New Law Utilizes Community Development Grants as Housing Incentive Lever
A recent analysis by Realtor.com investigates the potential impact of the 21st Century ROAD to Housing Act’s Community Development Block Grant (CDBG) payout program on local housing policies. The findings suggest that the incentives will likely have the most significant effects in smaller, post-industrial markets located in the Midwest and Northeast, where CDBG funding constitutes a larger portion of municipal budgets and new construction is relatively limited.
The Act connects CDBG allocations to local housing development, offering greater funding to communities that increase their housing supply while decreasing awards for those that fail to meet delivery criteria. However, for the majority of cities, the financial implications are minimal: the median city receives a CDBG grant amounting to only 0.33% of its total revenue, which is approximately one-three-hundredth of its overall budget. With the maximum penalty capped at 10% of a grant, the median possible penalty is around $84,000.
“CDBG funding can be a meaningful tool for local governments, particularly because communities have flexibility in how they put those dollars to work,” said Joel Berner, Senior Economist at Realtor.com. “But the current payout structure is unlikely to change housing policy in most large cities when the potential penalty is a tiny fraction of their overall budgets.”
The analysis juxtaposes the 2023 HUD grant data with city budget and population statistics from the Census Bureau, in addition to listing data from Realtor.com and estimates of household growth. The largest cities in the nation receive the highest total CDBG awards, with New York City leading at $169.3 million, followed by Chicago at $75.1 million and Los Angeles at $50.2 million. However, in smaller communities such as Altoona, PA; Franklin and Camden, NJ; Johnstown, PA; and Saginaw, MI, the funding proves to be more significant in relation to their city budgets.
In large cities with populations exceeding 250,000, Realtor.com has pinpointed markets where CDBG funding plays a relatively significant role in local revenue and where the proportion of for-sale listings that are newly built is minimal.
The 10 markets that are most likely to experience a substantial impact from the CDBG payout program are:
| U.S. City | CDBG Amount | CDBG as share of revenue |
New Construction Share of Listings |
New Construction Premium |
Household Growth 2025- 2026 |
| Milwaukee | $15,931,961 | 1.15 % | 1.3 % | 42.1 % | 1.0 % |
| Detroit | $34,030,759 | 1.10 % | 1.3 % | 321.2 % | 1.7 % |
| Toledo, Ohio | $7,355,028 | 1.01 % | 1.3 % | 144.5 % | -0.2 % |
| Newark, NJ | $6,851,649 | 0.87 % | 1.3 % | 49.7 % | 5.6 % |
| Cleveland | $20,779,240 | 1.40 % | 3.0 % | 259.3 % | 1.2 % |
| Buffalo, NY | $13,154,000 | 0.79 % | 1.3 % | 142.6 % | 0.8 % |
| Pittsburgh | $13,597,804 | 1.77 % | 3.9 % | 157.2 % | 0.9 % |
| Jersey City, NJ | $5,112,176 | 0.70 % | 1.9 % | 21.3 % | 6.3 % |
| Saint Louis | $18,096,578 | 1.11 % | 3.8 % | 340.9 % | -0.5 % |
| Minneapolis | $10,994,064 | 0.94 % | 3.6 % | 187.5 % | 1.9 % |
| National | $839,525 | 0.33 % | 17.9 % | 12.4 % | 1.6 % |
These markets typically exhibit significantly lower proportions of new construction compared to the national average. The national new-construction share of listings stands at 17.9%, whereas in cities such as Milwaukee, Detroit, Toledo, Ohio, Newark, NJ, and Buffalo, NY, it is only 1.3%. Concurrently, new homes in many of these urban areas fetch considerable premiums, indicating that the supply of new inventory is limited in relation to demand.
“Targeting incentives at places where homebuilding is least active could help unlock development where it is needed most,” Berner said. “The key question is whether cities can reduce regulatory barriers and make it easier to build. If Congress wants this program to drive broader change, however, the financial stakes will likely need to be larger.”
Four of the 10 major cities—Jersey City, NJ (6.3%), Newark, NJ (5.6%), Minneapolis (1.9%), and Detroit (1.7%)—are experiencing quicker household count growth than the 1.6% national average. A slower rate of household formation elsewhere does not always indicate that more housing is required because households may not be able to establish on their own due to financial limitations.
Penalties support incentives for communities that meet their housing-growth targets under the self-funding CDBG payment program. Cities that have low fair-market rents, high rental vacancy rates, no statutory zoning power, or a federally declared catastrophe during the previous 365 days are exempt.
Historically, CDBG funding have been used to support public services, economic development, housing repair and buyer aid, infrastructure, and public facilities. Since the program’s inception in 1974, the number of eligible participants has grown, but overall CDBG funding has not kept up with inflation. In 2023, the median award for the cities under analysis was $839,525.
To read more, click here.
