A CDBG rental project may go below 51 percent LMI occupancy only for new construction of non-elderly multifamily housing, at 20 percent minimum, with CDBG's cost share capped at the LMI unit share

cdbg.set_aside.twenty_percent_exception_to_the_fifty_one_percent_lmh_test · v1.0.0

The LMH national objective normally requires that at least 51 percent of the units in a structure of more than two units be occupied by low- and moderate-income households at affordable rents. 24 CFR 570.208(a)(3)(i) is the only route below that line for a rental deal, and all three of its conditions must hold together: the assistance must be for an eligible activity TO REDUCE THE DEVELOPMENT COST OF THE NEW CONSTRUCTION OF A MULTIFAMILY, NON-ELDERLY RENTAL HOUSING PROJECT; not less than 20 percent of the units must be occupied by low- and moderate-income households AT AFFORDABLE RENTS; and the proportion of the project's total development cost borne by CDBG funds must be NO GREATER THAN the proportion of units that will be occupied by LMI households. Three consequences follow that deals routinely get wrong. Rehabilitation cannot use this exception - it is new construction only. An ELDERLY project cannot use it, so a senior building must hit the full 51 percent. And the cost-share cap is a hard proportionality test, so a project at exactly 20 percent LMI units may take CDBG for at most 20 percent of total development cost. Where the exception is used, 570.506(b)(4)(vi) requires records demonstrating that the activity qualifies under these special conditions.

Confidence

high

Effective from

1995-11-09

Consequence model

agency finding with cure

Last reviewed

2026-08-22