My municipality is using CSLFRF for capital projects involving non-public facilities. How can we ensure that the projects remain affordable, or in their current state, long-term, without developers/business owners selling the property short-term?

It is incumbent on recipients and subrecipients to ensure that funding is used for eligible purposes. One mechanism to ensure compliance is to include enforceable contract or grant provisions in any subawards for capital projects that mandate how the funds may be used; for example, provisions that require the funds to be used for affordable housing or long-term projects.

The American Rescue Plan Act of 2021 (“ARP”) provides Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to alleviate the negative public health and economic impacts of the COVID-19 public health emergency on communities. The U.S. Department of the Treasury’s (“Treasury”) Final Rule clarifies that, under the Public Health and Negative Economic Impacts eligible use category,

recipients may use funds for capital expenditures that support an eligible COVID-19 public health or economic response. For example, recipients may build certain affordable housing, and other projects consistent with the requirements in this final rule and the Supplementary Information.[1]

Per the Final Rule, eligible uses include: “Development, repair, and operation of affordable housing and services or programs to increase long-term housing security.”[2]

Further, Treasury’s Frequently Asked Questions (“FAQ”) #2.14 includes guidance regarding the development of affordable housing:

Under the final rule, “Development, repair, and operation of affordable housing and

services or programs to increase long-term housing security” is an enumerated eligible use to respond to impacts of the pandemic on households and communities.

Affordable housing projects must be responsive and proportional to the harm identified. This test may be met by affordable housing development projects—which may involve large expenditures and capital investments—if the developments increase the supply of long-term affordable housing for low-income households. While there may be less costly (or non-capital) alternatives to affordable housing development, a comprehensive response to the widespread housing challenges underscored by the pandemic will require the production of additional affordable homes, and targeted affordable housing development is a cost-effective and proportional response to this need.[3]

This FAQ underscores the need to focus on long-term solutions to affordable housing needs in the use of the CSLFRF assistance. 

CSLFRF award recipients and subrecipients should pay particular attention to the Guidance on Recipient Compliance and Reporting Responsibilities (“Reporting Guidance”) to ensure that uses of funds are eligible and comply with all applicable statutes at each stage of project development:

The Award Terms and Conditions of the SLFRF financial assistance agreement sets forth the compliance obligations for recipients pursuant to the SLFRF statute, the Uniform Guidance, Treasury’s final rule, and applicable federal laws and regulations. Recipients should ensure they remain in compliance with all Award Terms and Conditions.[4]

For housing development projects executed through CSLFRF to be considered and remain eligible, they must continually meet the program terms and conditions set forth in the Final Rule, including increasing the long-term supply of affordable housing. The Reporting Guidance further details compliance requirements for award recipients and subrecipients as follows:

As outlined in the Uniform Guidance at 2 CFR Part 200, Subpart E regarding Cost Principles, allowable costs are based on the premise that a recipient is responsible for the effective administration of Federal awards, application of sound management practices, and administration of Federal funds in a manner consistent with the program objectives and terms and conditions of the award.[5]

In addition to affordable housing, Treasury’s enumerated eligible uses include rehabilitation of commercial properties, storefront improvements, and façade improvements for disproportionally impacted small business.[6] Municipalities may also fund capital expenditures beyond those enumerated by Treasury if supported by a written justification.[7]

In summary, recipients and subrecipients of CSLFRF assistance should ensure that the federal funding for capital expenditures is used to address the negative effects of the public health emergency. Therefore, it is incumbent on recipients to include enforceable contract or grant provisions that mandate the funds be used to address these long-term negative effects and that prohibit the beneficiary from disposing of the property in the short term.

Last Updated: June 15, 2022