Likely Trends in the Distribution of CDBG Funds

Likely Trends in the Distribution of CDBG Funds

Irving Health Center provides primary health care for low-income residents in Irving, Texas. Courtesy of National League of Cities
Since the 1970s, the Community Development Block Grant (CDBG) program has provided an important source of funding to assist local governments with various community development projects and programs. HUD allocates 70 percent of CDBG funds directly to qualifying “entitlement communities,” which include principal cities, satellite cities, and urban counties within metropolitan areas. The remaining 30 percent goes to states, which administer the funding on behalf of areas that do not qualify for direct entitlement grants.

CDBG allocations are based on two unique formulas used to estimate the relative need for each qualifying area. Formula A is based on a jurisdiction’s share of population, people in poverty, and overcrowded housing units, whereas Formula B uses population growth lag since 1960, people in poverty, and the number of housing units built before 1940 as formula variables. Jurisdictions are classified as either Formula A or Formula B depending on which method results in the largest award. The classification is subject to change as community characteristics evolve over time.

In the past, formula data came from the most recent decennial census and annual population estimates provided to HUD by the U.S. Census Bureau. In FY 2012, however, CDBG allocations will be based on data from the American Community Survey (ACS), which has replaced the long form of the decennial census. The ACS, implemented by the Census Bureau, continuously gathers detailed demographic, economic, and housing data. Data gathered through the ACS reflect changes taking place within communities more quickly and accurately than data taken from the long form of the decennial census.

To understand how using the ACS data will affect CDBG allocations, HUD’s Office of Policy Development and Research (PD&R) recalculated FY 2011 grant amounts using ACS data and has released the results in Redistribution Effect of Introducing 2010 Census and 2005–2010 ACS Data into the CDBG Formula. Incorporating ACS data resulted in substantial shifts in most of the formula variables used to determine grant amounts. Nationally, overcrowded housing units decreased by 46.4 percent in metropolitan areas, while the estimated number of housing units built before 1940 increased by 7.7 percent in metropolitan areas. Collectively, satellite cities lost 3.1 percent of funding, largely because of decreasing shares of overcrowded housing units. Urban counties received more funds because of rising shares of people in poverty; poverty rose by 16.3 percent overall in metropolitan areas but much more in urban counties than in principal cities and satellite cities. Principal cities received more funding because of increasing shares of housing built before 1940.

The redistribution of funds resulted in significant gains for some jurisdictions and significant losses in others. The largest gains and losses in funding were primarily the result of increases and decreases in shares of poverty, pre-1940 housing, and overcrowded housing units. The estimates of pre-1940 housing and overcrowding are particularly interesting, as they indicate unexpected changes from the 2000 census. PD&R’s research indicates that part of the apparent change is explained by methodological improvements from the 2000 census to the ACS. ACS interviewers obtain more accurate information about a structure's age and the number of rooms in a unit.

The use of ACS data in the CDBG formula represents important progress toward incorporating current data into the allocation of CDBG entitlement grants. Although using the new dataset may cause substantial changes in funding for some jurisdictions in FY 2012 because of significant changes in shares of overcrowding, poverty, and housing built before 1940, the annually updated data will provide more timely information regarding conditions within each entitlement jurisdiction.

To read the complete report, click here.