The Community Development Block Grant (CDBG) program, initially authorized by the Housing and Community Development Act of 1974, was one of the centerpieces of President Richard Nixon’s New Federalism reforms designed to decentralize decision-making responsibilities to state and local governments. The CDBG program consolidated seven existing categorical grant programs—including urban renewal and Model Cities—into a block grant for community development, with funding distributed on an annual basis to eligible jurisdictions.
The statute established two categories of funding under CDBG—metropolitan (entitlement) and nonmetropolitan (discretionary). Entitlement jurisdictions, which included all central cities, all cities with populations of 50,000 or more, and urban counties with a population of at least 200,000 that were also authorized by their state governments to undertake housing and community development activities, were guaranteed block grant funds on an annual basis as determined by a formula. Communities that did not qualify for entitlement status were permitted to apply for discretionary funding under the Small Cities component of the program.
In an effort to direct a greater share of CDBG funding to needier jurisdictions, Congress added a second formula when the program was reauthorized in 1977. Funding for entitlement jurisdictions is distributed through a dual formula system, with communities receiving their grant based on one of two formulas: formula A, which is based on population, overcrowded housing, and poverty; or formula B, which is based on growth lag, age of housing, and poverty. Entitlement communities receive their grant through whichever formula yields the larger grant, though all grants are prorated down to insure that total funding falls within the amount appropriated by Congress.
The proposal that President Nixon sent to Congress initially conceived of CDBG as a special revenue-sharing program, whereas the Congress called its proposal a “block grant.” These differences in perception were more than just semantics. At the core was the question of how much control the federal government would have over recipient jurisdictions—particularly on the front-end or application review stage—and the extent to which communities should be guided by federal goals and objectives in determining how they would use their block grant funds. While the legislation that was signed into law involved compromises on both sides, the program that emerged was much closer to the ideal type of a block grant than revenue sharing. The legislation called for a detailed annual application and front-end review by federal officials and also required each entitlement jurisdiction to develop a community development program that was consistent with national objectives. Section 104(b)(2) of the legislation identified three primary objectives for the CDBG program: to (1) “give maximum feasible priority to activities which will benefit low- or moderate-income families,” (2) “aid in the prevention or elimination of slums or blight,” and (3) “meet other community development needs having a particular urgency.”
Interpretation of the meaning of those objectives and the relative importance of them (i.e., should one objective be more important than the others?) was the source of considerable tension between Congress, the executive branch, and select entitlement jurisdictions during the early years of the program. Generally, Republican administrations (such as Ford and Reagan) took a “hands-off ” interpretation of the legislation and gave entitlement communities broad discretion in the design and administration of their community development programs. When President Jimmy Carter took office in 1977, HUD moved quickly to tighten the social and geographic targeting objectives of the CDBG program, placing strong emphasis on insuring that CDBG funds were being directed to activities that would primarily benefit low- and moderate-income families. Following the election of Ronald Reagan in 1980, HUD moved quickly to substantially relax the application and front-end review requirements and also shifted its position on the three national objectives, choosing to treat them as “coequal” objectives rather than give primary importance to the objective of primarily benefiting low- and moderate-income families.
The Reagan administration also succeeded in changing the nature of the discretionary portion of the CDBG program, transferring control over the distribution of funds to nonentitlement cities from the federal government to the states through the creation of a state-administered Small Cities Community Development Block Grant program.
In fiscal 2005, $2.9 billion in CDBG funds were awarded to more than 1,100 entitlement jurisdictions, including 614 central cities, 332 suburban cities, and 165 urban counties. The largest grants were awarded to New York City ($207 million), Chicago ($95 million), and Los Angeles ($83 million). Overall, 13 cities received block grants of $20 million or more.
CDBG funds are used for a wide variety of purposes by recipient jurisdictions. In fiscal 2004, one-third of the $4.7 billion spent by all CDBG recipients were used for public facilities and improvements, 24 percent was spent on housing activities, 11 percent for public services, 9 percent for economic development, and 14 percent for planning and administration. The single largest program use among entitlement cities was housing (27 percent), predominantly the rehabilitation of owner-occupied housing, followed closely by public improvements (24 percent). More than half of the funds spent through the state-administered portion of the CDBG program for nonentitlement communities was awarded for public improvements and facilities (56 percent) followed by housing (16 percent) and economic development (15 percent) activities.
Paul R. Dommel and Associates, Decentralizing Community Development (Washington, DC: Brookings Institution, 1982); Edward T. Jennings Jr., Dale Krane, Alex N. Pattakos, and B. J. Reed, From Nation to States: The Small Cities Community Development Block Grant Program (Albany: State University of New York Press, 1986); Michael J. Rich, Federal Policymaking and the Poor: National Goals, Local Choices, and Distributional Outcomes (Princeton, NJ: Princeton University Press, 1993); Christopher Walker, Paul R. Dommel, Harry P. Hatry, Amy Bogdon, and Patrick Boxall, Federal Funds, Local Choices: An Evaluation of the Community Development Block Grant Program (Washington, DC: Urban Institute, 1994); and Christopher Walker, Christopher Hayes, George Galster, Patrick Boxall, and Jennifer E. H. Johnson, The Impact of CDBG Spending on Urban Neighborhoods (Washington, DC: Urban Institute, 2002).