Community Development Block Grants: Impact and Funding Needs: A Report of the CDBG Coalition

Table of Contents

• Executive Summary
• CDBG Program Overview
• Distribution of Funding
• National Objectives
• Serving Low- and Moderate-Income People
• Local Flexibility and Partnerships
• Eligible Activities
• CDBG Works: Program Impact
• Leveraging
• Local Infrastructure .
• Affordable Housing
• Services
• Economic Development
• Job Creation
• Diminished Program Funding and the Need for CDBG
• Funding
• CDBG Needs Survey
• CDBG at Work: Project Examples
• Appendix: List of Survey Respondents

CDBG Program Overview

CDBG is a dynamic federal grant program that supports many elements and aspects of creating and sustaining healthy, functioning communities. The CDBG Program provides annual grants to cities, counties, states and insular areas to provide decent housing, a suitable living environment, and expand economic opportunities, principally for low- and moderate-income persons (LMI). Program funding is used to assist LMI people and neighborhoods through a variety of eligible activities. CDBG eligible activities are initiated and developed at the local level based upon a community’s needs and priorities.

CDBG remains the principal source of federal revenue for states, localities and their program partners to use in assisting low and moderate-income people and to prevent physical, economic, and social deterioration in neighborhoods and communities across the country.

CDBG is far reaching. For FY 2019, 1,268 grantees (local and state governments and insular areas) received an annual CDBG allocation. An estimated additional 7,250 local governments have access to CDBG funding.

CDBG Facts

• Created in 1974
• First program allocations distributed in 1975
• CDBG allocation in 1975: $2.4 billion
• CDBG allocation in 2019: $3.3 billion
• Number of CDBG grantees in 1975: 594
• Number of CDBG grantees in 2019: 1,268

How Is CDBG Distributed?

Congress appropriates funding for CDBG annually as part of the Transportation, Housing and Urban Development (THUD) appropriation bill, with the funds available under the heading of “Community Development Fund” (CDF). Insular areas (Guam, American Samoa, Northern Mariana Islands, and the U.S. Virgin Islands) receive $7 million annually pursuant to statutory directive. The remaining funding is split between local jurisdictions (entitlement communities) (70 percent) and states (30 percent). Entitlement grantees are metropolitan cities with populations greater than 50,000, designated principal cities of metropolitan statistical areas, and urban counties with populations greater than 200,000 (excluding the population of entitlement cities). Entitlement grantees distribute the funds they receive to local non-profit organizations and other subrecipients. States provide funding directly to small cities (non-entitled communities) in rural areas. Puerto Rico falls into the state category while the District of Columbia falls into the local entitlement category.

The U.S. Department of Housing and Urban Development (HUD) determines the annual amounts each grantee receives based on formulas that use the following factors: poverty, population, overcrowded housing, pre-1940 housing, and growth lag.

National Objectives

1. Principally benefit LMI persons
2. Aid in the prevention of slums or blight
3. Meet an urgent community development need

Serving Low and Moderate-Income People

Providing benefit to low- and moderate-income persons is the primary objective for the CDBG program and grantees are statutorily required to expend at least 70 percent of their CDBG funds for activities that benefit low- and moderate-income people. It should be noted that CDBG grantees routinely expend 95 percent of their funding on low-mod benefit activities.

• 51-80% of area median income = moderate-income
• 30-50% of area median income = low-income
• Under 30% of area median income = very low-income

Local Planning

State and local governments work with their local program partners and harness input from the public to develop community development programs that invest in low- and moderate- income people and neighborhoods. Grantees must develop a detailed plan known as the Consolidated Plan that provides information on community needs, priorities and activities to be funded using CDBG and other resources over a three to five year period. Grantees engage the local community through citizen participation meetings and forums to help form the plan. CDBG grantees subsequently work with a wide network of local partners (program subrecipients), mainly non-profit organizations, to deliver program activities. The Consolidated Plan is implemented through Annual Action Plans which provide a summary of the activities and resources that will be used annual to address the priority needs in the Consolidated Plan. Further, grantees report on accomplishments and progress toward meeting the Consolidated Plan goals in the Consolidated Annual Performance and Evaluation Report to HUD.

Eligible Activities

The CDBG program provides the flexibility to fund a wide range of activities that focus on affordable housing, economic development, public improvements and public services.

Public Facilities and Improvements. CDBG provides resources for communities to address slum and blighting conditions and the deterioration of infrastructure and community facilities. Nationally, CDBG grantees routinely expend over 30% of funds on public facilities and improvements.

Affordable Housing. The program focuses on the elimination of conditions which are detrimental to health, safety and public welfare primarily through rehabilitation of single family and rental properties as nearly 25% of CDBG funding annually is devoted to these activities. The program also focuses on preserving existing affordable housing and expanding the affordable housing stock available to low- and moderate- income people.

Public Services. The CDBG program aids in the expansion and improvement of community services that assist in the development of viable communities. Grantees can use up to 15% of their annual CDBG allocation on public services.

Economic Development. The program tackles physical commercial and economic distress and stimulates private investment.

Section 108 Loan Guarantee. Grantees can borrow up to five times their CDBG allocation to develop larger projects through the Section 108 Loan Guarantee component of the CDBG program. Eligible activities are a subset of those eligible under CDBG and focus on public facilities/infrastructure, economic development and housing. HUD facilitates financing of the loans via private sector lending sources, providing highly competitive interest rates and terms up to 20 years. A well-designed Section 108 activity or project can have a substantial expansive impact upon the scope and benefit of a jurisdiction’s CDBG program.