Would purchasing vacant land or conveying vacant land to non-profit entities be eligible uses in an attempt to obtain affordable and attainable housing under the ARP?

Purchasing Vacant Land

Pursuant to guidance issued by the U.S. Department of the Treasury (“Treasury”) in the Final Rule, demolition and greening (or other structure or lot remediation) of vacant or abandoned properties, including residential, commercial, or industrial buildings, is an eligible use of the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund (collectively, the “CSLFRF”). Further, costs associated with acquiring and securing legal title to vacant or abandoned properties and other related costs are permitted to “position the property for current or future productive use.”[1]

In response to public comment on the Interim Final Rule, Treasury underscored the need for safe, affordable housing and healthy neighborhood environments to restore public health and alleviate the pandemic’s negative economic effects, primarily on disproportionately impacted communities. “As such, certain services for vacant or abandoned properties are eligible.”[2] Eligible activities in addition to those listed above include:

• Rehabilitation, renovation, maintenance, or costs to secure vacant or abandoned properties to reduce negative impacts;
• Removal and remediation of environmental contaminants or hazards from vacant or abandoned properties, when conducted in compliance with applicable environmental laws or regulations;
• Demolition or deconstruction of vacant or abandoned buildings (including residential, commercial, or industrial buildings) paired with greening or other lot improvement as part of a strategy for neighborhood revitalization;
• Greening or cleanup of vacant lots, as well as other efforts to make vacant lots safer for the surrounding community;
• Conversion of vacant or abandoned properties to affordable housing; and
• Inspection fees and other administrative costs incurred to ensure compliance with applicable environmental laws and regulations for demolition, greening, or other remediation activities.[3]

As noted above, demolition and greening (or other structure or lot remediation) of vacant or abandoned properties, including residential, commercial, or industrial buildings, are eligible uses of funds. Treasury encourages recipients to undertake these activities to: (i) determine how the cleared property will be used to benefit the disproportionately impacted community; and (ii) integrate them as part of a neighborhood revitalization strategy. Activities under this eligible use should benefit current residents and businesses who experienced the pandemic’s impact on the community.[4]

Conveying Vacant Land to Nonprofit Entities

One of the four main eligible use categories of CSLFRF is “responding to the public health emergency or its negative economic impacts”[5] and the related subcategory, “assistance to nonprofits.”[6] Within the subcategory, Treasury specified the following eligible uses: “programs, services, or capital expenditures, including loans or grants to mitigate financial hardship such as declines in revenues or increased costs, or technical assistance.”[7] Treasury also expanded the definition of “nonprofit” in the Final Rule to include “501(c)(3) organizations and 501(c)(19) organizations.”[8]

To assist municipalities in determining the eligibility of nonprofit entities, Treasury streamlined its guidance regarding the identification of eligible populations: “the final rule maintains the ability for recipients to demonstrate a public health or negative economic impact on a class and to provide assistance to beneficiaries that fall within that class.”[9] Further, the Final Rule carries with it a presumption “that nonprofits operating in Qualified Census Tracts (‘QCTs’), operated by Tribal governments or on Tribal Lands, or operating in the U.S. territories were disproportionately impacted by the pandemic.”[10]

Under this guidance, CSLFRF recipients may determine that certain nonprofits were impacted or disproportionately impacted by the pandemic and provide responsive services.

Treasury also provided that nonprofits may receive funds from CSLFRF award recipients as both beneficiaries as well as subrecipients:

The final rule maintains the ability for the recipient to transfer, e.g., via grant or contract, funds to nonprofit entities to carry out an eligible use on behalf of the recipient… (e.g., developing affordable housing). When a recipient provides funds to an organization to carry out eligible uses of funds, the organization becomes a subrecipient. In this case, a nonprofit need not have experienced a negative economic impact in order to serve as a subrecipient.[11]

The guidance also instructs that nonprofits serving as subrecipients must comply with reporting requirements. Treasury states, “[a] nonprofit entity that receives a transfer from a recipient is a subrecipient. Per the Uniform Guidance, subrecipients must adhere to the same requirements as recipients.”[12]

Conclusion

While the Final Rule does not include language specifically regarding conveyance of land to nonprofit entities, it does include ways in which CSLFRF awards may be used to purchase vacant land to develop affordable housing. Award recipients should ensure compliance with the Final Rule, Treasury’s Reporting and Compliance Guidance,[13] and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”)[14] when transferring funds to entities as subrecipients, including nonprofit entities.

Last Updated: January 31, 2022