We are planning on using ARP funds for an Owner/Occupied Housing Rehabilitation Program targeting households earning up to 120% of the Area Median Income (“AMI”). Are ARP funds limited by a household’s AMI?

The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (the “Rule”) of the American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) lists “home repairs” as an eligible use of funds as a form of “assistance to households.”[1]  

Additionally, the Rule states that:

[I]n considering whether a potential use is eligible under this category, a recipient must consider whether, and the extent to which, the household has experienced a negative economic impact from the pandemic. In assessing whether a household or population experienced economic harm as a result of the pandemic, a recipient may presume that a household or population that experienced unemployment or increased food or housing insecurity or is low- or moderate-income experienced negative economic impacts resulting from the pandemic...Cash transfers must be reasonably proportional to the negative economic impact they are intended to address. Cash transfers grossly in excess of the amount needed to address the negative economic impact identified by the recipient would not be considered to be a response to the COVID-19 public health emergency or its negative impacts.[2]

“Moderate-income” is not a defined term in the Rule, and there is no other specific standard currently described by Treasury on how to support the determination of disproportionate impact. However, the United States Code defines the term “persons of moderate income” as “families and individuals whose incomes exceed 50 percent, but do not exceed 80 percent, of the median income of the area involved, as determined by the Secretary with adjustments for smaller and larger families.”[3]

Generally, the Rule and other current Treasury guidance presents forms of “assistance to households” as grants or cash transfers. There is no explicit guidance indicating whether loans are also potentially eligible forms of assistance to households. However, loans and revolving loan programs are noted as allowable assistance to small businesses and non-profits (among other uses),[4] so the lack of affirmative allowability of loans as forms of assistance to households in the guidance is notable. 

While the Rule does allow for flexibility in determining the most pressing needs of each community, Treasury does encourage recipients to “provide assistance to those households, businesses, and non-profits in communities most disproportionately impacted by the pandemic.”[5] There is no specific requirement for recipients to limit assistance to households based on income, or income relative to an area’s median income.

The municipality should consider documenting its assessments to what extent low- or moderate-income households experienced negative economic impacts resulting from the pandemic and whether cash transfers are reasonably proportional to the negative economic impact they are intended to address. Likewise, if the households receiving aid under this program earn more than the moderate-income threshold, the municipality should document whether, and the extent to which, the household receiving funds experienced negative economic impacts of the pandemic, ensuring that the support provided to the household is proportionate to the economic harm suffered as a result of the COVID-19 pandemic.