House lawmakers said Wednesday that the Department of Housing and Urban Development’s popular Community Development Block Grant program may need updates to get money to smaller, rural communities.
The formula used to determine which cities are guaranteed the CDBG money each year hasn’t been updated since the program was started in the 1970s even though the needs and challenges communities face have changed, lawmakers said at a House Financial Services Subcommittee on Housing, Community Development and Insurance hearing.
Financial Services Chairwoman Maxine Waters, D-Calif., said lawmakers are concerned small jurisdictions may not be getting the funds that they need.
“I have long supported CDBG. I will continue to support CDBG, not just increasing funds, but also with these reforms,” she said. “I'm one who believes that urban and rural should be taken care of and should be funded adequately.”
The program helps communities fund local projects that enhance living and expand economic opportunities of low- and moderate-income residents. The grants allow wide flexibility for communities to decide how to spend the money.
Seventy percent of funding goes directly to so-called entitlement cities with populations of at least 50,000. The remaining 30 percent is sent to states that then distribute grants to communities too small to get funding directly from HUD.
Subcommittee Chairman Emanuel Cleaver II, D-Mo., said he worries many communities that benefit from the grants don’t realize the money comes from the federal government because they receive funds funneled through the state.
“We've got to raise the awareness about the program in order to build support for it,” Cleaver said. “There are individuals, probably hundreds of thousands, maybe millions of people who have received the benefits of this program and have absolutely no idea the origin of those dollars.”
Cleaver said he agreed with subcommittee ranking member Rep. French Hill, R-Ark., that the program itself may need adjustments.
“I think it is time for some adjustments from a program that started back in 1974,” Cleaver said. “There have been no significant adjustments since it started.”
Hill said the formulas used to determine which jurisdictions get funding directly from the federal government need to be updated.
“How the CDBG funding formula is set in statute, it's woefully out of date,” Hill said, citing the reliance on cities’ housing stock level in the 1940s as a baseline. The formulas also disadvantage rural communities, he said.
“CDBG can overlook the needs of our smallest rural communities as they get lumped in with other communities that are too small to qualify for entitlement community status,” Hill said.
Salim Furth, a senior research fellow at the Mercatus Center at George Mason University, said the formulas reflect 1970s concerns about declining urban populations.
“At the time, age and decline seemed synonymous. Thus 70 percent of entitlement formula B depends on having old housing and a slow rate of growth,” he said. “But today New York City, Seattle and many other cities have strong tax bases and booming economies.”
Smaller, newer cities that could use the help get less, he said.
Defining a city
Hill also pressed witnesses on how grant allocations would be affected if the White House Office of Management and Budget moves forward with a plan to double the size that communities must be to be considered a city in the eyes of the federal government, from 50,000 to 100,000 residents.
Joseph Jaroscak, an analyst in economic development policy for the Congressional Research Service, said for most cities already guaranteed funding under the current CDBG formula nothing would change.
“Under the CDBG statute, there is essentially a grandfathering provision,” Jaroscak said. “Eligible grantees that have been eligible for CDBG entitlement funds for two or more years are able to remain in the program, even if there are changes to the definitions for metropolitan statistical areas or if their populations decrease below that threshold.”
Communities with populations nearing 50,000 residents now have the most to lose from such a change, Jaroscak said.
Local government leaders who appeared before the committee praised the program, in particular the flexibility communities have to decide how to spend the funds.
San Francisco Mayor London Breed said the city used its grant to fund the Tenant Right to Counsel program that provides residents with legal help to avoid eviction. Almost 70 percent of residents who received legal representation through the program remained in their homes last year, compared to 38 percent of tenants who received limited legal assistance, Breed said.
Kimberly Robinson, executive director of the Pioneer Valley Planning Commission in Massachusetts, said the program has funded infrastructure projects, food pantries, programs for elderly people and domestic violence prevention, among other programs in the region she works with.
Robinson works mostly with smaller communities that get CDBG funding through the state government. Teaming up regionally can give localities a leg up in securing state-distributed funding, she said.
Contradicting lawmaker concerns, Robinson said rural communities are well-served by the program. Massachusetts received $35 million to distribute to smaller communities in fiscal 2021, she said.
“In this regard, CDBG cannot be viewed simply as a ‘big city’ program,” Robinson said.
Local leaders’ chief criticism of the grant program was that Congress has not kept up in funding it. President Joe Biden has asked Congress to provide $3.8 billion for the program in fiscal 2022, up from $3.5 billion in fiscal 2021. President Donald Trump repeatedly tried to cut off CDBG funding in his budget requests, which Congress ignored.
“If the program’s original allocation of $2.4 billion in 1975 was adjusted for inflation, the CDBG program would be receiving over $10 billion today,” Robinson said. “We believe restoring and increasing CDBG from that high-water mark should be a priority for Congress.”