The Evolving Federal Role in Community Development

The Evolving Federal Role in Community Development
Paul Joice, Social Science Analyst, Program Evaluation Division (2007 to present)

Even before Flint, Michigan attracted national attention for lead in its drinking water, the city had lost half its population over the preceding five decades. In 2014, I became one of the few people moving to Flint, and perhaps the only person in years to move there from Washington, DC. I had been working at HUD headquarters in the Office of Policy Development and Research (PD&R) and was drawn to Flint by the opportunity to make a difference through a new federal government initiative called Strong Cities, Strong Communities (SC2).

SC2 had been developed in PD&R, under the leadership of Erika Poethig and Mark Linton, as a new way for the federal government to support distressed cities during a time of federal budget austerity. With support from the White House, SC2 became an interagency initiative led by HUD. Under the SC2 model, a team of federal employees was assigned to a city, at the city’s request, to help address specific local needs. The overarching theme of SC2 was to improve collaboration between federal and local governments.

I volunteered to be the SC2 team lead for Flint. I spent a year and a half in the city and worked every day at Flint City Hall alongside city staff. I coordinated a team of federal employees from agencies including the Federal Bureau of Investigation, the U.S. Environmental Protection Agency, the U.S. Economic Development Administration, several offices within HUD, and more. SC2 team members went to work each day thinking about how the federal government could be a better partner for Flint — how we could work together on neighborhood revitalization, public safety, and economic development. The city already received millions of dollars annually from the federal government; we wanted to help them use those resources strategically, align efforts across programmatic silos, and cut red tape.

Most people probably think of community development as an inherently local activity, in which city governments and nonprofits improve the social, economic, and physical infrastructure of a place to better serve residents. The federal government’s role generally is limited to providing funding, setting policy objectives, conducting research, and providing technical assistance. Throughout its 50-year history, PD&R has made important contributions in each of these realms.

One of the most significant turning points in the history of community development policy took place just as PD&R was being established: the creation of the Community Development Block Grant (CDBG) program in 1974. CDBG subsumed and replaced eight categorical grant programs, including the Urban Renewal and Model Cities programs, as well as other grant and loan programs focused on housing rehabilitation, water and sewer infrastructure, and public facilities. CDBG marked a landmark shift away from federal funding for specific targeted activities to flexible block grants that local governments could use for various needs. Distributing a block grant requires objective, data-driven criteria, so naturally PD&R’s data experts have played a critical role in formula allocations. A previous PD&R@50 article discusses PD&R’s role in creating the CDBG formula and how that experience has informed formula allocations for other community development programs.

Although the CDBG program has proved durable, its funding has eroded significantly over time. Figure 1, from HUD’s fiscal year 2024 Congressional Justifications, presents CDBG appropriations from 1975 to 2022, adjusted to 2022 dollars. Declining total appropriations combined with significant growth in the number of grantees has caused the average grant size to plummet from $13.45 million in 1975 to $2.67 million in 2022. Although CDBG remains an important HUD program, for each grantee it is only one piece of the community development puzzle, and no longer a particularly large piece. (For more on the history of CDBG, see the January 2014 issue of Housing Policy Debate marking the program’s 40th anniversary.)

Figure 1

As CDBG funding has dwindled, federal funding for community development has gradually shifted toward a hybrid of flexible block grants and more narrowly focused programs. Some programs have been built directly on the bureaucratic chassis of the CDBG program, including CDBG Disaster Recovery (CDBG-DR) and the Neighborhood Stabilization Program (NSP). Others, such as the Emergency Solutions Grants and the HOME Investment Partnerships Program (HOME), are block grants distributed by formula but more targeted to specific activities than CDBG. Still others, such as Choice Neighborhoods, are competitive programs that more closely resemble the pre-CDBG categorical grants. Related to this last category are tax incentive programs such as Empowerment Zones and Opportunity Zones. PD&R staff often have contributed to the design of these programs, advising the HUD Secretary and other HUD program offices as well as providing input to congressional staff drafting legislation.

These programs vary in their specific objectives, but they all fall under the community development umbrella. One of the most noteworthy aspects of the current landscape of community development funding is its fragmentation. CDBG and the other revenue-sharing proposals of President Nixon’s “New Federalism” movement were meant to consolidate programs and simplify government. In the past four decades, however, complexity and fragmentation have gradually returned to fill the void left by the atrophy of the CDBG program.

This fragmentation is a considerable challenge for local governments — an issue made clear to federal staff working on SC2. Doing community development work is like creating a mosaic: governments and other funders create the tiles in various colors, shapes, and sizes, and local community development practitioners assemble the pieces. Similar pieces, connected in different ways, can create completely different pictures. Some pieces fit together well, whereas others leave large gaps between them. CDBG is like a magical mosaic tile that can assume any shape or color — perfect for filling in these gaps. In its early days, the CDBG program was large enough that the CDBG tile might make beautiful art entirely on its own. Today, a community development project such as an affordable housing development might require layering five or more funding sources, including HOME, the Low-Income Housing Tax Credit program, private financing, a project-based voucher Housing Assistance Payments contract, and perhaps some CDBG funding to fill any gaps. Each funding source comes with its own thicket of rules and challenges. Many community development activities require an ongoing subsidy, and losing any single funding source could threaten the long-term sustainability of the activity.

This points to another key role of PD&R in the creation of the community development mosaic: providing data, research, and technical assistance to help practitioners use existing programs as effectively as possible. All local governments that receive CDBG, HOME, and other HUD funds must prepare a Consolidated Plan to assess their local needs and present strategies to address those needs. The flexibility of these block grants places a heavy burden on grantees to make good choices. PD&R data and GIS tools are essential resources for communities preparing their Consolidated Plans. During the Great Recession, PD&R produced nationwide, neighborhood-level measures of foreclosure risk to support the implementation of NSP. PD&R provides data to support CDBG-DR grantees with disaster recovery. Applicants for Choice Neighborhoods grants use a PD&R mapping tool to identify their target neighborhood and assess eligibility. PD&R recently took over responsibility for administering HUD’s technical assistance programs.

PD&R’s evaluations and research projects often seek to demonstrate the merits and flaws of different community development strategies, thereby helping practitioners do their jobs better. But PD&R also looks at the big picture to assess whether the programs we have are the right ones, whether we are creating the right set of mosaic tiles for practitioners to work with. Unfortunately, this task has proven to be a vexing one, often thwarted by the nature of community development programs and the activities they support. The flexibility that makes a program such as CDBG so useful for practitioners (and beloved by mayors) also makes it difficult for researchers to assess what the program is supposed to do, what outcomes it should accomplish, and whether it meets those goals. Even when focusing on more narrowly targeted activities or programs (such as NSP), rigorous evaluations often show no impact, perhaps because an individual community development program is typically dwarfed by the concentrated disadvantage it seeks to overcome. This situation is frustrating because, at the ground level, the benefits of community development often are obvious. Buildings are transformed, families are housed, and people receive much-needed services. In some cases, an apparent improvement reflects underlying trends that would have continued even in the absence of the activity being studied. In other cases, effective activities are offset by other ineffective activities, leading to a program-wide null effect. PD&R continues to test different evaluation approaches, in particular focusing on evaluating specific types of community development activities rather than programs as a whole.

I opened this article with SC2 because it was an innovative PD&R initiative that reflects many aspects of PD&R’s role in community development. Federal employees involved with SC2 provided technical assistance and sought to expand the use of evidence-based best practices, including the incorporation of data and research that PD&R has produced. Perhaps most important, SC2 pushed federal staff to look at the big picture and understand the challenges and opportunities facing community development practitioners.

Notably, SC2 did not continue beyond the Obama administration. And for all that it did well, the program was fairly modest; it did not provide funding, which is what distressed communities need most, and it was designed to help practitioners navigate a complex community development landscape rather than overhaul and simplify that landscape. As we celebrate and reflect on 50 years of PD&R — and, next year, 50 years of CDBG — we should continue to strive to create a community development ecosystem that is simple, robust, and evidence-based.