Davenport, Iowa— This city doesn’t get much money from the Community Development Block Grant (CDBG) program, but officials here make sure what they do receive gets them the biggest bang for their buck when it comes to housing.

Davenport, a city of about 100,000 sited just across the Mississippi River from Illinois, spends nearly half its CDBG dollars on housing programs, a much bigger share than even larger cities such as Chicago, which earmarks about a third of its CDBG money for housing.

The bulk of Davenport’s CDBG funds for housing support programs designed to assist single-family homeowners or would-be homeowners, such as its Urban Homestead program, in which the city acquires and renovates vacant and abandoned houses, then finances their purchase by low- and moderate-income homebuyers with low-interest loans. Other programs provide funds for home renovation, retrofits that make living units disabled-accessible, and downpayment assistance.

“Most of the people funded through CDBG programs would not be able to get financing from a traditional lender, because of either poor credit history or not having held a job long enough,” said Bruce Berger, the city’s housing rehabilitation program manager. “We’re able to help those who, without our assistance and affordable loans, would not be able to improve the homes in which they live.”

Still, Davenport’s recent experience with a larger multifamily housing development that tapped CDBG funds taught it the same lesson many larger cities have learned: that the changes such projects bring can add new spark to a neighborhood’s economy.

The city used about $800,000—a sizable amount, considering its total CDBG allocation this year is $1.78 million, down 23 percent from six years ago—to help develop two abandoned warehouses downtown. The former Crescent Cracker & Macaroni Co., originally a bakery, was transformed by the Madison, Wis.-based Alexander Co., into the Davenport Lofts, a mixed-income community of 73 loft apartments, including 51 affordable and 22 market-rate units.

“It really was a catalyst for opening up more housing downtown,” said Berger. The area’s population has jumped by 40 percent over the last six years, and private developers are starting to come in and develop both smaller apartment properties of 10 to 15 units and larger ones of 30 or more. These days, said Berger, “it’s kind of hip to live downtown.”