a)
Before obligating or expending funds that will directly result in demolition or conversion, the grantee must make public and submit to CDFA the information required in the grantee’s Residential Anti-displacement and Relocation Assistance Plan. Attachment 9-17: Sample Residential Anti-displacement and Relocation Assistance contains a sample plan that should be adopted by the grantee and submitted with project application.
There are four key issues in understanding the one-for-one replacement requirement.
- Which dwelling units must be replaced (and which need not be replaced)?
- What counts as a replacement dwelling unit?
- What information must be made public and submitted to the state before execution of contracts?
- What is the exception to one-for-one replacement rules?
All replacement housing must initially be made available for occupancy at any time during the period beginning one year before the grantee makes public the information required under the Residential Anti-displacement and Relocation Assistance Plan and ending three years after the commencement of the demolition or rehabilitation related to the conversion. Also, a One-for-One Replacement Summary Grantee Performance Report must be submitted before relocation activities can begin and kept updated (informing CDFA of updates) for the low- and moderate-income units demolished or converted in the project. See Attachment 9-18: One-for-One Replacement Summary Grantee Performance Report for a sample of the One-for-One Replacement Summary Grantee Performance Report.
Dwelling Units That Must Be Replaced
Grantees must replace a housing unit if the unit meets all three conditions listed below:
- Condition 1: It meets the definition of low/moderate dwelling unit. A low/mod dwelling unit is defined as a dwelling unit with a market rent (including an allowance for utilities) that is equal to or less than the Fair Market Rent (FMR) for its size. A reduced rent charged to a relative or on-site manager is not considered market rent. Fair Market rents may be found on the HUD website at: HUD Fair Market Rents
- Condition 2: It is occupied or is a vacant occupiable dwelling unit. A vacant occupiable dwelling unit is defined as:
– A dwelling unit in standard condition (regardless of how long it has been vacant); or
– A vacant unit in substandard condition that is suitable for rehabilitation (regardless of how long it has been vacant); or
– A dilapidated unit, not suitable for rehabilitation, which has been legally occupied within three months from before the date of agreement.
- Condition 2: It is occupied or is a vacant occupiable dwelling unit. A vacant occupiable dwelling unit is defined as:
- Condition 3: It is to be demolished or converted to a unit with a market rent (including utilities) that is above the FMR or to a use that is no longer for permanent housing (including conversion to a homeless shelter).
It is important to note that the income of the particular occupant is irrelevant in one-for-one replacement. It is also important to note that local funds used to match a CDBG grant (including those in excess of the required match amount) are defined as any monies expended to support CDBG activity, which means that the use of the matching funds for the demolition or conversion of a unit that meets the criteria listed above would also trigger the Section 104(d) replacement requirements.
Criteria for Replacement Units
Replacement low- and moderate-income dwelling units may be provided by any public agency or private developer. Replacement units must meet all of the following criteria:
- Replacement units must be located within the grantee’s municipality and, to the extent feasible and consistent with other statutory priorities, the units shall be located within the same neighborhood as the units lost. (Applicable statutory priorities include those promoting housing choice, avoiding undue concentrations of assisted housing, and prohibiting development in areas affected by hazardous waste, flooding, and airport noise.)
- Replacement units must be sufficient in number and size to house no less than the number of occupants who could have been housed in the units that are demolished or converted.
- The number of occupants who could have been housed in units shall be determined in accordance with applicable local housing occupancy codes. The grantee may not replace those units with smaller units (e.g., a 2-bedroom unit with two 1-bedroom units) unless the grantee, before committing funds, provides information to citizens and to CDFA demonstrating that the proposed replacement is consistent with the housing needs of lower-income households in the municipality.
Provided in standard condition and vacant; rehabilitation of occupied units toward replacement does not count. Replacement low- and moderate-income dwelling units may include units that have been raised to standard from substandard condition if:
- The unit must have been vacant for at least three months before execution of the agreement covering the rehabilitation (e.g., the agreement between the grantee and the property owner); and
- No one was displaced from the unit as a direct result of the assisted activity.
Provided within a four-year time frame:
- Replacement units must be initially made available for occupancy at any time during the period beginning one year before the grantee’s submission of the information required under 24 CFR 570.606(c)(1)(iii) and ending three years after the commencement of the demolition or rehabilitation related to the conversion. A grantee that fails to make the required public submission, described below under Grant Submission Requirements, will lose the year before submission for counting replacement units.
- This period may slightly exceed four years. However, CDFA requires all replacement units to be available before the project is closed.
- Affordable for 10 years.
- Replacement units must be designed to remain LMI dwelling units for at least 10 years from the date of initial occupancy.
- A key factor in projecting affordability is the character of the neighborhood in which the replacement units are located (i.e., neighborhood where current market rents are moderate and projected future rents are expected to remain within future FMRs).
- Replacement low- and moderate-income dwelling units may include, but are not limited to, public housing, existing housing receiving Section 8 project-based assistance, HOME or CDBG- funded units that have at least a 10-year affordability period.
Grantee Submission Requirements
24 CFR 42.375(c) Before a grantee executes a contract committing to provide CDBG funds for any activity that will directly result in either the demolition of low- and moderate-income dwellings units or the conversion of low- and moderate-income dwelling units to another use, the grantee must make public by posting in the municipality Authorized Official’s office and submit the following information in writing to CDFA for monitoring purposes:
- Description: A description of the proposed assisted activity.
- Location and number of units to be removed: The location on a map and number of dwelling units by size (number of bedrooms) that will be demolished or converted to a use other than as a LMI dwelling units as a direct result of the assisted activity.
- A time schedule for the commitment and completion of the demolition or conversion.
- Location and number of replacement units – the location on a map and the number of dwelling units by size (number of bedrooms) that will be provided as replacement dwelling units.
- If such data is not available at the time of the general submission, the submission shall identify the general location on an area map and the approximate number of dwelling units by size. Information identifying the specific location and number of dwelling units by size shall be submitted and disclosed to the public as soon as it is available.
- Basis for concluding that each replacement dwelling unit will remain a lower-income dwelling unit for at least 10 years from the date of initial occupancy,
- Information demonstrating that any proposed replacement of dwelling units with smaller dwelling units is consistent with the housing needs of lower-income households in the municipality.
Exception to One-for-One Replacement
Replacement is not required if CDFA determines that enough standard, vacant, affordable housing serving the municipality is available. A grantee may not execute a contract for demolition or rehabilitation of dwelling units for which an exception is sought until the exception is authorized in writing by CDFA.
The one-for-one replacement requirement does not apply to the extent CDFA determines, based upon objective data, that there is an adequate supply of vacant lower-income dwelling units in standard condition available on a non-discriminatory basis within the grantee’s jurisdiction.
In determining the adequacy of supply, CDFA will consider whether the demolition or conversion of the low- and moderate-income dwelling units will have a material impact on the ability of lower-income households to find suitable housing. CDFA will consider relevant evidence of housing supply and demand including, but not limited to, the following factors:
- Vacancy rate: The housing vacancy rate in the municipality.
- Number of vacancies: The number of vacant LMI dwelling units in the municipality (excluding units that will be demolished or converted).
- Waiting list for assisted housing: The number of eligible families on waiting lists for housing assisted under the United States Housing Act of 1937 in the municipality. However, CDFA recognizes that a community that has a substantial number of vacant, standard dwelling units with market rents at or below the FMR may also have a waiting list for assisted housing. The existence of a waiting list does not disqualify a community from consideration for an exception.
- Consolidated Plan: The needs analysis contained in the State’s Consolidated Plan and relevant past predicted demographic changes.
- Housing outside the municipality: CDFA may consider the supply of vacant low- and moderate-income dwelling units in a standard condition available on a non-discriminatory basis in an area that is larger than the grantee’s jurisdiction. Such additional dwelling units shall be considered if CDFA determines that the units would be suitable to serve the needs of lower-income households that could be served by the low- and moderate-income dwelling units that are to be demolished or converted to another use. CDFA will base this determination on geographic and demographic factors, such as location and access to places of employment and to other facilities.
Procedure for Seeking an Exception
The grantee must submit a request for determination for an exception directly to CDFA. Simultaneously with the submission of the request, the grantee must make the submission public and inform interested persons that they have 30 days from the date of submission to provide to CDFA additional information supporting or opposing the request. If CDFA, after considering the submission and the additional data, agrees with the request, CDFA must provide its recommendation with supporting information to HUD.