Will power shift in Congress ease attacks on this crucial community development tool?

One of the federal government’s key programs for funding local community development efforts survived an attempt on its life, but still finds itself defending its existence and effectiveness two years later, even as Democratic leaders take the reins in Congress.

A White House proposal that would have eliminated the Community Develop-ment Block Grant (CDBG) program and folded its activities (while at the same time slicing their funding by $1 billion) into the Commerce Department was rejected by Congress after it was put forward in 2005. But the attempt both inspired a massive campaign by CDBG advocates to keep the program intact and sparked a conversation about what the program is meant to do and how to measure its effectiveness.

As Democrats take control of both houses of Congress for the first time in 12 years, that discussion continues, as do debates about whether and how to change the formula

for distributing CDBG funds. Last year, the Bush administration stopped fighting CDBG’s existence at the Department of Housing and Urban Development (HUD), but this year, for the second time, it proposed slashing funding for the program’s core formula grants by about 20 percent, to $2.97 billion in fiscal 2008 from $3.71 billion in 2007. HUD also proposed formula changes last year that included tighter targeting to poor communities, a move advocates feared would erode the program’s political support by characterizing it mainly as an anti-poverty effort.

Calls to reform the program emphasize that the CDBG distribution formula has not changed since the 1970s. Proponents of the revisions say that demographic changes since then mean CDBG no longer sends the most money to places of greatest poverty or urban decay. The funding that communities receive is based on a two-pronged formula, which directs money to areas deemed to have the greatest community development needs as well as to areas with high concentrations of pre-1940 housing, even though many such buildings have been renovated.

The formula is politically hard to change without alienating every member of Congress whose district would lose money. In 2002, Rep. Sue Kelly (R-N.Y.), who was defeated in the November election, vigorously defended her Westchester district against a White House proposal to reduce CDBG aid in areas with per capita incomes more than twice the national average.

“CDBG was not designed to be strictly an anti-poverty program,” said Saul Ramirez, executive director of the National Association of Housing and Redevelopment Officials, in Congressional testimony that year. “Indeed, the statute requires that at least 70 percent of all CDBG funds expended go toward activities benefiting low- and moderate-income persons.”

The administration has already said it will again introduce a proposal to change the CDBG formula for fiscal 2008. The Bush administration could not find a Congressional sponsor for the measure last year and is no more likely to succeed this year, said Vicki Watson, legislative director for the National Community Development Association.

In addition to the lack of support for formula-change proposals, Watson believes CDBG proponents will be able to beat back any new funding cuts and possibly achieve a modest increase in funding.

The Office of Management and Budget (OMB) began denigrating the program about three years ago, claiming it had no measurable goals and labeling it “ineffective.” Since then, OMB has worked with HUD and community development advocates to agree on CDBG performance measures that received final approval in March 2006. However, the “ineffective” rating still appears on its Web site, and White House attempts to cut the program’s funding have met with some success.

The performance measurement system introduced last year requires municipalities receiving CDBG funds to submit annual reports to HUD on their CDBG spending and its outcomes. “Many [HUD] grantees have been frustrated by the inability to ‘tell their story’ to their citizens and other stakeholders about the outcomes of the investments they have made in their communities using federal, state, and local resources,” said HUD last year in the notice announcing the system’s implementation.

The information HUD now compiles includes data detailing which racial populations and income groups were served by CDBG funds; how the money was distributed between housing, economic development, and other uses; how many households and people were helped by CDBG activities; and how the money was distributed between the program’s objectives (benefiting low- and moderate-income individuals, preventing or eliminating slums or “blight,” or meeting urgent community development needs).

The program’s usefulness has been documented in the past, though its very flexibility makes measurement difficult. A 1994 Urban Institute study found that census tracts with the highest CDBG spending amounts per capita had the most reduced poverty rates. Sadly, though, it also found that when a poor neighborhood raised its average income, usually richer people had moved in or poorer people had moved out; unless a major employer came to town, the old neighbors themselves didn’t necessarily earn more.

A 2002 Urban Institute report found “that larger CDBG investments are linked to improvements in neighborhood quality” in 17 sample cities, measured in part by local median home loan amounts and numbers of local businesses. It warned, however, that the study was “not broad enough to conclusively prove that CDBG investments are positively correlated with specified measurable results.”

Housing has garnered a healthy share of program funds. “The big federal resource for improving the existing housing stock has been CDBG, as allocated by localities,” wrote Neil S. Mayer, a former Urban Institute scholar, in a 1995 history of HUD’s first 30 years. Still, CDBG funding was not immediately easy to use for low-income housing. “Until 1977, housing rehabilitation was an eligible CDBG activity only as part of a concentrated neighborhood effort,” wrote Mayer. “However, since that early period, housing has consistently been the major focus of CDBG entitlement funds (typically over 35 percent of funds).”

In Chicago, which received about $30 million in CDBG funds this year, about a third of those funds are used for housing programs. In some cases they’ve allowed the city to undertake efforts for which no other funding sources exist, such as its program to reclaim dilapidated rental housing from neglectful owners, perform emergency repairs, and then pass the property on to new owners committed to upgrading the units and keeping them in good condition.

That’s just one example of the creativity and flexibility cities can bring to bear in their use of CDBG funds to preserve and create housing, support the poorest among their populations, and revitalize run-down neighborhoods. To highlight a range of these efforts, Affordable Housing Finance has profiled six cities that have taken creative or aggressive approaches to rehabilitating and developing housing, a crucial element in urban renewal plans, with their CDBG dollars.

“CDBG has sparked the development of neighborhoods throughout Chicago,” said Jack Markowski, commissioner of Chicago’s Department of Housing, which is almost entirely funded with CDBG dollars and administers most of the city’s housing-related CDBG programs. “The fact of the matter is that communities throughout the country depend on this.”