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Council hears that state CDBG‑DR rules are prompting property owners to back away from elevation projects
Summary
City manager warned state (ACCD) rules on CDBG‑DR elevation projects could require program‑income repayment on property sales and limit owner interest; council discussed reappraisal, pro‑rata approaches, deed covenants and the city attorney’s role.
City Manager Nicholas summarized recent state guidance for CDBG‑DR Round 2 that has prompted many North End property owners to withdraw from elevation projects. Under the guidance managers described, a multifamily rental elevated with CDBG‑DR funds could be required to remain an affordable multifamily rental for a 20‑year period and sales within the program‑income window may force the city to return funds to ACCD proportional to the state's share of project cost.
The manager gave numerical examples to illustrate the potential equity impact for owners. He said "if ACCD contributed all of that elevation grant, all of those $300,000...ACCD would recover a 100% of those sale proceeds," and councilors called the scenario "pretty jarring." Several owners have already backed out of elevation options; the city is examining reappraisal timing, pro‑rata recovery formulas and whether deed covenants or restrictions could limit city liability if ACCD seeks repayment. The manager said the city attorney is involved to draft covenants and deed restrictions.
Councilors and staff flagged the risk that the state agreement is with the city, not individual property owners, so any recovery demand would come to the city. No final policy change was made; staff will continue negotiating with ACCD and inform the council before the Feb. 10 hearing and the Feb. 27 application deadline.
The issue bears on the scale of the North End application (buyouts, acquisitions, elevations) and the city’s ability to preserve affordable multifamily rental housing while using federal disaster recovery funds.
