The primary objective of the CDBG program is the development of viable urban communities, by providing decent housing, suitable living environments, and expanded economic opportunities, principally for low- and moderate-income persons. To divide the annual appropriation of CDBG funds among jurisdictions, Congress has designed a formula that seeks to provide larger grants to communities with relatively high community development need and smaller grants to communities with relatively low community development need. The core formula variables in the allocation formula have not been changed since 1978. This report provides the latest assessment of how well the variables being used in the CDBG formula continue to target funds toward community development need. It shows that the formula does generally continue to target to need, but that targeting toward community development need has declined substantially over the past 26 years. Over time, an increasing number of jurisdictions with similar need have come to receive substantially different grants. In addition, the amount of funds going to the most needy grantees on a per capita basis has decreased, while the amount of funds going to the least needy grantees on a per capita basis has increased.

This report offers four alternative formulas that would substantially improve targeting to community development need. Each provides trade-offs in terms of formula simplicity, the amount of funds reallocated, and the type of community development need to be accorded the highest priority. It’s important to recognize that any change to the existing formula that improves targeting to need will result in a significant redistribution of funds. Nonetheless, the Department hopes that serious attention will be given to the alternatives presented in this report. We look forward to working with Congress, CDBG grantees, and other stakeholders to discuss alternatives to the current formula.