Recent changes to a popular federal grant program could help bring new housing to areas that need it most, a new Realtor.com® analysis shows.
The 21st Century Road to Housing Act, the bipartisan housing bill that just passed into law, includes some tweaks to the Community Development Block Grant program, which is administered by the U.S. Department of Housing and Urban Development to cities around the country.
Congress’ new formula ties both bonuses and penalties for cities to new housing production. But which cities will be most affected?
Using grant data from HUD, plus U.S. Census Bureau budget and population statistics, Realtor.com found that the cities with the most to gain are the ones that need homebuilding the most—in Northeastern and Midwestern markets.
The cities that may see the biggest benefit from the new rules are Milwaukee, Detroit, Toledo, OH, Newark, NJ, and Cleveland, with many more regional names nearby also ranking highly.
“Municipalities that successfully expand their housing inventory will see their grant allocations grow, while those failing to meet delivery standards risk reductions,” says Realtor.com senior economist Joel Berner. “This pivot transforms CDBGs from traditional development tools into the primary currency of a national incentive system designed to streamline permitting and modernize local zoning laws.”
What is CDBG?
The Community Development Block Grant program, or CDBG, allows HUD to give funding to cities to implement their own housing, infrastructure, and economic development programs.
The program, which was signed into law in 1974, gives communities some latitude about what kinds of programs they can support. Many kinds of activities are eligible, including property acquisition, relocation and demolition, and public infrastructure construction.
CDBG funding can also be used on activities related to energy conservation, renewable energy, and economic development, like grants for a business to grow. Only a few things are specifically excepted, like political activity and some kinds of new housing or government buildings.
The idea is that the program gives communities some leeway to formulate their own strategy for growth.
For years, the White House has taken aim at CDBG. This year it put out a budget request that would’ve stripped $3.3 billion from the program, as part of a 13% budget reduction at HUD.
CDBG, the government said, “has been used for many projects that the Federal Government should not be funding.”
Most of the examples it offered in the budget request included diversity and equity initiatives and arts programs, but HUD Secretary Scott Turner said the program had “lost focus.”
The National Association of Realtors® and others cried foul.
“Federal housing programs are a critical part of the solution, and we must maintain and strengthen investments in them to help communities address the full spectrum of their needs,” NAR’s 2026 president, Kevin Brown, said in an April 30 letter to Congress.
Congress, including Republicans, balked at the request, ultimately funding CDBG.
Changes in Store
Funds from the CDBG program are currently allocated based on a predictable formula that takes into account population, poverty, and housing statistics. The biggest recipients are, naturally, the largest cities by population.
New York City got $169.4 million in 2023, while Chicago got $75.1 million and Los Angeles got $50 million. For many large cities, this funding is just a marginal share of total revenue. In 2023, the median grant-to-revenue ratio was one-third of 1%.
The cities where CDBG represents a larger share of their revenue might be the biggest beneficiaries of the changes.
Realtor.com calculated Altoona, PA, Franklin, NJ, and Camden, NJ, as the three cities where CDBG money made up over 3% of the revenue they brought in in 2023.
The problem, Berner says, is that CDBG funding hasn’t kept pace with inflation. And because the median grant among cities is so small, the penalties HUD threatens with cities that don’t meet their homebuilding growth goals is very small.
In fact, the median penalty stands at about $84,000. A very weak stick to a city with a budget in the tens of billions.
“CDBG funding can be a meaningful tool for local governments, particularly because communities have flexibility in how they put those dollars to work,” says Berner. “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.”
So, to find the cities that stand to gain the most from the rules change, Realtor.com looked at two factors: cities where CDBG funding is a significant part of the budget, and cities that have a low share of new construction.
The winners are overwhelmingly in the Northeast and Midwest, and these top 10 large cities stand to benefit:
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Milwaukee, WI
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Detroit, MI
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Toledo, OH
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Newark, NJ
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Cleveland, OH
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Buffalo, NY
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Pittsburgh, PA
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Jersey City, NJ
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St. Louis, MO
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Minneapolis, MN
“The cities that have an outsized impact from CDBG tend not to build as many homes right now, which means that the incentive system may have a larger effect in the places where homebuilding is currently the least active,” the report said. “This could be a good thing, if regulatory burden is what is keeping homes from being built and the cities make good faith moves to reduce that burden and keep their CDBG money.
“It could also be the case that these cities are not growing fast enough to require increased homebuilding, and that their much-relied-upon CDBG funds are in jeopardy unless they build homes that are not needed,” the report said.
