Community Development Block Grants at 40: Time for a Makeover

Michael J. RichEmory University

Department of Political ScienceCenter for Community Partnerships

Urban Affairs Association n San Antonio, TX n March 21, 2014

Context for ReformProblems• Number of grant programs

tripled between 1960 and 1968• Grants tended to go to special

purpose governments• Duplication, overlap, narrow

categories of aid, variable matching rates, funding uncertainty, grantsmanship v. need

• Federal government’s role become “bigger, broader, deeper”

Solutions• Creative Federalism Hearings

– Mayors called for block grants

• Nixon’s domestic policy agenda– Executive branch reorganization

• 4 “super” agencies including Community Development

– Intergovernmental reform• New Federalism• General Revenue Sharing• Six special revenue sharing programs

that would consolidate 129 programs, about half of all federal aid at the time

CDBG Structural FeaturesFeature Nixon Proposal CDBG

Grant type Special revenue sharing Block grant

Scope Community development Community development

Eligibility Local governments Local governments

Funding distribution Formula Formula

Application None Yes

National goals None Yes

Use of funds Locally determined Locally determined within federal guidelines

Grant consolidation 6 programs 8 programs

Housing and Community Development Act of 1974Passed Senate, 80-4Passed House of Representatives, 377-21

CDBG: Views from Washington

• Swinging pendulum between categorical grant and general revenue sharing

• Presidential administrations (and Congress) oscillated on key features of CDBG

• Despite bipartisan consensus in legislative enactment, many differences remained (emerged) during implementation

• These differences largely centered on the federal role

Points of Contention

• “Three national objectives”– Maximum feasible priority to activities which will

benefit low- or moderate-income families– Aid in the prevention or elimination of slums or

blight– Meet other community development needs

having a particular urgency• Social targeting: 1 of 3 or primary goal?• Extent of Federal review and oversight

Carter Administration (1977-1980)What Happened in CDBG• 1977 Legislative changes– Dual Formula allocation system to increase targeting to

distressed cities and counties– Economic development as an eligible activity

• Administrative changes– Social targeting

• Application review—conditional approvals

– Geographic targeting—NSAs• Restricted public services to NSAs

– Citizen participation plan

Reagan Administration (1981-1988)What Happened in CDBG– Deregulating CDBG

• Application and HUD review eliminated• Social targeting—eliminated percentage threshold reviews• Geographic targeting—rescinded NSAs• Citizen participation—eliminated CP plan

– Social Targeting contested• 1983 reauthorization set 51% threshold• 1987 reauthorization set 60% threshold• HUD did not issue regulations implementing LM thresholds

until September 1988

Bush Administration (1989-1992)What Happened in CDBG

• LM benefits threshold increased to 70%

What Didn’t Happen– CDBG reforms

• Social targeting increase to 75%, 100% in affluent communities• Change method for calculating social targeting• Fold CDBG into a mega block grant to the states

Clinton Administration (1993-2000)

What Happened in CDBG

– Sharp rise in CDBG funding

– Consolidated Plan—CDBG, HOME, Emergency Shelter Grants, HOPWA

– On-site CDBG entitlement community monitoring declined by 90% between 1990 and 1998

Other HUD– Empowerment

Zones and Enterprise Communities

– HOPE VI

Bush Administration (2001-2008)

What Didn’t Happen in CDBG

CDBG Reform– Revise formula allocation system– New performance evaluation system– Program consolidation

• CDBG consolidated into new block grant under control of Commerce Dept.

– Sharp funding reductions

Obama Administration (2009-)

What Happened in CDBG– CDBG key tool in addressing

recession– No formal hearings or legislation

introduced to address CDBG reform– Despite initial rise in early years

(10%), sharp funding reductions (25%) between 2010-2012

Other HUD– Neighborhood

Revitalization Initiative

– Choice Neighborhoods

– Sustainable Communities Initiative

Entitlement Funding and Jurisdictions

CDBG Funding and Need

Richardson, CDBG Formula Targeting to Community Development Need, 2005

Uses of CDBG Funds

Uses of CDBG Funds

Program Income

Geographic TargetingTHEN:Carter Administration -- NSAs• Encourage concentration of

CDBG activity• Limited public services to

NSAs• More than 75% of

entitlement communities established NSAs

• NSAs received about half of all CDBG funds invested in 1979 and 1980

NOW:Local Target Areas 1995-2012

– Increased flexibility for housing and economic development

– Exemption from services cap– About half of CDBG

entitlements jurisdictions identified at least one local target area; 17% had at least one NRSA

– About 17% of CDBG funds invested in local target areas (32% unweighted)

Geographic Targeting

Whose Targeting?

Social Targeting

THEN• Lack of consistency in

measuring social targeting in early years of program

• Social targeting increased under Carter

• Studies show social targeting estimates vary widely from what local jurisdictions report

NOW• Direct benefit activities• Area benefit activities (51%

or more LMI persons)• Exception (upper quartile of

all census block groups)• Little variation across

entitlement cities—96% in low poverty jurisdictions vs. 99% in high poverty jurisdictions

1. Federal aid is authorized for a wide range of activities within a broadly defined functional area and allows its recipients greater program discretionScope 1975 2010

CDBG as % of all outlays in community and regional development

53% 19%

CDBG as % of HUD outlays 31% 7%

Neither the statute nor administrative regulations have significantly constrained the choices entitlement communities may make regarding the allocation of their CDBG funds

2. Eligibility provisions are statutorily specified and favor general purpose governmental units as recipients and elected officials and administrative generalists as decision makers

• More than 100 communities have been “grandfathered” into the CDBG entitlement program and account for more than $75 million

• Nearly one-third of CDBG entitlement communities are cities with populations less than 50,000

• Institutional transformation at local level—new departments and agencies with responsibility for housing and community development– Over 60% of lead agencies have community development

in their title

3. Federal aid is distributed on the basis of a statutory formula, which results in narrowing federal administrator’s discretion and providing a sense of fiscal certainty to recipients

• Entitlements have broadly expanded the number of recipient communities

• Formula funding has brought greater fiscal certainty• Less evidence that formula funding has yielded a

distribution system more responsive to need than the discretionary system it replaced

4. Administrative, fiscal reporting, planning, and other federally imposed requirements are kept to the minimum amount necessary to ensure that the national goals are being accomplished

• Depth and scope of requirements have oscillated across presidential administrations

• “minimum” and “necessary” represent competing tensions in the struggle to define CDBG. Both terms defined in the eyes of the beholder.

• Processes that appear comprehensive and performance-oriented may not necessarily translate to practices that promote efficiency and effectiveness at the local level

Recommendations:Improve targeting to need

• Revise the formula allocation system to improve targeting to community need

• The formula alone cannot carry the entire burden of improving targeting. One must also examine the eligibility criteria for determining entitlement status

• Enhance geographic targeting• Enhance social targeting

Recommendations:Strengthen the process

• Strengthen the consolidated planning requirements– Strategies v. block grant spending plan

• Strengthen citizen participation requirements– Promote citizen engagement– Invest in CBOs to build their capacity to become

effective partners

Recommendations:Local intermediaries

• Paradigm shift underway, from community development (real estate development model, housing production) to community building (collaborative, comprehensive, community-based initiatives)

• Asset-based, holistic, strategic planning, community engagement, cross-sector

• Local intermediaries key ingredient of success– Support relationships among groups, build capacity, steer

strategic investments to communities, lead planning process, manage implementation, ensure accountability