Texas Prioritizes Sewers and Financial Assistance to For-Profit Businesses over Low Income Housing in CDBG program

The primary objective of this chapter and of the community development program of each grantee under this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income.

42USC5301, the statutory basis for the Community Development Block Grant Program

In early June HUD released a report detailing the use of CDBG Funds by the state of Texas in 2009.  State-allocated CDBG funds are administered in Texas by the Texas Department of Rural Affairs.

From February 1, 2009 to January 31, 2010, Texas spent just 3.6% of its state-allocated CBDG funds on housing activities.  Nationally, 25% of CDBG funds are spent on housing.

Texas spent the vast majority of its CDBG funds (78%, or $60 million) on “Public Improvements,” primarily water/sewer systems and roadwork.  It also prioritized Financial Assistance to For-Profit Businesses (7.8%, or $6 million) higher than housing.[1]

By comparison, the single largest line category in the national use of CDBG funds is Single-Unit Residential Housing Rehabilitation.

Category Texas National Relative Priority
Water/Sewer Improvements 58.8% 10.0% 591%
Street Improvements 12.1% 6.2% 234%
Financial Assistance to For-Profit Businesses 7.9% 3.4% 196%
Administrative And Planning 7.6% 15.0% 51%
Housing 3.6% 25.4% 14%

One concern we have with this spending pattern is that it appears that localities use CDBG funds to replace local core infrastructure funding rather than provide additional funding for new initiatives.  This goes against congressional intent as stated in the statute.[2]

Another concern is that only 51% of the beneficiaries of CDBG-funded public work improvements and economic development initiatives have to be  low-to-moderate income individuals for it to be considered a “low-to-moderate income” initiative, while housing initiatives have to benefit 100% low-to-moderate income individuals to get that designation.[3] As a result, Texas’s CDBG program is likely much less targeted than other programs at the low-to-moderate income population for which the funds are “principally” intended.

We call on Texas to re-focus the CDBG program on low-to-moderate Income beneficiaries by using the funds for initiatives targeted at low- and moderate-income recipients, such as housing, rather than as a replacement funding mechanism for general local infrastructure.

[1] This line item appears to go to the “Texas Capital Fund.”  In 2009, the Texas Capital Fund created or retained 241 jobs at a cost of 25k per job.  According to the Texas Department of Agriculture, the administrator of the funds, the program has not been particularly competitive and last few years of the program they’ve “been able to fund just about everything that came in the door.” (Texas Capital Fund Webinar, at minute 18)

[2]It is the intent of Congress that the Federal assistance made available under this chapter not be utilized to reduce substantially the amount of local financial support for community development activities below the level of such support prior to the availability of such assistance.” – 42USC5301,

[3] Further complicating this is that only 70% of the funds have to benefit low-to-moderate income individuals at all.  As a result, a CDBG program dominated by public works initiatives may only have 36% low-to-moderate income beneficiaries.  We believe that 36% doesn’t meet a common-sense interpretation of the intent that a program “principally benefit” low and moderate income persons.

1 Comment

  1. What actions can be taken to get the CDBG funds spent on low-income housing up the minimum 25%?

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