Legislative Update: Duplication of BenefitsCommunity Development Block Grant Disaster Recovery (CDBG-DR) Policy Update
In February 2018, the Department of Housing and Urban Development (HUD) made an important update to the way that Small Business Association (SBA) disaster loans are assessed, a change which applies to duplication of benefits (DOB). A DOB occurs when any person, business, or entity uses federal funds to cover losses for which they have already received assistance from another source.
SBA provides low-interest disaster loans to businesses and homeowners. These loans help homeowners meet their immediate needs in the months, and sometimes years, it can take after a disaster for CDBG-DR assistance to become available. However, SBA loans must be paid back, while CDBG-DR grants do not. Therefore, it may be in homeowners’ best financial interest to wait for CDBG-DR funding if they can afford to do so.
Previously, the full SBA loan amount offered to a homeowner would be counted against the grant money they could receive from HUD — even if they only took a portion of the money offered. As a result of the policy update, only the money actually received by the homeowner will now be assessed as a DOB. This is important because homeowners can now take just the SBA money they need to make their homes habitable while waiting for the CDBG-DR funding that doesn’t need to be paid back to be released.
For example, if a homeowner needs $100,000 to repair or rebuild their home, they may be offered an $80,000 SBA loan but choose to only accept $50,000 needed to make immediate repairs. Previously, they would have only been eligible to receive $20,000 from HUD to meet their remaining need, because HUD would have considered the entire $80,000 SBA loan offered in their calculations. However, with passage of the new legislation, only the $50,000 of the SBA loan actually used will be taken into account, and the homeowner is still eligible to receive $50,000 from HUD.
This update was passed in the Bipartisan Budget Act of 2018.
The following is excerpted from the Bipartisan Budget Act of 2018, released in February 2018. The excerpt can also be found beginning on page 93, line 19 of the Act.
“That with respect to any such duplication of benefits, the Secretary and any grantee under this section shall not take into consideration or reduce the amount provided to any applicant for assistance from the grantee where such applicant applied for and was approved, but declined assistance related to such major declared disasters that occurred in 2014, 2015, 2016, and 2017 from the Small Business Administration under section 7(b) of the Small Business Act.”