Community Development Block Grant
February 1, 2008
By Ed Gramlich, Director of Outreach, National Low Income Housing Coalition
The Community Development Block Grant (CDBG) program is a federal program aimed at creating viable communities by providing funds to improve housing, the living environment and economic opportunities principally for persons with low and moderate incomes. At least 70% of the CDBG funds received by a jurisdiction must be spent to benefit people with low and moderate incomes. The remaining 30% can be used to aid in the prevention or elimination of slums and blight or to meet an urgent need such as hurricane, earthquake or flood relief.
The CDBG program was established under Title I of the Housing and Community Development Act of 1974, which combined several existing programs (such as Urban Renewal and Model Cities) into one block grant. It is administered by the U.S. Department of Housing and Urban Development’s (HUD) Office of Community Planning and Development (CPD). Seventy percent of each annual appropriation is automatically distributed to cities with more than 50,000 in population and counties with more than 200,000. These are called entitlement jurisdictions. The remaining 30% goes to states for distribution to their small towns and rural counties.
Intent
The primary objective of the CDBG program is to create viable communities by providing funds to improve housing, the living environment and economic opportunities for persons with low and moderate incomes. The emphasis on low income people is reinforced by the formulas that determine how much money each entitlement jurisdiction and state will receive. The formulas are based on factors heavily weighted by the degree of poverty and indicators of poor housing conditions in a jurisdiction.
Beneficiaries
At least 70% of the CDBG funds received by a jurisdiction must be spent to benefit people with low and moderate incomes. The remaining 30% can also benefit lower income people, or it can be used to aid in the prevention or elimination of slums and blight (often used by local governments to justify downtown beautification) or to meet an urgent need such as hurricane, earthquake or flood relief.
“Low and moderate income” is defined as household income below 80% of the area median income (AMI), which can be quite high. For instance, in Cincinnati 80% of AMI was $51,700 in 2007. AMI in some jurisdictions is so high (the AMI in the Lowell, MA, metro area was $82,400 in 2007) that HUD caps the qualifying household income at the national median income, which was $59,600 for a four-person household in 2007.
A CDBG activity is counted as benefiting people with low and moderate incomes if it meets one of four tests:
Housing Benefit. If funds are spent to improve a single-family home, the home must be occupied by a low or moderate income household. In multifamily buildings, at least 51% of the units must be occupied by low or moderate income households. In addition, the housing must be affordable, as defined by the jurisdiction. In recent years, about 24% of CDBG funds have been used for some type of housing program, which is a decline from 35% in previous decades.
Area Benefit. Some CDBG-eligible projects, such as road and park improvements, can be used by anyone. To judge whether such a project primarily benefits lower income people, HUD looks at its service area. If 51% of the residents in the activity’s service area are lower income people, then HUD assumes lower income people benefit. The regulations provide several ways to challenge that assumption. The primary challenge is to show that the full range of direct effects of the activity do not benefit lower income people.
Limited Clientele. A service or facility assisted with CDBG funds must be designed so that at least 51% of its users have lower incomes. The three most common ways to meet this test are: 1) limit participation to people who are lower income; 2) show that at least 51% of the beneficiaries are lower income; or 3) serve a population that HUD presumes is lower income, including abused children, domestic violence victims, people with disabilities, illiterate
individuals, migrant farm workers and senior citizens. Advocates can challenge a presumed benefit claim if an activity does not really benefit low income people.
Job Creation or Retention. If job creation or retention is used to justify spending CDBG money, then at least 51% of the resulting jobs on a full-time-equivalent basis must be filled by or be available to people with lower incomes. “Available to” means either the job does not require special skills or a particular level of schooling or the business agrees to hire and train lower income people. Lower income people must receive first consideration for the jobs.
Eligible Activities
CDBG funds can be used for a wide array of activities, including: housing rehabilitation (such as loans and grants to homeowners, landlords, nonprofits and developers); new housing construction by certain neighborhood-based nonprofits; downpayment assistance and other help for first-time home buyers; lead-based paint detection and removal; purchasing land and buildings; constructing or rehabilitating public facilities such as shelters for people experiencing homelessness or victims of domestic violence; making buildings accessible to the elderly and disabled; public services such as job training, transportation, healthcare and child care (public services are capped at 15% of a jurisdiction’s CDBG funds); capacity-building for nonprofits; rehabilitating commercial or industrial buildings; and loans or grants to businesses.
Public Participation
Every jurisdiction must have a public participation plan that describes how the jurisdiction will provide for and encourage involvement by low income people. Public hearings are required at all stages of the CDBG process. Hearings must give residents a chance to state community needs, review the proposed uses of CDBG funds and comment on the past uses of these funds. There must be adequate public notice to people who are likely to be affected by CDBG-funded projects, and people must be given reasonable and timely access to information. In particular, advocates should get a copy of the draft Annual Action Plan (see the Consolidated Plan chapter) and the latest Grantee Performance Report (GPR). Many jurisdictions will try to deny the public copies of the GPR; it must be made available. The GPR also goes by the name “IDIS Report C04PR03.”
Funding
In FY08, CDBG received an appropriation of $3.593 billion, a decrease from FY07’s funding of $3.711 billion.
Making CDBG Work in Your Community
Because only 70% of CDBG funds have to benefit low or moderate income people and because all of the funding could benefit moderate income people, many of the lowest income households never benefit from the program. Locally, people can organize to get 100% of a jurisdiction’s CDBG to be used for activities that benefit lower income people and can strive to have more used to benefit extremely low income people.
The public participation process can be used to organize and advocate for more CDBG dollars to be used for the kinds of projects they really want in their neighborhoods and then monitor how funds are actually spent. To do this, obtain and study the jurisdiction’s Annual Action Plan, which lists how a jurisdiction plans to spend CDBG funds in the upcoming year, and the Grantee Performance Report (C04PR03), which lists how CDBG money was spent in the previous year.
For More Information:
National Low Income Housing Coalition • 202-662-1530 • www.nlihc.org
HUD’s Entitlement Cities Division • 202-708-1577 • www.hud.gov/offices/cpd/communitydevelopment/programs/entitlement/index.cfm
HUD’s States and Small Cities Division • 202-708-1322 • www.hud.gov/offices/cpd/communitydevelopment/programs/stateadmin/index.cfm
