Community Development Failures

December 03, 2013

By Akash Chougule

Community Development Block Grants (CDBGs) are meant to fund local improvement projects such as affordable housing, anti-poverty programs, and infrastructure development. However, in cities and towns around the country, millions of federal taxpayer dollars in the form of CDBGs are instead being used to pad the pockets of well-connected crony insiders.

According to the U.S. Department of Housing and Urban Development (HUD), “not less than 70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons.” The HUD description goes on to explain that each activity must meet one of the following objectives: “benefit low- and moderate-income persons, prevention or elimination of slums or blight, or address community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community for which other funding is not available.” As Victor Nava and Anothony Randazzo detailed in a June 2013 report for the Reason Foundation, this has not been the case in far too many occasions.

The Reason report cited several examples where CDBG funds were clearly not benefitting lower- and moderate-income people or community welfare. Alexandria, Louisiana spent $588,000– 90% of its CDGB funds–to build a marina, benefitting a few fishermen. Roanoke, Virginia spent $245,000 of CDBG money to renovate awnings at a historical market that would clearly benefit those businesses, but do little else. Bell’s Brewery in Michigan was awarded $220,000 for an expansion project that not only does not fit within the guidelines of Community Development Grants, but also provided Bell’s an unfair advantage over the competition.

Even more alarming are cases like the Community Redevelopment Agency of Los Angeles and Enterprise Florida, quasi-public organizations in charge of distributing funds who overtly used their positions to reward themselves and their friends, using taxpayer funds to pick winners and losers rather than to enhance the well-being of the community. It would be a stretch to justify any of these expenditures as urgent community development necessities, to say the least.

St. Louis, Missouri provides another example of the potential for cronyism and mismanagement of CDBG funds. There, community development grants are divided up by ward. HUD awards the grants to each Alderman of the particular ward, who then directs funding at his or her own discretion. Obviously, this opens the door to rampant corruption and cronyism, as aldermen are more like to reward funds to friends and allies. Furthermore, those in Congress who support greater CDBG investment or play a role in the allocation of funds are likely to be influenced by lobbying and campaign dollars, rather than true public interest.

Community develop block grants are over $3 billion a year. Community development spending has increased over 320% in the past forty years, and is projected to reach $15 billion dollars by 2016, despite the fact that both the White House and HUD have criticized the program as being ineffective or, at the very least, nearly impossible to assess. A major reason for this is CDBG’s vague guidelines and measures of success. As a result, none of the ten lowest income counties in America received a dollar in CDBG allocations, but eight of the ten highest income counties received over $750,000.

Lack of transparency and accountability in Community Development Block Grants are leading to cronyism and rampant wasteful spending of taxpayer dollars intended to assist blighted areas. Nevertheless, pouring billions into this program has done little to improve conditions in these communities. The federal government could cut spending by making community development block grants more competitive and efficient, improving CDBG transparency and accountability- and in the process would help free up the economies of these same communities to grow and produce wealth.

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