Best planning and implementation toolbox

Federal and State Funding Sources for Community Development

Purpose of Tool:
The US Department of Housing and Urban Development (HUD) is the primary agency that administers federal funds for community development, through Community Development Block Grants (CDBG) and HOME Investment Partnerships (HOME) program. CDBG grants and HOME grants are similar in the type of projects they fund, but CDBG funds benefit low- to moderate-income individuals and families, while HOME funds benefit very low- to ¬low-income individuals and families (according to HUD CDBG and HOME Income Limits).

In Texas, these grants are distributed in two ways. Urban counties (and cities therein) and certain large cities are typically considered entitlement communities. Entitlement communities receive CDBG funding directly from HUD and implement projects via a community development plan. Rural counties and the cities therein, are considered non-entitlement communities and compete for CDBG funds through a Regional Review Committee administered by the State of Texas Office of Rural Community Affairs (ORCA) and the applicable Council of Government.

The purpose of CDBG funding is to “develop viable communities by providing decent housing and suitable living environments, and expanding economic opportunity principally for persons of very low- to moderate-income.” CDBG funds can be used for a wide range of community improvements. For entitlement communities, typical project types include street paving, park improvements, demolition and clearance, rehabilitation of private homes owned by low-income families, and subsidized child care and adult day care. Project priorities for non-entitlement communities are established by Governor-appointed Regional Review Committees within each Council of Government. Historically, project priorities include wastewater, sewer, drinking water, road and drainage projects. While states administer the federal CDBG funds, state funding is not readily available for community development purposes.

Benefits of Using Tool:
Communities and regions are able to benefit from these programs in several ways:
  • Funding can be used for improving municipal facilities, revitalizing local neighborhoods, and creating jobs.
  • These programs help municipalities meet their community development, affordable housing, and economic development needs and objectives.
  • These programs can aid in the prevention or elimination of slums or blighted areas.

    Steps Involved to Use Tool:
    Most entitlement cities and counties in Texas administer the CDBG and HOME funds through the following process:
  • A Notice of Funds Availability (NOFA) from HUD is given to the governing body and, in turn, to interested potential grantees.
  • Requests for proposals for eligible projects or programs are submitted to the local community development office or committee by eligible entities, such as public services agencies, city departments, or neighborhood based non-profits.
  • The community development office or committee prioritizes the proposed projects or programs based on the national objectives of the CDBG and HOME programs.
  • The selected projects or programs are chosen by the local jurisdiction and submitted to HUD for final approval.
  • After HUD approval, the local community development staff executes grant agreements to initiate project activities.
    Non-entitlement communities apply for projects through a competitive Regional Review Committee process which scores and ranks projects based on State approved scoring criteria. Each committee submits the final list of recommended projects to ORCA for final review and additional scoring. ORCA and the applicant enter into contracts to fund and complete individual projects.

    Special Requirements to Use Tool:
    Projects chosen to potentially receive grant must meet at least one of the following three (3) CDBG National Objectives:
  • Benefit low- and moderate-income persons;
  • Aid in the prevention or elimination of slums or blight; or
  • Addresses an urgent need to mitigate an immediate threat to the health and safety of residents.

    Specials Resources Needed to Use Tool:
    To use these funding sources for community development, it is necessary for the entitlement community to be eligible with HUD to receive these funds. In order to be eligible, entitlement grantees must submit to HUD their Consolidated Plans and applications for funding, and the Plan must indicate the jurisdiction’s goals for the funding, if obtained.
    The process for non-entitlement communities is presented in Special Requirements to Use Tool, above.

    Communities / Agencies that Have Used Tool:
    Many communities across the United States have used these programs. The following examples demonstrate successful uses of the program:
  • City of El Paso: The City of El Paso, TX has successfully utilized CDBGs to fund projects involving parks, street and drainage improvements, public facilities, housing, and social service programs. Since 1975, over $300 million of CDBG funding has been allocated toward improving El Paso’s low- and moderate-income neighborhoods.  Contact:

    William Lilly
    Community and Human Development Department Manager
    2 Civic Center Plaza
    8th Floor City Hall
    El Paso, TX, 79901

  • City of Harlingen: The City of Harlingen, TX has used CDBG funds for various types of projects, including public facilities and improvement projects, housing projects, and public services. The Northwest Area Drainage Improvements project consisted of $350,000 of CDBG funding for construction of drainage improvements. This project improved existing drainage systems with new structures to better serve the City’s needs, especially in heavy rain events. This benefited numerous citizens at all income levels.  Contact:

    Tammy DeGannes
    Community Development Director
    118 East Tyler
    Harlingen, TX, 78550

    Metrics to Use to Monitor Tool Effectiveness:
    There are not currently any specific case studies regarding the effectiveness of federal and state funding sources for community development.

    List of Resources to Obtain Additional Info:
    For more information, please see:
  • U.S. Department of Housing and Urban Development (HUD) Community Investment Network.[tt_news]=1891&tx_ttnews[backPid]=745&tx_ttnews[sViewPointer]=1  and[tt_news]=1890&tx_ttnews[backPid]=745&tx_ttnews[sViewPointer]=1
  • Texas Office of Rural Community Affairs, Texas Community Development Block Grant Program,
  • U.S. Department of Housing and Urban Development, “Community Development Block Grant Program: Preserving America,”
  • City of Harlingen, Texas 2008-2009 CDBG-Funded Activities,
  • HUD Income Limits,
  • Texas Office Of Rural Community Affairs