November 28, 2007

The Community Development Block Grant: Does It Work?

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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. 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.

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."