Untie Poverty from ‘Community Development’ Funds

National Initiative 2

Block Grant ReqirementsOne of the most powerful tools the federal government offers cities is the Community Development Block Grant program, administered by the Department of Housing and Urban Development.

Unfortunately, it is not being used to anything remotely close to its true potential.

Each year, block grants pump billions of dollars into  American municipalities. About three-quarters of that money is used for two main areas: public infrastructure and housing.

Saginaw is what’s known as an “entitlement community” – the largest city in its metropolitan statistical area. According to HUD, block grant funds for such communities are “to develop viable communities by providing decent housing, a suitable living environment, and opportunities to expand economic opportunities, principally for low- and moderate-income persons” [my emphasis].

One of its big goals is to increase the quantity and quality of “affordable housing.” That “principally for low- and moderate-income persons” translates into a requirement that “70 percent of CDBG funds must be used for activities that benefit [them].”

As a result, HUD forces cities to throw good money after bad.

In Saginaw, somewhere near 20 percent of our housing stock is vacant and abandoned; another 20 to 30 percent is rental property in decline. Like many cities, we have suffered from the concurrent blows of exurban flight and job loss through plant closures – in our case, the evaporation of several thousand General Motors jobs.

Exurban sprawl is fed by many things – subdivision laws, the hefty subsidy of the federal home mortgage income tax deduction, the needs of the home-building and real-estate development industries and the fears of the middle class, among many other factors. Either way, it has created a huge surplus of housing in America, especially in inner cities such as Saginaw. This has left no shortage of “affordable housing” in our cities.

What it has left is a shortage of people who are not low-income individuals.

This means that one aspect of HUD’s mission –  “to create strong, sustainable, inclusive communities” is directly at odds with of the requirement that “70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons.”

We must, at some point, come to the realization that trying to prevent and eliminate blight by focusing spending on low- and moderate-income people is a little like trying to plug a hole in a boat by flooding the leaky compartment with water.

Rehab funds that can be used by moderate-income homeowners are little-known and underused. New construction programs add to the oversupply, and cause further decline of all the City’s property values. And you don’t want to get urban homeowners started talking about Section 8 vouchers.

To put it very plainly, the problem in cities isnot a shortage of affordable housing for low-income residents. (The quality of that housing is often a legitimate issue.) What cities need are incentives for residents of moderate and upper incomes to invest in those cities.

Because they aren’t now, and those cities are doomed without them.

My suggestion would be for HUD to put more emphasis on “urban development” and less on “housing,” by creating new programs that build safe middle-class neighborhoods.

The recent Neighborhood Stabilization Program was a start. But, at least in Saginaw, that meant rehabbing a few dozen homes to a required 5-star energy rating. Might we not have been much farther ahead rehabbing 1,000 homes to 3-star energy efficiency?

If we want the CDBG fund to live up to its potential and make more serious inroads in turning our cities around, we should drop the 70-percent requirement on CDBG funds – and make more federal money available for programs that benefit entire neighborhoods, rich and poor – such as community policing and infrastructure improvements.

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