Section 104(d): When CDBG or HOME Funds Change the Rules

Housing authorities and developers often add CDBG or HOME funds to fill a gap in the capital stack. Those dollars can bring Section 104(d) of the Housing and Community Development Act of 1974 with them. Section 104(d) is implemented at 24 CFR Part 42, Subpart C, and explained in Chapter 7 of HUD Handbook 1378.

When it applies

Section 104(d) generally applies when CDBG or HOME assistance is used in connection with demolishing lower-income dwelling units or converting them to another use. Rehabilitation alone, without demolition or conversion, does not usually trigger the replacement requirement, though URA may still apply.

The two main requirements

• One-for-one replacement. Occupied and vacant occupiable lower-income units that are demolished or converted generally must be replaced with comparable lower-income units within a set period, subject to limited exceptions.
• Relocation assistance for lower-income persons. Lower-income households displaced in connection with the demolition or conversion may be eligible for 104(d) relocation assistance. They generally may choose between 104(d) assistance and URA assistance.

The RARAP

Grantees must adopt and follow a Residential Anti-displacement and Relocation Assistance Plan (RARAP). The plan describes how the jurisdiction will minimize displacement and meet its replacement and relocation obligations. When your project uses a city's or state's CDBG or HOME funds, that grantee's RARAP applies to your project.

Planning implications

• Check the sources before you commit. Ask early whether any CDBG or HOME dollars will be used, and how.
• Count units carefully. Replacement obligations depend on the number and bedroom size of lower-income units affected.
• Budget the choice. If eligible households may choose 104(d) or URA benefits, budget for the more costly option.
• Coordinate with the grantee. The city or state administering the funds will want to see your compliance documentation.

In RAD conversions, the RAD relocation Notice expressly identifies Section 104(d) as one of the authorities that may apply when CDBG or HOME funds are part of the project.