30 Pages Posted: 13 Dec 2008
Date Written: November 1, 2007
The federal government operates hundreds of programs intended to stimulate regional economic development and revitalize communities. The largest of these, the Community Development Block Grant (CDBG), has awarded $118 billion since 1974 to thousands of localities.
Where communities lack sufficient revenues due to an eroded tax base or economic stagnation, CDBG is intended to provide stop-gap funding for crucial infrastructure, public safety, housing, and social service projects. In addition, it is argued that CDBG can help stimulate economic development through business loans and commercial revitalization projects intended to attract residents and investment to the community. However, there is little evidence that the program accomplishes its stated aims.
The wide scope of the program, the lack of consistent data, and the varied applications of CDBG funds hamper formal evaluations. Where beneficial outcomes are observed, evaluators must also address the problem of causality. Did CDBG cause the development? What would have happened in communities if they had not received funds? Claims of effectiveness tend to rest on intermediate measures, such as the number of jobs created, houses built, or dollars leveraged. These metrics are not evidence of success. They indicate how funds were spent, not the objectives achieved by the program.
Economic assessment of one of CDBG's achievements-the Poplar Nehemiah Homeownership project in North Philadelphia-reveals the new development did not spur revitalization. Though it is of only one particular use of CDBG funds, the analysis reveals how the application of CDBG funds in a blighted neighborhood interferes with market signals, and the limitations of local planning due to the "knowledge problem."
Keywords: Community Development Block Grant, CDBG, economic development, urban economics, HUD, housing, infrastructure
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