COMMUNITY DEVELOPMENT BLOCK GRANT

CDBG funds are allocated on a formula basis.

Upon reauthorizing CDBG in 1978, Congress instituted a dual formula to strengthen controls on how money was spent and to better serve communities with different types of problems. A city’s proportion of the overall CDBG allocation is either the average of the area’s fractions of the US’s total population, total poverty and total amount of housing overcrowding, or the average of the area’s fractions of the country’s total growth lag, total poverty, and total age of housing. Formula A typically benefits rapidly growing cities with high poverty that lack affordable housing. Formula B tends to benefit cities with large shares of old housing and low growth, including many affluent suburbs.

HUD calculates both formulas for all entitlement grantees and awards the larger amount, but Congressional appropriation has ultimate determination on program funding. These formulas have become less well matched to community need over time, and improvements or revisions have been proposed by several analytical reports.

More than 1,100 local and state governments, called “entitlement communities”, automatically qualify for the grant. Cities qualify if they have populations of at least 50,000 or are the principal city of a Metropolitan Area, as determined by the Office of Management and Budget. Counties qualify if they have populations of at least 200,000, excluding any entitlement cities, and are in a metropolitan area.They are required to submit allocation reports (showing to whom and where the money was spent) and quarterly reports to the United States Department of Housing and Urban Development. First, “not less than 70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons”. Secondly, funds must be spent on eligible activities, which are broadly defined as including “community development activities directed toward neighborhood revitalization, economic development, and improved community facilities and services”. Such activities may include “Acquisition of real property, Relocation and demolition, Rehabilitation of residential and non-residential structures, Construction of public facilities and improvements”, and more. Third, governments must follow a plan of project selection that includes citizen participation, especially by citizens who live in “areas in which the grantee proposes to use CDBG funds”.

There are a number of other distribution methods of CDBG funds besides entitlement communities. The 1978 re-authorization also required HUD to award 30% of all CDBG funds to states for grants to municipalities and counties that are not entitlement communities. This is often called the “Small Cities” program, because it includes many small cities and rural counties. Other programs include the CDBG Insular Area Program (for American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands), the CDBG Program Colonias Set-Aside, and the Neighborhood Stabilization Program.

Nominal levels of CDBG funding have remained fairly constant over time, but they have dramatically declined over the course of the program’s existence in inflation-adjusted terms, as can be seen in the figure to the right.

The CDBG program was enacted in 1974 by President Gerald Ford through the Housing and Community Development Act of 1974 and took effect in January 1975. Most directly, the law was a response to the Nixon administration’s 1973 funding moratorium on many Department of Housing and Urban Development (HUD) programs.[1]

President Ford emphasized the bill’s potential for reducing inefficient bureaucracy, as the grant replaced seven previous programs that were “too fragmented to provide comprehensive solutions to complex local needs”.[2] He also noted its potential for improving government effectiveness by “replacing Federal judgments on local development with the judgments of the people who live and work there”:[3] placing more decision-making power on local funding choices in the hands of local governments who “are most familiar with local needs”.[4] The CDBG was presented as explicitly meant to “redistribute influence from the federal bureaucracies to local governments”[5] – in Ford’s words, to “return power from the banks of the Potomac to people in their own communities”.[6]

It had bipartisan support, reportedly because liberal legislators shared its goal of extinguishing poverty and “urban blight” and conservative legislators appreciated the control the program placed in the hands of private investors and the reduction it made in the role of the United States government. Decentralizing control over community development appealed to some Democrats because the central administration of previous programs meant benefits often did not reach the targeted low-income communities,[7] while Republicans appreciated that the program was represented as meant to “limit the powers of the federal bureaucracy”,[8] a political and ideological presentation reflective of “growing public resentment of big government and big bureaucracy”.[9]

The law ultimately passed both houses with large bipartisan majorities.[10][11]

Later Congressional changes created additional small CDBG set-asides that fund programs in minority-serving universities (Section 107), in US territories such as Guam, and for large-scale rehabilitation loans (Section 108)