Roanoke City Councilman Alvin Nash said Wednesday that to avoid violating the federal conflict of interest law, the Blue Ridge Housing Development Corp. will forgo two types of federal grants that have in recent years provided the nonprofit group with about half a million dollars of annual income.

The U.S. Department of Housing and Urban Development last week denied an exemption from the federal conflict of interest law to Nash, who was appointed in March to fill the remainder of former Councilman Alfred Dowe's term.

Blue Ridge Housing Development Corp., of which Nash is president, receives federal Community Development Block Grants or HOME Investment Partnerships Program subgrants, which are administered by the city. In the 2006-07 fiscal year, the agency received $443,268 in the grants.

The grants have been used by Blue Ridge for housing construction and rehabilitation projects, Nash said.

Federal regulations prohibit members of elected boards that administer the grants from receiving the federal funding.

Nash said that rather than resign from the city council or from Blue Ridge, the nonprofit group would instead forgo the grants for the remainder of his term, which ends in June 2010.

"We have enough on the table in current contracts that would last for the next couple years," Nash said. "We may revisit this later and I may make another decision, but right now I don't want to make a career decision just from this."

David Nixon, who serves as a Blue Ridge board member as well as its vice president of legal affairs, said that the agency has about $900,000 from grants that were awarded before Nash's appointment. That funding, which according to HUD officials does not contribute to a conflict of interest, will sustain another 18 to 24 months of projects.

That would carry Blue Ridge near or even through the end of Nash's term on the city council. But according to the HUD letter denying his request for a conflict of interest exemption, he would be ineligible to receive the grants for an additional year after that.

The agency appears to have been moving away from its overt reliance on the federal grants: In the 2005-06 fiscal year, they constituted 55 percent of its total income. In the 2006-07 fiscal year, that number dropped to 32 percent.

Blue Ridge board Chairwoman Cyndi Beach Stultz said that Blue Ridge views the change "as an opportunity."

"This forces us to move out of the comfort zone of CDBG and HOME funds into some areas that may benefit us better in the long run," Stultz said. "Change is always a little bit scary but sometimes change can be the best thing that happens to you."

Nash said those changes include seeking "alternate funding" sources and looking for projects in localities other than Roanoke, naming Danville, Salem and Roanoke County as possibilities.

It's unclear whether HUD will allow the use of CDBG and HOME grants from other localities.

"Sometimes these opportunities come up as a time to look at where you are and what you're doing," Nash said.

"With the support of my board and current council members, I think my decision was tough but something we can live with over the next couple of years."

The 11 members of the Blue Ridge board unanimously approved Nash's decision.

"Let's look at the pros in having someone like Alvin Nash on city council," Stultz said. "That can bring a focus and concentration on affordable housing that no one's ever been able to bring to the table before."