CDBG Funds Not Useful Focus for Zoning Reform

Jenny Schuetz considers a strategy to address exclusionary zoning by putting provisions on grants to cities through the Community Development Block Grant (CDBG) program. The award of CDBG grants could require reform of regulations that hinder local development, says Schuetz.

“A statutory formula set by Congress determines the amount of funding for each locality, based on population size, poverty, housing age, and housing conditions. By design, larger and poorer communities receive more funds through the entitlement program,” notes Schuetz. For an exclusionary zoning reform mechanism to work, CDBG funds need to be a primary revenue source for a community receiving the funds directly from the Department of Housing and Urban Development (HUD). 

Schuetz takes a closer look at exclusive cities, “defined as those with high rents and little rental or multifamily housing,” in California and New Jersey. Only 17 percent of these California cities receive CDBG funding, and no exclusive cities in New Jersey receive these funds. The California cities could be targets for zoning reform to encourage more affordable housing, says Schuetz:

However, low-income residents who are the intended beneficiaries of CDBG projects have little political influence over zoning decisions in affluent neighborhoods. Moreover, these cities are a small share of CDBG grantees. Undertaking the costly process of revising a federal regulation that affects thousands of communities in order to influence a handful of grantees is like performing brain surgery with a chainsaw.

Schuetz suggests alternative strategies HUD could pursue, including the HUD Secretary talking more directly about the need for zoning reform. “Explain how restrictive zoning harms not just low-income families but regional housing markets. Name and shame worst offenders, or applaud cities that have undertaken zoning reform. Provide direct guidance on what specific zoning practices should be changed.”

She also encourages HUD staff to use the wealth of data and analysis available to the agency and recommends that HUD bring together different stakeholders to come up with politically viable solutions.