Issue: Community Development Assistance

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Issue Summary

The Community Development Block Grant (CDBG) and other economic development programs are intended to target federal assistance to communities with high rates of poverty and aging housing stock. They were established to help meet the housing needs of low-income homeowners, homebuyers and renters, expand a community's supply of affordable housing, and promote economic development. The programs attempt to accomplish these goals by providing assistance to poverty stricken communities to revitalize, expand, and upgrade their physical infrastructure to attract new industries, expand businesses, diversify their economies, and generate job and investment growth.1

The Federal government spent more than $4.2 billion on Community Development programs in FY2011.2 This represents a 24 percent increase over what was spent in FY2008, not including the costs to administer the programs.3

Economic development activities most commonly associated with these programs include: planning and developing strategies for job creation and retention; developing new markets for existing products; constructing roads and sewer systems to attract industry to undeveloped areas, and establishing business "incubators" to provide facilities for new business operations.4

The GAO has identified substantial overlap in economic development efforts at four agencies — the Departments of Commerce; Housing and Urban Development (HUD); Agriculture (USDA); and the Small Business Administration (SBA). Grants, loan guarantees and direct loans are also provided for "entrepreneurial efforts" such as helping employers develop business plans and identify funding sources.5 The GAO found that these efforts are often fragmented or overlap because of legislative or regulatory restrictions that target funding on the basis of characteristics such as geography, income levels, and population density (rural or urban). A shocking 60 percent of the programs fund only one or two activities while the separate programs simultaneously target similar geographic areas.6

Further, the GAO report noted that agencies lack key information about the programs they administer; do not consistently monitor or evaluate these programs; have few incentives and no guide for collaboration; and that federal statutory or regulatory authorities often impede agencies' ability to work with one another.7

Granting states the maximum flexibility to collaborate and coordinate activities in community and economic development with other anti-poverty efforts would enable them to conserve resources and consolidate or eliminate some programs — objectives the GAO report shows the federal government has been unable to achieve during the two decades covered by the GAO report.8

What Would Reagan Do?

Ronald Reagan acted almost immediately as President to increase the efficiency of the Community Development Block Grant. In one of his first bills, the Omnibus Budget Reconciliation Act of 1981, President Reagan handed over a portion of the program for states to control. Using the Omnibus bill, the President grouped 50 programs including the small cities portion of the CDBG into 9 distinct block grants for states to better serve their constituents. Sadly, over the years, the program has become little more than a slush fund for big-city mayors.

Issue History

The CDBG program was created in 1974 to provide communities with resources to address community development needs. It is now one of the longest continuously run programs at the Department of Housing and Urban Development. It provides annual grants on a formula basis to 1,209 general units of local government and States.9


The Welfare Reform Action Fund's (WRAF) sister organization — the 501(c)3 Carleson Center for Welfare Reform (CCWR) — identified numerous federal community and economic development programs that combined would create a consolidated block grant to the states to provide community and economic development assistance to targeted low-income or economically disadvantaged neighborhoods and communities.10

Small Business Administration and other programs that principally focus on providing loans to businesses rather than individuals were not included in the CCWR report's review or recommendations. Nevertheless, the CCWR's recommendations for a CDBG block grant to the states would consolidate 8 other programs that cost the federal government over $4.2 billion in FY2011. This amount does not include the federal government's costs to administer the programs, so the savings would go well beyond the grant totals themselves.

An informed government policy to protect the nation's safety net should begin by reining in the welfare state through a time-tested approach — cutting spending on those who are NOT really in need. Thirty years ago, Ronald Reagan approved a blueprint to end welfare dependency not just for the benefit of federal and state taxpayers, but for the long-term benefit of welfare recipients themselves. The time was not right then. The time must be right now.

The CCWR report proposes an achievable, common-sense plan — and model legislation to enact it — to end the hopeless bureaucratic overlap and fiscal abuse plaguing our nation's welfare spending; assure that limited taxpayer funding is directed to benefit the truly needy; and permanently reduce the size and influence of the federal welfare bureaucracy. The WRAF is working to urge Congress to approve this and the CCWR report's recommendations to block grant 6 other categories of welfare programs to the states as well.



Program Name



Change from 2008-2011


Community Development Block Grants/Entitlement Grants





Community Services Block Grant





Section 4 Capacity Building for Community Development and Affordable Housing





Sustainable Communities Regional Planning Grant Program





Community Challenge Planning Grants and the Department of Transportation's TIGER II Planning Grants





Community Services Block Grant –Discretionary Awards





Capacity Building for Sustainable Communities





Community Development Financial Institutions Bond Guarantee Program








  1. GAO-11-318SP, p. 42.
  2. 2012 Catalog of Federal and Domestic Assistance; Office of Management and Budget and General Services Administration; October 2012;
  3. Catalog of Federal and Domestic Assistance, Office of Management and Budget and General Services Administration; December 2009;
  4. GAO-11-318SP, p.42
  5. Ibid, p. 42.
  6. Ibid, p. 43.
  7. Ibid, p. 44.
  8. Ibid, p. 46.
  9. Community Development Block Grant Program- CDBG; U.S. Department of Housing and Urban Development;
  10. "Securing the Safety Net," a report by The Carleson Center for Welfare Reform (January, 2013).