HUD Archives: News Releases


Kristine Foye
(617) 994-8218
For Release
Thursday
June 8, 2006

HUD OFFERS PROPOSAL TO REFORM COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
Under Proposal, Lowell's Grant Would Increase by 19 percent

Across America, there are areas of high poverty and community distress that currently receive less federal funding than more affluent communities. The reason? Funding formulas intended to measure need haven't changed since
1978 while the country has undergone significant and dynamic demographic and socio-economic change. To correct this funding disparity, the U.S. Department of Housing and Urban Development recently offered Congress The Community Development Block Grant (CDBG) Reform Act of 2006 that seeks to change to the underlying formulas
to CDBG.

"More than 30 years ago, CDBG was designed to target the needs of our cities, counties and states," said
Secretary Alphonso Jackson. "It's increasingly clear that an outdated formula that once measured the needs of
urban America no longer reflects the modern needs of today's communities. This is about fairness. Communities
with the greatest needs deserve more funding compared to relatively less needy places. It's only fair."

Under the proposal, Lowell's Community Development Block Grant would increase by 19 percent.  Under the current formula, the city receives $2,431,000, but under the proposal that amount would increase to $2,893,000.

A Case for Formula Fairness
Last year, HUD published CDBG Formula Targeting to Community Development Need, the Department's fifth major analysis of how the hallmark block grant program meets the needs of urban America. Using data on poverty, fiscal distress, economic decline, crime, unemployment, and housing problems, HUD found stark examples of areas that
are currently under funded based upon their actual needs. Likewise, other communities receive relatively large
grants yet have relatively few community development needs.

For example, Congress modified CDBG's formulas in 1978 and determined that the number of homes built before
1940 was a good measure of community development need. But nearly three decades later, placing so much
emphasis on the number of older homes effectively penalizes some high-need cities like Detroit, Michigan; East St. Louis, Illinois; and, Gary, Indiana. Over the years, these communities were very aggressive in tearing down older
slum housing, one of the statutory goals of the program, and consequently receive less funding for their efforts. Meanwhile, more affluent bedroom communities receive relatively more funding primarily because they have a significant amount of rehabilitated older housing.

The CDBG formula allocates funding in such a way that many high-need areas receive similar grants compared to
more affluent communities. Miami, Florida; Compton, California; Macon, Georgia; Passaic, New Jersey; and, Memphis, Tennessee are just a few of the high-need communities that are significantly under funded based on their actual needs.

CDBG's formula currently rewards towns with large college student populations by including the incomes of these
full-time dependant students in calculating poverty. As a result, the poverty rates in these college and university towns appear high. By excluding the incomes of full-time dependant students who are financially supported by their parents, the poverty rate in these college towns drops to a level which is much more reflective of that community's actual need.

HUD proposes to change the complex dual formula system that currently allocates funding to a simpler single
formula. The proposed CDBG formula would use five variables to allocate funds:

  • The number of households living in poverty, excluding full-time dependant college students.
  • The number of overcrowded housing units.
  • The number of female head of households with minor children.
  • The number of homes 50 years or older occupied by a low-income family.
  • The per capita income of the community relative to the per capita income of its metropolitan area.

In addition to modernizing CDBG's formula, HUD proposes to create a minimum grant threshold for entitlement communities to be eligible for an annual allocation. Currently, some communities receive a relatively small grant
each year. It's been HUD's experience that smaller grants allocated to hundreds of communities dilute CDBG's
impact. Smaller grantees that do not meet this new threshold may receive larger grants by prevailing on their
CDBG-funded programs at the state level or by joining with their urban county to create a new combined
entitlement community. Based on the appropriation level for fiscal year 2006, The CDBG Reform Act would set
the minimum grant threshold at $518,000.

Improving Performance Measurements
The CDBG Reform Act is designed to further enhance performance measurement and accountability in the block
grant program by holding communities more accountable in fostering suitable living conditions, developing affordable housing, and creating economic opportunity. To help communities in meeting these objectives, HUD intends to train more than 2,000 local housing and community planners in 15 training sessions around the country.

Challenge Grants
HUD also proposes to offer $200 million in "challenge grants" to be awarded to certain entitlement communities
that target their CDBG funding to areas of concentrated need. These challenge grants must be used in targeted neighborhoods as part of a community's strategy to expand economic opportunities in these distressed areas.
These challenge grants may also be used to create affordable housing for low- and moderate-income households when part of a strategy that expands economic opportunities in areas of particular need.

Consolidation
The CDBG Reform Act also seeks to consolidate several programs that duplicate the broad program goals of CDBG. Those programs include: Brownfields Economic Development Initiative (BEDI); Rural Housing and Economic Development Program; and, Section 108 Loan Guarantee Assistance Program.

Since 1974, HUD's Community Development Block Grant (CDBG) Program has awarded approximately $113 billion to state and local governments to target their own community development priorities. The rehabilitation of affordable housing and construction of public facilities and improvements have traditionally been the largest uses of the
grants, although CDBG is also an important catalyst for job growth and business opportunities. CDBG funds are distributed by formula around the country based on a community's population, poverty, the age of its housing
stock, and extent of overcrowded housing.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet
and espanol.hud.gov.

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Content Archived: June 27, 2011