As the federal budget tightens, major sources of federal support for US communities are in the spotlight, but the conversations are often short on evidence, especially for block grant programs. Block grants give states or localities flexible, formula-based funding (and general guidelines), allowing grantees to determine how to spend it.

For community development and housing activities that benefit low-income people, the Community Development Block Grant program (CDBG) has been a substantial source of flexible funds for more than 40 years. The program’s creation reflected a bipartisan compromise between devolving decisionmaking power to state and local governments and creating a national program benefiting low-income communities. As a block grant, it could do both.

The program continues to play an important role today as a unique community development resource. According to the US Department of Housing and Urban Development (HUD), between 2005 and 2013, CDBG created or retained 330,546 jobs, assisted over 1.1 million people with homeownership and improvements, benefited over 33 million people nationwide through public improvements, and provided public services to over 105 million people. Practitioners also report that CDBG funds are often the "first capital in" to a project, which is critical in attracting other funds.

But CDBG might be eliminated, and the program has faced criticism for a lack of evidence on its benefits. But this lack of evidence does not mean CDBG doesn’t have positive results. It may be related to limited investments in program evaluation and monitoring and inherent difficulties in determining outcomes for multi-objective place-based efforts.

How well do grantees use funds to help low-income people?

The program’s inherent flexibility raises concerns that local allocations of CDBG funding do not adequately target low-income people’s needs. Even if grantees target funds to low-income people, the benefits may be focused at the high end of the income range. Tensions also arise between using CDBG funds to support social services for low-income people versus using funds toward brick-and-mortar development projects to improve low-income neighborhood conditions.

But the question of which types or mix of programs most benefit low-income people remains unanswered and may vary with local markets. Additional monitoring of funding uses and benefits would help address this problem. New guidelines could also strengthen income-targeting requirements, ensuring some percentage is targeted to those with income below 50 percent of the area median.

Funds may also be more effective if they are more geographically concentrated, but the politics of allocating money within a city often lead to broader distributions. Stronger requirements for geographic targeting of funds to neighborhoods with a certain level of need could allow local officials to circumvent the politics of funding allocations and allow them to support activities at a level sufficient for greater impact.

In addition, more concentrated targeting may make outcomes easier to determine, because measuring outcomes when funds are too diffuse is difficult. And funding levels have deteriorated so much for grantees that choosing to spread funds widely means no activity can receive much.

How can grantees and CDBG foster good performance?

Because of local fiscal stresses and the small size of each CDBG grant, some jurisdictions use CDBG as a substitute for funding gaps rather than for transformative or capacity-building investments. Decreased staffing has also diminished HUD’s ability to support, monitor, and reward grantees for good performance. Recent place-based initiatives, such as HUD’s Sustainable Communities and Promise Neighborhoods, provide examples of how high expectations, strong technical assistance, and dedicated resources can help grantees use data to analyze their needs and create comprehensive community development strategies.

To strengthen CDBG, HUD should increase its field office capacity, reward jurisdictions for good performance, facilitate peer learning and improve technical assistance, set aside funds for planning, guide and encourage CDBG recipients to pursue public engagement, educate potential project partners about CDBG requirements, and alter regulations to encourage evidence-based practices while leaving room for risk taking and innovation. Data systems also need to be improved to better monitor and reward performance.

By better evaluating and improving CDBG, rather than eliminating it, HUD could allow this flexible funding source to achieve its potential as a transformative investment for distressed places and people. Absent these changes, CDBG’s funding will likely continue its downward trend—at least in real terms—until this important social program is gone.