Community Development Block Grant (CDBG)

How It Works

Congress appropriates CDBG money each year. After amounts are set aside for special-purpose grants, HUD divides the rest by formula:

• 70% to entitlement communities. These are principal cities of metropolitan areas, other metropolitan cities with at least 50,000 residents, and qualifying urban counties. They receive grants directly.
• 30% to states. States act as pass-through agents. Each state designs its own method for distributing funds to smaller “nonentitlement” communities, typically a competition. Hawaii is the exception; HUD funds its small communities directly.

HUD runs two alternative formulas and gives each grantee the higher result. One weighs population, poverty, and overcrowded housing. The other weighs poverty, housing built before 1940, and slow population growth.

Before receiving money, a grantee must adopt a Consolidated Plan that assesses local housing and community development needs, with public hearings and citizen participation. It must also report results to HUD every year.

What It Pays For

CDBG is deliberately broad. Eligible activities fall into five groups:

• Housing: rehabilitation of owner and rental homes, land acquisition, and site clearance for affordable housing
• Public works and facilities: streets, water and sewer lines, parks, and community centers
• Public services: job training, child care, health, and senior services, capped at 15% of a grantee’s allocation
• Economic development: assistance to businesses that creates or keeps jobs
• Planning and administration

Grantees can also borrow against future allocations through the Section 108 Loan Guarantee program to finance larger projects.

For housing, CDBG has historically paid for the pieces around a building more than the building itself: buying land, installing infrastructure, or repairing existing homes. Until 2026, it generally could not pay to build new housing, except through certain community-based development organizations or under disaster waivers. That changed in 2026, as described below.

Who It Serves

Every funded activity must meet one of three national objectives:

1. Principally benefit low- and moderate-income persons
2. Help prevent or eliminate slums or blight
3. Meet an urgent need that poses a serious and immediate threat to health or safety

In addition, each grantee must spend at least 70% of its funds, over a one-, two-, or three-year period it chooses, on activities that principally benefit low- and moderate-income people. HUD generally defines that group as households at or below 80% of area median income. The statute bars HUD from waiving this requirement, even after disasters, although Congress itself has occasionally lowered the percentage.

How to Access It

Individuals and nonprofits do not apply to HUD. They apply to their city, county, or state CDBG office, which announces funding rounds and programs, such as home-repair grants, through its annual action plan. Small towns apply to their state.

History

President Gerald Ford signed the Housing and Community Development Act on August 22, 1974. His signing statement described it as sweeping away seven categorical grant programs, among them urban renewal and Model Cities, and replacing them with a single block grant. The goal was to shift decisions from Washington to local governments. In FY 1975, the program’s first year of operation, there were 594 entitlement communities. By FY 2014 the number had reached about 1,200.

The 21st Century ROAD to Housing Act (Public Law 119-101), signed July 11, 2026, made three notable changes:

• New construction of affordable housing, as defined under the HOME program, became an eligible use for funds appropriated after enactment, capped at 20% of a grantee’s allocation.
• Grantees must maintain a public, searchable database of undeveloped land they own, effective October 1, 2026.
• Beginning in FY 2029, HUD will adjust some entitlement grants up or down based on local housing production.

Limitations

• Spread thin. Congress appropriated $3.3 billion for CDBG in FY 2026, the same as in FY 2025, divided among the states and more than a thousand entitlement communities.
• Housing competes with other needs. Because CDBG funds roads, services, and businesses, housing is one priority among many.
• Recurring proposals to end it. The administration’s FY 2026 and FY 2027 budgets both proposed eliminating CDBG. Congress kept FY 2026 funding level, and the FY 2027 bill the House Appropriations Committee approved in June 2026 would again provide $3.3 billion.