This week, the U.S. Department of Housing and Urban Development (HUD) announced that it has allocated $5 billion in additional funding to assist targeted communities affected by Hurricane Sandy. This is the second round of funding allocated by HUD from the Community Development Block Grant (CDBG) Disaster Recovery Funds (the Disaster Recovery Funds).

The Disaster Recovery Funds have been made available under the Disaster Relief Appropriations Act of 2013 (Act). Congress originally appropriated approximately $16 billion for the program, but this was later reduced to $15.18 billion due to the automatic spending cuts known as sequestration. In March 2013, HUD allocated $5.4 billion in the first round of funding.

Eligible Affected Areas and Funding Amounts

The funds are being made available to assist certain communities affected by the storm so they can pay for unmet recovery needs. The funds will be made available to the states listed below, as well as New York City, which is provided a separate funding allocation.

Eligible Grantees

This Disaster Recovery Funds will be made available to eligible grantees, which include, among others, states and units of local government. Those states and units of local government must develop an Action Plan detailing the activities that may be funded with the Disaster Recovery Funds and the process for distributing such funds. The Action Plan must be submitted to HUD for review and approval before the activities can be implemented.

Eligible Activities

Eligible activities are determined by the Act and the CDBG Program regulations. The Act requires that the appropriated funds must be used for "necessary expenses related to disaster relief, long-term recovery, and restoration of infrastructure, housing and economic revitalization." The funds, however, must further meet at least one of the CDBG Program national objectives, which include activities that fit any of the following criteria:

• Benefit persons of low and moderate income

• Aid in the prevention or elimination of slums or blight

• Meet other urgent community development needs for which other financial resources are not available

The activities must further comply with the CDBG Program regulations or applicable waivers. Eligible CDBG Program activities include recovery efforts relating to the construction of housing, and economic development and infrastructure projects. Housing activities generally include the new construction, and/or rehabilitation of single family or multifamily owner-occupied or rental housing.

Generally, grantees must use at least half of the funds for activities that principally benefit low-and-moderate income persons. The use of the Disaster Recovery Funds cannot duplicate funding available from the Federal Emergency Management Agency, the Small Business Administration and the U.S. Army Corps of Engineers.

Applying for Funds

Within the next few weeks, HUD is expected to officially publish notice of the availability of the $5 billion of Disaster Recovery Funds in the Federal Register. The notice will describe relevant statutory provisions, eligible activities, the grant award process, and the criteria for Action Plan approval. Eligible government units must then develop and submit an Action Plan, which details how the funds will be used, to HUD for approval before receiving the funding allocation.

Funds will then be distributed by an agency of the eligible government units in accordance with the requirements of the approved Action Plan. The government agencies charged with administering and distributing the Disaster Recovery Funds will notify eligible applicants of the funding availability and the requirements relating to the allocation of such funds based on the requirements of the applicable Action Plan.