[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]






 
                  FLEXIBLE FEDERAL FUNDING: EXAMINING

                   THE COMMUNITY DEVELOPMENT BLOCK

                    GRANT PROGRAM AND ITS IMPACT ON

                      ADDRESSING LOCAL CHALLENGES

=======================================================================

                            VIRTUAL HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HOUSING,
                         COMMUNITY DEVELOPMENT,
                             AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 16, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-31
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]             
 
 
 
 
                            ______                       


              U.S. GOVERNMENT PUBLISHING OFFICE 
42-255 PDF            WASHINGTON : 2021 

                            
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           PETE SESSIONS, Texas
DAVID SCOTT, Georgia                 BILL POSEY, Florida
AL GREEN, Texas                      BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri            BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                  Subcommittee on Housing, Community 
                       Development, and Insurance

                  EMANUEL CLEAVER, Missouri, Chairman

NYDIA M. VELAZQUEZ, New York         FRENCH HILL, Arkansas, Ranking 
BRAD SHERMAN, California                 Member
JOYCE BEATTY, Ohio                   BILL POSEY, Florida
AL GREEN, Texas                      BILL HUIZENGA, Michigan
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
CAROLYN B. MALONEY, New York         TREY HOLLINGSWORTH, Indiana
JUAN VARGAS, California              JOHN ROSE, Tennessee
AL LAWSON, Florida                   BRYAN STEIL, Wisconsin, Vice 
CINDY AXNE, Iowa                         Ranking Member
RITCHIE TORRES, New York             LANCE GOODEN, Texas
                                     VAN TAYLOR, Texas
                                     
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 16, 2021................................................     1
Appendix:
    June 16, 2021................................................    37

                               WITNESSES
                        Wednesday, June 16, 2021

Breed, London N., Mayor, City and County of San Francisco, 
  California.....................................................     5
Furth, Salim, Senior Research Fellow, Mercatus Center at George 
  Mason University...............................................    10
Jaroscak, Joseph V., Analyst, Economic Development Policy, 
  Congressional Research Service (CRS)...........................    12
Mensah, George, Director, Department of Housing and Community 
  Development, City of Miami, Florida............................     6
Robinson, Kimberly H., Executive Director, Pioneer Valley 
  Planning Commission (PVPC).....................................     8

                                APPENDIX

Prepared statements:
    Breed, London N..............................................    38
    Furth, Salim.................................................    44
    Jaroscak, Joseph V...........................................    48
    Mensah, George,..............................................    54
    Robinson, Kimberly H.........................................    60

              Additional Material Submitted for the Record

Cleaver, Hon. Emanuel:
    Written statement of the Council of State Community 
      Development Agencies.......................................    65
Hollingsworth, Hon. Trey:
    Letter from Americans for Prosperity in support of the YIMBY 
      Act........................................................    63


                  FLEXIBLE FEDERAL FUNDING: EXAMINING

                    THE COMMUNITY DEVELOPMENT BLOCK

                    GRANT PROGRAM AND ITS IMPACT ON

                      ADDRESSING LOCAL CHALLENGES

                              ----------                              


                        Wednesday, June 16, 2021

             U.S. House of Representatives,
                           Subcommittee on Housing,
                             Community Development,
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:01 a.m., 
via Webex, Hon. Emanuel Cleaver [chairman of the subcommittee] 
presiding.
    Members present: Representatives Cleaver, Sherman, Beatty, 
Green, Vargas, Axne, Torres; Hill, Posey, Huizenga, 
Hollingsworth, Rose, Steil, Gooden, and Taylor.
    Ex officio present: Representative Waters.
    Chairman Cleaver. This hearing of the Subcommittee on 
Housing, Community Development, and Insurance will come to 
order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the subcommittee are authorized to 
participate in today's hearing.
    As a reminder, I ask all Members to keep themselves muted 
when they are not being recognized by the Chair. Staff has been 
instructed not to mute Members, except where a Member is not 
being recognized by the Chair and there is inadvertent 
background noise.
    Members are also reminded that they may only participate in 
one remote proceeding at a time. If you are participating 
today, please keep your camera on, and if you choose to attend 
a different remote proceeding, please turn your camera off.
    Today's hearing is entitled, ``Flexible Federal Funding: 
Examining the Community Development Block Grant Program and Its 
Impact on Addressing Local Challenges.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    The Community Development Block Grant (CDBG) Program was 
originally authorized under Title I of the Housing and 
Community Development Act of 1974, and signed into law by 
President Gerald R. Ford. It is the Federal Government's 
largest and most widely-available source of financial 
assistance to support State and local efforts in government-
related neighborhood revitalization, including housing 
rehabilitation and economic development activities.
    At the time of its authorization, CDBG ushered in a new 
approach to addressing community needs at the local level, one 
that provided flexibility to communities to address challenges 
without a plethora of Federal mandates.
    The flexibility of CDBG is what separates it from most 
other Federal programs in that while targeting funds toward the 
benefit of low- to moderate-income persons, the program leaves 
it to the States and local jurisdictions to tailor programs and 
set priorities that are best suited for their particular 
communities.
    Urban, suburban, and rural areas all receive CDBG program 
funding. CDBG funds reach every State and are accessible to all 
congressional districts and insular areas.
    Most Americans do not need to look far to see the critical 
role that CDBG plays in supporting low- to moderate-income 
Americans and communities.
    In my congressional district, the most recent CDBG 
Accomplishment Report for Kansas City, Missouri, of which I am 
the former mayor, details critical housing, public services, 
and public improvement projects which benefited over 180,000 of 
our citizens.
    Roughly half of Kansas City's CDBG expenditures were coded 
as housing, and CDBG funds helped to rehabilitate hundreds of 
single-unit residential homes, targeted towards stabilizing 
homes in low- to moderate-income urban core neighborhoods.
    In Independence, Missouri, an entitlement City I also 
represent, and the birthplace of former President Harry Truman, 
thousands more benefited from critical and ostensibly life-
saving public services.
    CDBG has been used for partnerships with nonprofit and 
homeless service providers, neighborhood stabilization, public 
improvements, affordable housing, and economic development, 
among other important purposes.
    The story of CDBG in my district is true in localities 
across the nation. Ask governors, county executives, mayors, 
and other stakeholders, urban or rural, Democrat or Republican, 
and they will tell you that the CDBG program is an instrumental 
piece of community development efforts.
    In many cases, CDBG funds are combined with other sources 
of funding and are the difference in whether a community 
development project moves forward.
    Since 1975, CDBG has assisted millions of low- to moderate-
income Americans.
    And with that, I will end my comments, and recognize the 
Chair of the full Financial Services Committee, the gentlewoman 
from California, Chairwoman Waters.
    Chairwoman Waters. Thank you very much, Chairman Cleaver. I 
want to start by saying how much I appreciate how you have 
drawn from your experience as mayor to dive deep into Community 
Development Block Grants, and to provide leadership on needed 
reforms.
    And I want to emphasize some reforms you and I have talked 
about--how Members of Congress can get their concerns 
addressed. Also, there are some concerns about some of the non-
entitlement small areas, jurisdictions that may need to, I 
guess, apply for entitlement, et cetera. But I am worried about 
them, because I have been hearing from some of our Members 
about that.
    And so, I am very pleased that CDBG serves as an important, 
flexible funding resource for communities across the country, 
helping to build homes, repair streets, support local small 
businesses, and provide meals to seniors.
    I appreciate the leadership you are taking on examining 
ways to strengthen and expand this important program.
    I have long supported CDBG. And I will continue to support 
CDBG, not just by increasing funds, but with these reforms that 
you and I, again, have talked about.
    I yield back the balance of my time.
    Chairman Cleaver. Thank you, Madam Chairwoman.
    The Chair now recognizes the ranking member of the 
subcommittee, Mr. Hill, for 5 minutes for an opening statement.
    Mr. Hill. Thank you, Chairman Cleaver. It is good to have 
this hearing. We haven't had a hearing on CDBG in many, many 
years.
    I am also delighted to join you. We have the band back 
together again. I am proud to be your ranking member for this 
Subcommittee on Housing, Community Development, and Insurance, 
and I look forward to working with you and the rest of our 
subcommittee members.
    The CDBG program is an important, popular program at HUD, 
certainly over the past 5 decades. With a regular appropriation 
of around $3.5 billion, CDBG is the 4th-largest program at HUD. 
There are over 1,200 so-called entitlement communities that 
receive direct HUD funding from the CDBG program each year. And 
if you know anything about how local governments operate, they 
very much enjoy financial flexibility.
    However, despite its long history and robust annual 
funding, we rarely talk about CDBG much in this committee.
    Now, I will say, my good friends, Al Green of Houston, and 
Ann Wagner of St. Louis, did a good job in looking at the CDBG 
disaster funding in the last Congress and made some 
improvements.
    But as a general matter, we do not pay enough attention and 
do enough oversight over this program. In fact, the last 
hearing on CDBG before the House Financial Services Committee 
dates back 15 years, to 2006. And even at that, it was a field 
hearing, more to discuss local benefits of the program, and 
less to talk about fundamental statutory issues, like the 
funding allocation formula, project prioritization, and other 
technicalities that make up this program.
    That might seem innocuous at times, but I think this 
hearing will demonstrate that it is time to review this program 
and look at the fundamental issues around the definitions at 
CDBG.
    For example, defining the housing stock that predates 1940 
is still a measurement going back to 1974, when this program 
rolled up all the Johnson and Nixon neighborhood revitalization 
programs into one block grant. That single-anchor analytic 
really skews who gets this money.
    To put a fine point on it, I first realized how impactful 
that was when I looked at Cleveland, Ohio, when I was there in 
2016. In 1940, during World War II, Cleveland had a population 
who played a different role in the economy than it does now. 
They had about 875,000 people in Cleveland back in the 1930s 
and 1940s, and now it is about 380,000, and the housing stock 
reflects that.
    As such, the CDBG funding could evolve, but I am afraid 
that has not been the case over the years. So, I would say this 
program is ripe for review and reform to ensure that taxpayer 
dollars are only being used for necessary projects to address 
the actual needs of low- and moderate-income communities. And 
we will no doubt hear about this today.
    There are many positive outcomes from the CDBG program, but 
it is worth remembering that there is evidence of poor spending 
choices, just like in any other big government program, when 
the program has loose strings and insufficient oversight.
    Criticism of the CDBG program generally centers around 
poorly-targeted funding to low- and moderate-income 
communities, creating lackluster results despite flexibility in 
funding.
    In my view, necessary oversight of these types of programs 
is critical to learn what and how programs have fallen short of 
expectations, and to occasionally kick the tires to see if all 
of the parts are actually working as Congress intended.
    Today, I believe there are three main areas of possible 
concern that are worthy of further explanation, and we thank 
our witnesses for being here: first, as I mentioned, how the 
CDBG funding formula is set in statute--it is woefully out of 
date; second, CDBG rules can sometimes allow too much 
flexibility, which can deprioritize important projects relative 
to lesser ones, even if the lesser ones are an allowable 
resource or use; and third, how CDBG can overlook the needs of 
our smallest rural communities as they get lumped in with other 
communities that are too small to qualify for entitlement 
community status.
    I look forward to the discussion today. I thank my chairman 
for the convening the hearing. And I yield back the balance of 
my time.
    Chairman Cleaver. Thank you. The ranking member yields 
back.
    Today, we welcome the testimony of our distinguished 
witnesses: Mayor London Breed, the Mayor of the City and the 
County of San Francisco, California; Mr. George Mensah, the 
Director of the Department of Housing and Community Development 
in the City of Miami, Florida; Ms. Kimberly Robinson, the 
Executive Director of the Pioneer Valley Planning Commission; 
Mr. Joseph Jaroscak, an Analyst in Economic Development Policy 
at the Congressional Research Service; and Mr. Salim Furth, a 
Senior Research Fellow with the Mercatus Center at George Mason 
University.
    Witnesses are reminded that their oral testimony will be 
limited to 5 minutes. You should be able to see a timer on your 
screen that will indicate how much time you have left, and a 
chime will go off at the end of your time. I would ask that you 
be mindful of the timer, and quickly wrap up your testimony if 
you hear the chime, so that we can respectfully hear all of the 
witnesses and the committee members. And without objection, 
your written statements will be made a part of the record.
    Mayor Breed, thank you for being here. You are now 
recognized for 5 minutes to give an oral presentation of your 
testimony.

  STATEMENT OF LONDON N. BREED, MAYOR, CITY AND COUNTY OF SAN 
                     FRANCISCO, CALIFORNIA

    Ms. Breed. Thank you, Chairman Cleaver, Ranking Member 
Hill, and distinguished members of the subcommittee. Thank you 
all so much for the invitation to testify before you today.
    I am testifying today on behalf of the U.S. Conference of 
Mayors, the Mayors and CEOs for Housing Investment, and the 
City and County of San Francisco. I am here to talk about what 
San Francisco is doing to protect our most vulnerable residents 
and what more we can do together with the critical support of 
the Federal Government.
    San Francisco is a City of real disparities. We have 
neighborhoods of beautiful homes and incredible views that are 
within walking distance of people living in really challenging 
circumstances. Housing instability, homelessness, and income 
inequality are a threat to far too many of our residents.
    San Francisco is not alone in facing these challenges. We 
have seen estimates that due to the challenges caused by this 
pandemic, more than 30 million Americans could be at risk of 
being evicted.
    This is a looming national crisis, and it is why these 
Community Development Block Grants are so critical for cities 
like San Francisco. They provide badly-needed support to face 
these challenges, but they also provide flexibility for us to 
be able to work with our communities on tailored solutions.
    One key example of this is our Tenant Right to Counsel 
program, which is funded by the CDBG program. Starting in 2019, 
we began implementing this landmark policy that all residential 
tenants facing eviction have a right to full-scope legal 
representation. This program requires eviction legal assistance 
to provide full-scope legal representation.
    We have seen that this full-scope representation gets 
better results for tenants. So far, 67 percent of full-scope 
clients stayed in their home as compared to 38 percent of those 
without.
    And among African-American tenants, the rates are even 
higher. Eighty percent of those who received full-scope 
representation stayed in their homes.
    Those are statistics, yes. But those are lives. Those are 
families. Those are people whom, if evicted, could end up 
homeless.
    It is too expensive here, and people so often have to move 
out of the City, away from their families and communities. So 
many people I grew up with in the Fillmore neighborhood have 
left our City for this very reason.
    Keeping people housed in their community is essential for 
keeping our community strong and diverse. And in my upcoming 
budget, San Francisco will fully fund the Tenant Right to 
Counsel program so that every tenant in need has full-scope 
representation.
    This will be a dramatic difference in our City where 
housing affordability is a challenge for so many, and it proves 
the significant impacts of these block grants.
    The key reason for this success is the flexibility provided 
by CDBG funds. For San Francisco, we can fund our landmark 
tenant protection program to help our most vulnerable from 
being evicted, but a smaller community or a city in a different 
part of the country might have a different program to deliver 
on that need. We are a vast and varied country. CDBG works 
because it recognizes that fundamental truth.
    Now, while I am proud of our ability to fund Tenant Right 
to Counsel, the need is so much greater. COVID has exposed the 
already-existing disparities with disproportional impacts 
hitting our African-American and Latino communities. And over 
the last 2 decades, as our population has grown, San Francisco 
has seen a decline in CDBG funding. We need to reverse that 
trend.
    In San Francisco, in our most recent request for CDBG 
funding, the request for dollars exceeded the amount available 
by 350 percent. An increase in overall allocation of CDBG would 
not only support San Francisco, but would help every State, 
city, and local jurisdiction that relies on these funds.
    I want to thank Congress for your leadership over the last 
year in passing critical relief packages in response to the 
COVID health crisis. And I especially want to thank Speaker 
Nancy Pelosi for her unwavering support for San Francisco, and 
mayors across the country to ensure that local governments have 
the resources we need, such as CDBG funds, so that we can 
provide the care and support our residents need and deserve.
    I am urging Congress to recognize that our residents and 
our neighborhoods can thrive if we provide the resources and 
the flexibility to local communities to make decisions about 
supporting what is best.
    Thank you for your time and your continued support.
    [The prepared statement of Mayor Breed can be found on page 
38 of the appendix.]
    Chairman Cleaver. Thank you very much, Mayor Breed.
    Mr. Mensah, you are now recognized for 5 minutes to give a 
presentation and your testimony.

STATEMENT OF GEORGE MENSAH, DIRECTOR, DEPARTMENT OF HOUSING AND 
         COMMUNITY DEVELOPMENT, CITY OF MIAMI, FLORIDA

    Mr. Mensah. Chairman Cleaver, Ranking Member Hill, and 
distinguished members of the subcommittee, thank you for the 
invitation to testify before you today.
    I am testifying today on behalf of the National Community 
Development Association (NCDA), which represents nearly 500 
local governments that administer the Community Development 
Block Grant program.
    NCDA is an association of people committed to assist local 
governments to achieve high-quality, locally-responsive 
programs for making communities better places in which to live.
    Created in 1974, the CDBG program provides annual funding 
to over 1,200 States, local jurisdictions, and insular areas to 
provide decent housing and a suitable living environment, and 
to expand economic opportunities for low- and moderate-income 
persons.
    Program grantees use CDBG funding to invest in low- and 
moderate-income people and neighborhoods through a variety of 
activities that focus on four major areas: affordable housing; 
infrastructure; services; and economic development.
    While the program allows communities to design and 
implement strategies tailored to meet local needs and 
priorities, reforms are needed to make the program more 
flexible.
    In June 2020, NCDA formed a working group of Latinx and 
Black community development administrators to examine the CDBG 
program to make recommendations for improving the program to 
better serve communities of color.
    The working group developed five recommendations for 
improving the CDBG program.
    First, to substantially increase the authorized funding 
level for the CDBG program. The CDBG funding has diminished 
significantly over time. The program was authorized at $2.473 
billion in 1974, and reached its highest funding level of $4.4 
billion in 2001. That was 20 years ago. The program has 
remained relatively stagnant in recent years, hovering at $3.4 
billion.
    CDBG funding has not kept up with inflation and program 
needs. The program has never been adjusted for inflation even 
though program costs increase annually. Grantees report that 
requests for funds consistently outweigh available grant 
dollars. The number of grantees receiving CDBG funding has 
increased from 594 in 1975 to 1,245 today, a 47.7 percent 
increase.
    Immediate and long-term investment in programs like CDBG 
would help address underinvestment in communities of color and 
low-income communities.
    We recommend that CDBG funding be expanded significantly to 
meet the inflation-adjusted value of the program, estimated to 
be $12 billion, and be adjusted annually to reflect the rise in 
inflation.
    Second, let CDBG grantees determine the public services 
cap. Allow grantees the discretion to decide the amount of 
public service dollars needed to address their community needs. 
The public services category within CDBG covers many important 
activities that support and benefit low-income communities, but 
it is limited by a 15-percent cap, which means the total amount 
of CDBG funds for public service activities cannot exceed 15 
percent of the annual grant allocation.
    Grantees use CDBG funds for a wide range of public service 
activities, which include job training, daycare assistance for 
low-income working families, food banks, youth services, 
services for seniors, and other vital services.
    We urge Congress to eliminate the current 15-percent public 
services cap requirement and allow CDBG grantees to determine 
their public services cap as part of the Consolidated Plan 
process. As precedent, the Coronavirus Aid, Relief, and 
Economic Security (CARES) Act waived the public services cap to 
allow grantees the utmost flexibility to respond to COVID-19.
    Third, provide more flexibility for grantees to use their 
CDBG funds for new construction of housing. America is facing 
an affordable housing crisis. Stable, decent, affordable 
housing is critical to improving communities and economies. 
Local governments and their partners need resources to expand 
and preserve the supply of affordable housing.
    CDBG can be used for new construction of housing, but only 
in extremely limited circumstances. This narrowly-restricted 
use impedes communities from using CDBG to increase the local 
supply of affordable housing.
    Local governments need to be able to use all of the 
available tools to address the affordable housing crisis, and 
the use of CDBG funding for new construction is one tool that 
most communities have available. We urge Congress to broaden 
the CDBG statute to allow new construction of housing as an 
eligible program activity without restrictions.
    Fourth, provide more flexibility for grantees to use their 
CDBG funds for fair housing activities.
    And fifth, to support nonprofit partners through technical 
assistance and capacity-building.
    Thank you for the opportunity to speak with you today. I 
look forward to your questions. Thank you.
    [The prepared statement of Mr. Mensah can be found on page 
54 of the appendix.]
    Chairman Cleaver. Thank you very much, Mr. Mensah, for your 
oral presentation.
    Ms. Robinson, you are now recognized for 5 minutes to give 
an oral presentation of your testimony.

STATEMENT OF KIMBERLY H. ROBINSON, EXECUTIVE DIRECTOR, PIONEER 
               VALLEY PLANNING COMMISSION (PVPC)

    Ms. Robinson. Thank you, Chairman Cleaver, Ranking Member 
Hill, Chairwoman Waters, and distinguished members of the 
subcommittee, for the opportunity to testify today.
    My name is Kimberly Robinson, and I am the executive 
director of the Pioneer Valley Planning Commission, the 
regional planning agency for 43 communities here in western 
Massachusetts.
    I am testifying today on behalf of the National Association 
of Regional Councils, or NARC, which serves as the national 
voice for regions by advocating for regional cooperation as the 
most effective way to address a variety of community planning 
and development opportunities and issues.
    NARC members include regional councils, councils of 
government, regional planning and development agencies, 
metropolitan planning organizations, and other regional 
organizations.
    Members work collaboratively with their communities, large 
and small, urban and rural, to address their citizens' needs 
and to promote a regional approach to planning for the future.
    NARC has been a strong advocate for Community Development 
Block Grants since its inception, as it has a proven track 
record of assisting low-income neighborhoods in communities of 
all sizes across the country. It is a critical tool in our 
members' efforts to address poverty, inequity, economic 
development, and infrastructure needs. Its unique flexibility 
allows us to direct Federal resources to frequently-changing 
areas that are most in need each year.
    While most CDBG entitlement communities have populations of 
over 50,000, the program's reach goes far beyond that 
threshold. As you know, each State also receives CDBG 
allocations to be used in non-entitlement communities. My State 
of Massachusetts received over $35 million for that purpose in 
Fiscal Year 2021 alone. In this regard, CDBG cannot be viewed 
simply as a, ``big city'' program.
    Of the 43 communities that are members of the Pioneer 
Valley Planning Commission, only 4 are CDBG entitlement 
communities, but PVPC provides technical assistance to many of 
our communities when they seek CDBG funds for various projects. 
PVPC both applies for funding and also administers the grants 
on behalf of these communities.
    In Fiscal Year 2019, PVPC worked with over 19 different 
communities on CDBG-funded works, with populations ranging from 
500 residents to 40,000 residents. We have aided over 30 
municipalities since 1988.
    In order to encourage regional cooperation, the State 
increases the minimum allocation that a non-entitlement 
community can receive if they join with one or two other 
communities for regional efforts.
    The regional approach here in the Pioneer Valley has led to 
long-term stability for services in many of our towns. A 
perfect example of this is the Southern Hilltowns' regional 
applications, which have been funded since the mid-1980s. Some 
of the services here include infrastructure projects, a food 
pantry, senior programming, and a domestic violence prevention 
program.
    As another example, we have assisted the town of Agawam, a 
non-entitlement community, in applying for and administering 
CDBG funding for a variety of uses in the community. This 
includes improvements and repairs at an assisted housing site, 
a disabled accessibility study for the town hall, an 
infrastructure study of one of the town's most densely-
populated neighborhoods, and grants to small businesses with 
CARES Act funds.
    CDBG is a valuable program that works locally to address 
substandard housing, poor or nonexistent infrastructure, 
pockets of decline, and neighborhood development. It provides 
the resources and tools that enable local communities to design 
flexible strategies to address these issues.
    CDBG is also an important leveraging tool for local 
communities to gain access to other funding sources. Every 
dollar of CDBG invested in communities leverages another $4.09 
in private and public investment.
    CDBG is an impactful program, creating strong, sustainable, 
inclusive communities, and quality, affordable homes for all. 
The program is a model in efficiency and effectiveness, using 
strategic planning and coordination to assist millions of low- 
and moderate-income people annually.
    Despite the impact and success brought by CDBG, there are 
not enough resources in the program to address all of the needs 
of our communities and regions. While overall funding for the 
program has stabilized in the past few years, its funding level 
in 2021 is still almost $1 billion less than it was in 2004.
    As you may know, if the program's original allocation of 
$2.4 billion in 1975 was adjusted for inflation, the CDBG 
program would be receiving over $10 billion today.
    While I know this committee is not responsible for annual 
appropriations, we believe that restoring and increasing CDBG 
from that high-water mark should be a priority for Congress.
    Thank you again for the opportunity to testify today. I 
would be happy to answer any questions you may have about the 
role that regions play in administering CDBG funds in our 
communities. Thank you.
    [The prepared statement of Ms. Robinson can be found on 
page 60 of the appendix.]
    Chairman Cleaver. Thank you very much, Ms. Robinson.
    Mr. Jaroscak, you are now recognized for 5 minutes to give 
an oral presentation of your testimony.
    Mr. Jaroscak, you may not be connected with us. If you will 
unmute, please?
    Sir, we are unable to hear you. We can see you, but we 
can't hear you. If you would please unmute?
    Staff, there may be a technical problem with Mr. Jaroscak, 
and I don't want to miss his opening statement.
    The staff is trying to provide some assistance.
    Hey, this is a new world in which we are functioning.
    Mr. Hill. Can we go to the next witness and come back to 
him?
    Chairman Cleaver. Okay. This is being worked on. So, we 
will go on to Mr. Furth. You are now recognized for 5 minutes 
to give an oral presentation of your testimony.

  STATEMENT OF SALIM FURTH, SENIOR RESEARCH FELLOW, MERCATUS 
               CENTER AT GEORGE MASON UNIVERSITY

    Mr. Furth. Good morning, Chairman Cleaver, Ranking Member 
Hill, and members of the subcommittee. Thank you.
    My name is Salim Furth, and I am a senior research fellow 
at the Mercatus Center at George Mason University. My remarks 
today cover the need to reform the CDBG funding formula, two 
questionable categories of CDBG spending, and the inequitable 
treatment of non-entitlement communities.
    Congress intended CDBG for the benefit of low- and 
moderate-income people and the neighborhoods where they live. 
But the most impactful parts of the statute are the formulas, 
and the formulas fail to fulfill the stated purpose. These 
formulas took on added significance in the past year because 
the Coronavirus Aid, Relief, and Economic Security (CARES) Act 
and the American Rescue Plan Act (ARPA) both use them to 
distribute a lot of money.
    As you know, there are two formulas for entitlement 
communities and two for States. The formulas reflect 1970s 
concerns. This was the era of, ``Ford to City: Drop Dead'', and 
``Will the last person leaving Seattle--turn out the lights.''
    At the time, age and decline seemed synonymous. Thus, 70 
percent of entitlement Formula B depends on having old housing 
and a slow rate of growth. But today, New York City, Seattle, 
and many other cities have strong tax bases and booming 
economies.
    The inequities are even more egregious in the case of 
affluent prewar suburbs. In Newton, Massachusetts, half of the 
homes were built before 1940. The median household income is 
$150,000, but Newton receives $386 in CDBG per resident in 
poverty.
    McAllen, Texas, is much newer and less affluent. It 
receives half as much CDBG funding per capita and only $54 per 
resident in poverty.
    There is also an arbitrary distinction between entitlement 
and non-entitlement communities. As a result, inequities arise 
even between similar areas.
    Chelsea, Massachusetts, and Everett, Massachusetts, are 
working-class suburbs with even older housing than Newton, but 
their populations are less than 50,000, so they receive funding 
through the State. They receive between $100 and $150 per 
person in poverty, better than McAllen, but still less than 
half of what Newton gets.
    Newton, in turn, can envy the towns of Martha's Vineyard, 
where ``summer'' is a verb, and which somehow receives $1,700 
per resident in poverty.
    The relationship between the CDBG program's stated goals 
and its true priorities as reflected in its budget is tenuous. 
In my written testimony, I suggest one way to transition 
gradually to better formulas.
    Moving on, there are a couple of legal uses of CDBG funding 
that are contrary to the spirit of the law. Number one, 
subsidizing private businesses. Studies of so-called economic 
development subsidies find that they are ineffective at 
creating jobs. Instead, they boost recipient companies at the 
expense of everyone else.
    In my own research, looking at 17 States, I found that 4 
States dedicate at least a quarter of their State's CDBG 
funding for private subsidies. One town in Maine used 79 
percent of its CDBG funding over 2 decades in support of a 
single local business.
    Targeted subsidies are an invitation to favoritism and 
petty corruption and are outside the scope of what governments 
ought to do.
    Another questionable use is when affluent communities use 
CDBG to eliminate cheap housing. Nobody calls it that, of 
course, but it is common to see exclusive locales spend their 
CDBG on the rehabilitation of single-family homes. The 
recipients all have low incomes, of course, but they implicitly 
have substantial wealth by dint of owning a home there.
    The well-funded Martha's Vineyard program I mentioned 
earlier has long used this tactic. It is completely innocent at 
the town level--for example, fixing up an old house which was, 
frankly, an eyesore, so someone doesn't have to move--but the 
practice has the effect of raising the prices of what would 
have been the cheapest homes in town.
    To curb this, I recommend barring rehabs of units worth 
more than the national average.
    In many States, non-entitlement communities cannot set 
their own CDBG priorities. States allocate annual grants among 
various categories and entertain grant requests only within 
those categories. Entitlement communities, by contrast, have 
predictable funding and tremendous flexibility.
    There are good arguments to be made for either system, but 
using the two systems in parallel seems unfair. At a minimum, 
States should make their grants predictable so that small 
communities can approach the CDBG program as a budget rather 
than a lottery.
    In conclusion, I doubt that anyone on this call, if they 
had a free hand budgeting $3.5 billion from scratch, would come 
up with CDBG.
    But this is a program Congress has inherited, and it is not 
going away, so Congress should make the adjustments necessary 
to ensure that CDBG funds are distributed and spent equitably 
and in accordance with the program's intent.
    Thank you.
    [The prepared statement of Dr. Furth can be found on page 
44 of the appendix.]
    Chairman Cleaver. Thank you, Mr. Furth.
    We want to try to go back to check to see if Mr. Jaroscak 
has been able to connect with us.
    Mr. Jaroscak, you are now recognized for 5 minutes.
    Mr. Jaroscak. Can you hear me now?
    Chairman Cleaver. Oh. Praise--
    Mr. Jaroscak. I'm sorry. I think something got mixed up, 
but I think it works now.
    Chairman Cleaver. Okay. You are now recognized for 5 
minutes.

STATEMENT OF JOSEPH V. JAROSCAK, ANALYST, ECONOMIC DEVELOPMENT 
          POLICY, CONGRESSIONAL RESEARCH SERVICE (CRS)

    Mr. Jaroscak. Thank you.
    Chairman Cleaver, Ranking Member Hill, Chairwoman Waters, 
and members of the subcommittee, thank you for the opportunity 
to testify before you today.
    My name is Joe Jaroscak. I am an analyst in economic 
development policy with the Congressional Research Service.
    This CRS statement provides an overview of the Community 
Development Block Grant Program administered by the U.S. 
Department of Housing and Urban Development. In particular, it 
will focus on describing the program's structure, funding 
mechanisms, and potential policy considerations.
    CRS' role is to provide objective, nonpartisan research and 
analysis to Congress. Any arguments presented in my written and 
oral testimony are for the purposes of informing Congress and 
not to advocate for a particular policy outcome.
    The CDBG program is a primary source of flexible Federal 
funding to States, localities, and insular areas for economic 
and community development and other related purposes.
    The program was originally authorized under Title I of the 
Housing and Community Development Act of 1974, with the primary 
purpose of establishing and maintaining viable urban 
communities through the implementation of activities that 
benefit low- and moderate-income persons.
    CDBG's flexibility as a block grant program allows grantees 
to use their program funds for a range of activities, from 
public services to infrastructure, among others.
    There are limits on certain types of activities, and any 
eligible activity must meet one of the program's three 
statutory national objectives: principally benefit low- and 
moderate-income persons; aid in the prevention or elimination 
of slums or blight; or meet an urgent need by addressing 
conditions that pose a serious and immediate threat to the 
health and safety of residents.
    The CDBG program is funded via discretionary appropriations 
to the Community Development Fund account. Seventy percent of 
CDBG formula funds are distributed to entitlement communities, 
defined as principal cities of metropolitan statistical areas, 
other metropolitan cities with populations of 50,000 or 
greater, and urban counties with populations of 200,000 or 
greater when excluding entitlement city populations within 
county borders.
    Thirty percent of formula funds are allocated to States 
based on a separate formula allocation process. States and 
Puerto Rico distribute these funds to communities that do not 
qualify for entitlement funds. States have broad discretion 
over the methods for distribution of these funds within their 
jurisdiction.
    Before formula allocations are made to States and 
localities, $7 million is statutorily set aside to be 
distributed among other U.S. Territories or insular areas.
    The formula methodology developed by HUD based on direction 
in the CDBG statute includes several factors related to 
population or population growth, poverty, and housing 
characteristics. HUD program expenditure data indicate that 
public improvement activities and housing-related activities 
represent the majority of overall CDBG expenditures in general.
    Since the program's inception in 1975, the number of annual 
CDBG grant allocations has increased. During that same period, 
the annual CDBG funding amounts have declined, based on 
inflation-adjusted dollars and other metrics.
    The CDBG program's authorizing legislation expired in 1994. 
Given changes in the national economy, and policy priorities 
for State and local governments, there may be interest in 
revisiting some aspects of the program.
    This concludes my prepared remarks. Thank you for the 
opportunity to testify. I look forward to responding to any 
questions that you may have. And if additional research and 
analysis would be helpful, my CRS colleagues and I are prepared 
to assist the subcommittee.
    Thank you.
    [The prepared statement of Mr. Jaroscak can be found on 
page 48 of the appendix.]
    Chairman Cleaver. Thank you, sir, very much, for your 
testimony.
    Let me remind the witnesses to please keep your cameras 
turned on during the full duration of our hearing, even when 
you are not speaking.
    I will now recognize myself for 5 minutes of questioning.
    One of the problems we have with CDBG is that most people, 
even communities that are receiving those dollars, have 
absolutely no idea of the source of the dollars. They believe 
that the money is coming from the State.
    In the State of Missouri, my home State, if you look at the 
Missouri Housing Development Corporation's statement, you can 
read through it, and there is not one single sentence about the 
origin of the dollars.
    So, it is easy for people to come to the conclusion that 
the Federal Government is not participating in rural areas of 
our States when the fact is that they are getting Federal 
dollars. And I can tell you right now, experientially, they 
will not have any idea of the source of those dollars.
    And I would agree with the ranking member, I think it is 
time for some adjustments to a program that started back in 
1974. Actually, we have benefited by the program, the CDBG 
program, which Richard Nixon was actually flirting with. Gerald 
Ford was able to get it through. But we haven't had any major 
changes; there have been no adjustments in the program, 
significant adjustments, since it started.
    And given the importance of the Community Development Block 
Grant program, we have to raise the awareness about the program 
in order to build support for it. There are individuals, 
probably hundreds of thousands, maybe millions of people who 
have received the benefits of this program and have absolutely 
no idea of the origin of those dollars.
    So, I just would like to find out from our witnesses, 
particularly Ms. Robinson, do you have any reason to doubt what 
I have just said about people not knowing where the funds came 
from, and do you have any ideas on what can be done to make 
sure that people do have some idea about the origin of CDBG 
assistance?
    Ms. Robinson. Thank you, Mr. Chairman.
    I do believe that you have a good point. I think there is a 
lot of--at times, it can be confusing exactly where funding 
comes from.
    I think there are a couple of things that really help, 
though. Community Development Block Grant funds, even if they 
are running through the State, are still being referred to as 
CDBG funds. And to me, that is shorthand for, ``This money is 
coming from the Federal Government.''
    I think the second thing that we can do, and certainly as 
an agency that applies for these funds and manages them across 
our communities, is we could certainly make more of an effort 
to ensure that the residents understand that this is Federal 
funding that is coming directly into their communities.
    And I took a note of that while you were speaking, so that 
we can start to do that in our communities. Thank you.
    Chairman Cleaver. Okay. Thank you.
    Would any of the other witnesses like to comment on that?
    Let me just add that one of the problems, when the funds 
come from the Federal Government and the entitlement cities 
receive their funding, is the States will receive their 
funding, and in all likelihood they will put it into some kind 
of existing program--State economic development, State housing 
corporations, or any number of other government agencies--so 
that it gets washed out.
    The fact that these are Community Development Block Grant 
dollars that came from the Federal Government is washed out 
because now they are coming from a State agency.
    And I can assure you that the average person in a small 
town receiving $10,000 from the North Dakota State Government 
has no idea that it originated right here in Washington, D.C..
    So, we are always going to have a problem unless we can fix 
this big issue of the origin of the dollars and how we can make 
sure that people who are getting those dollars understand the 
origin so that they can have some appreciation for the program.
    In spite of that, we still need to make some changes.
    I now recognize the distinguished ranking member of the 
subcommittee, Mr. Hill, for 5 minutes.
    Mr. Hill. Thanks, Mr. Chairman. Thanks again for having 
this really good, thoughtful oversight hearing. And our panel 
has been very, very helpful.
    I was reading that the Biden Administration wants to change 
the definition of metropolitan statistical area from 50,000 to 
100,000. That knocks out a lot of rural States' metro areas by 
increasing that.
    Let me ask the witness from the Congressional Research 
Service, what kind of impact would that have on this, sir?
    Mr. Jaroscak. Thank you, Ranking Member Hill.
    The majority of existing CDBG grantees would remain in the 
program. Under the CDBG statute, there is essentially a 
grandfathering provision, that eligible grantees that have been 
eligible for CDBG entitlement funds for 2 or more years are 
able to remain in the program even if there are changes to the 
definitions for metropolitan statistical areas or if their 
populations decrease below the threshold.
    What it would affect is the potential for communities that 
are near that 50,000 threshold, their potential eligibility in 
the near term.
    Mr. Hill. Yes, that hurts it prospectively for the growing 
communities.
    And then you say that if they have participated for 2 or 
more years, they are essentially grandfathered in. Does that 
really make it hard to modify these formulas if, essentially, 
if you are in the program, you can't get out of the program?
    Mr. Jaroscak. Yes, so the grantees are able to opt out of 
the program if they wish. But what it has done is, as many of 
the witnesses have mentioned, the number of entitlement 
communities has increased over time. And part of that is 
because the grandfathering provision has stabilized existing 
CDBG grantees, the number of existing CDBG grantees. And then, 
as additional communities have continued to grow, HUD has 
estimated in some reporting that the entitlement community 
program grows by 5 to 10 eligible grantees per year.
    Mr. Hill. Thank you for that background.
    Mr. Furth, I really appreciated your testimony about the 
weighting in the formula, that it hasn't been reviewed, it is 
essentially based on urban life as we knew it in 1974, and that 
was 50 years ago, not reflecting true poverty needs in many, 
many communities. So, I really appreciated your testimony.
    Turning to the subject of the 26 eligible uses for CDBG, do 
you believe these should be limited or reevaluated? And I am 
sure it has been added to over the years, probably never 
subtracted from. Give me your thoughts on those 26 approved 
uses?
    Mr. Furth. Thank you, Ranking Member Hill.
    As I said in the testimony, I think that subsidizing 
private businesses goes through a few of the different 
categories.
    I think that is something that we should be able to agree 
is not the role of government generally and is a significantly 
inferior use. The other witnesses here who talked about the 
great successes of CDBG in their communities did not talk about 
subsidizing businesses. That is because it is usually not a 
great use.
    So, I would get rid of any kind of subsidies through any of 
those 26 items.
    Then, the second thing that I would do is put some 
conditions on it, so that when you have very affluent 
communities or communities with extremely strong tax bases that 
should be able to fund the basics of community life themselves, 
without help, and where the big problem is that they are 
excluding people through their zoning, through the limits on 
who can move there, there should be more limits on how those 
types of communities can use funding so that we actually have a 
program that is furthering fair housing in a very broad sense, 
rather than subsidizing those who are comfortable and want to 
keep other people out of their communities.
    Mr. Hill. I really appreciated the panel's testimony, with 
lots of good, different perspectives.
    Thank you, Chairman Cleaver, and I yield back.
    Chairman Cleaver. Thank you.
    I will now recognize the Chair of the full Financial 
Services Committee, the gentlewoman from California, Chairwoman 
Waters.
    Chairwoman Waters. I would like to understand what I think 
is a mandate in CDBG that you have hearings or community 
meetings to get input and to discuss plans for funding.
    And I want to know if that is divided up by, for example, 
the City of Los Angeles or the City of San Francisco, by 
council districts, or those hearings are held in combination 
with all of the districts, or is this money basically divided 
up in terms of your council districts and everybody gets so 
much in order to deal with the problems in their district?
    Mayor Breed, could you help me with that?
    Ms. Breed. Thank you, Chairwoman Waters, and it is so great 
to see you here today.
    I will tell you that in San Francisco, we have city 
councils that are basically the board of supervisors. And we 
don't necessarily divide it up on districts. We look at the 
income inequalities in specific ZIP Codes, and we focus on the 
areas where we know the need is greater.
    But we also have, as you know--in 94115, we have an 
extremely wealthy community where the area median income is 
over $100,000, and we also have people living in extreme 
poverty where the annual median income is $8,000. So, we have 
to be very creative and strategic, not just focusing on a 
supervisorial district, but really focusing on specific 
communities and how these dollars impact those communities 
directly.
    And we have various nonprofit organizations. We do various 
meetings all over San Francisco to get feedback. But we also 
have a clear understanding of where the need is, and we provide 
it throughout San Francisco, because poverty kind of exists in 
various pockets, although it is concentrated in certain 
neighborhoods.
    Chairwoman Waters. Okay, then. Are you telling me that you 
have the flexibility, looking at the high-end neighborhoods 
perhaps, not to put as much money into those neighborhoods as 
you would in neighborhoods that are very poor, that really need 
more help? Do you have that flexibility?
    Ms. Breed. We definitely have that flexibility. But the 
challenge sometimes is, based on the reporting requirement, we 
run into some difficulties because, as I said, 94115 is a 
perfect example when talking about when submitting the 
compliance information to the Federal Government. They look at 
sometimes the average area median income of a particular ZIP 
Code.
    So we have to break it up, we have to explain it so that we 
are able to leverage the funds necessary to support a community 
or a project. And sometimes it can get quite complicated, but 
we do have a level of flexibility there.
    Chairwoman Waters. So, included in your allocation, you 
take care of the non-entitlement areas in the San Francisco 
area? How does that work? I heard how they do it with the 
regional look at this. But what is your responsibility, if any, 
in dealing with the non-entitlement jurisdictions?
    Ms. Breed. In San Francisco, the way it works is we are a 
City and a County. We don't have other cities within our 
County, we are just responsible for San Francisco, which 
provides us more of the flexibility to control how these 
dollars are spent directly. So, we don't necessarily run into 
those problems in the same way as other jurisdictions.
    Chairwoman Waters. I see.
    And lastly, there is a lot of talk about urban versus rural 
all the time in so many different ways. I am one who believes 
that both urban and rural should be taken care of, and should 
be funded adequately.
    What do you think about, if we are talking about expanding 
the amount of money in this program, that we pay attention not 
only to our urban areas but to the rural areas also?
    Ms. Breed. Oh, definitely. The fact is, when we talk about 
equity there, equity means different things to different 
communities. In a rural community, it is going to be different. 
It doesn't mean that there isn't poverty; it is just a 
different layer of poverty, versus a very dense City like San 
Francisco.
    So having the level of flexibility for these resources and 
providing distribution of these resources in all communities to 
meet their needs, and giving them the flexibility to use these 
dollars for the most important needs in their communities based 
on their experiences, is how and why this program is important.
    And so, I hope that it will continue, but also be expanded 
and look at addressing inequality throughout our entire 
country, and rural communities are a part of that for sure.
    Chairwoman Waters. Thank you very much. You are the first 
mayor that I have heard talk about assisting tenants in the way 
that you are doing.
    Do you have any recommendations that you can give to Mr. 
Cleaver that would help us in whatever Mr. Cleaver provides the 
leadership to do, to deal with the inequities and reform that 
is needed in CDBG? Would you help us with your recommendations?
    Ms. Breed. Oh, definitely, I would be happy to help you 
with the recommendations. Because at the end of the day, 
preventing people from being homeless is important. And so, 
providing them with not only legal counsel, but also rental 
assistance, is what has helped to keep people housed, because 
they can end up, of course, on the streets or away from their 
families or communities.
    When you look at a place like San Francisco, which had a 
population of over 12 percent African Americans, to the point 
where we are at less than 6 percent now, it has everything to 
do with displacement and not making the right investments to 
not only build more housing but to keep people housed and to 
keep them in their communities.
    The neighborhood I grew up in used to be a thriving 
African-American community. And now, if you look at the income 
inequality and the disparities and how expensive it is to live 
in this community, it has changed significantly.
    So, supporting tenants in this way is critical to the 
success of keeping people in their communities and keeping our 
cities diverse. 
    Chairman Cleaver. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you so much. And I want you to 
know, with our CARES program and our relief program, the 
American Rescue Plan, we put $47 billion in it for tenants, and 
I don't know how it has been used. We will talk about that 
later.
    My time has expired. Thank you so much, Mr. Cleaver.
    Chairman Cleaver. Thank you, Madam Chairwoman.
    Mr. Posey, you are now recognized for 5 minutes.
    Mr. Posey. Thank you, Chairman Cleaver.
    Dr. Furth, the title of this hearing emphasizes the 
flexible funding of the local communities in the Community 
Development Block Grant program. While flexibility is a great 
benefit to local governments, isn't it hard to assess a need 
for more or less government resources for Community Development 
Block Grant funding without some sort of national performance 
metrics?
    Mr. Furth. Thank you, Congressman.
    That is absolutely right. CDBG replaced a bunch of specific 
Federal grants for specific urban needs, like sewers and roads. 
And so, I think it is hard to go back and forth between those 
things. On the one hand, Congress reasonably wants 
accountability and wants to know that funds are being used in 
high-quality ways. On the other hand, neither Congress nor 
mayors want micromanagement from Washington.
    I think you have the difficult task of trying to find a 
balance between those. My suggestion is to look at those 
approved uses and keep the flexibility, but narrow the scope 
and say we have some things that either just generally, across-
the-board, like subsidizing private businesses, shouldn't be 
done, and then we have some things that conditionally shouldn't 
be done.
    So if your community reaches certain metrics, where we have 
in private houses is probably raising housing costs, not making 
more units habitable that were uninhabitable, then you 
shouldn't be doing that. And there should be some more 
oversight in terms of the scope.
    But I don't think I would want to go back to the old method 
of Washington giving a city money that can only be used on 
sewers, when that city doesn't need sewer replacement.
    It is a tough question, and I don't envy you your job in 
that respect.
    Mr. Posey. That is a good answer.
    Do you believe we can develop national performance metrics 
for the CDBG program that will allow us to evaluate the need 
for more or less funding? Or is this program focusing on local 
discretion simply a matter of what we can afford to spare at 
the national level?
    Mr. Furth. I think that could be realistic to do with the 
State CDBG programs, probably because there are only 50 States, 
and they are looking at a broad enough cross-section of 
communities that you can sort of look at what they are doing 
with the money over time. And, like I said, some States are 
putting money into things that I think are pretty questionable 
given their circumstances.
    I don't think that you could kind of compare apples to 
apples across say--we have heard about Agawam, Massachusetts, 
and San Francisco, California. The needs and circumstances are 
so different that even starting to compare the needs and the 
uses is really difficult.
    Obviously, it is important that HUD continue its work of 
making sure that funds are being spent responsibly, that there 
isn't insider dealing. Wherever there is funding, there is an 
opportunity for corruption, and that is just the kind of grunt 
work of running a grant program, is making sure that your 
grantees are doing what they say they are doing.
    But that is HUD's job, not Congress', unless HUD is really 
lying down on the job, and I don't think there is any evidence 
of that.
    But, yes, I would focus really on the formula and making 
sure that communities are getting a reasonably equitable 
allocation of the money, because right now that is not 
happening.
    Mr. Posey. The number of entitlements for entitlement 
communities under the CDBG has increased from 594 to 1,236 over 
the life of the program. What does your research on the program 
suggest about the performance of the program since its 
inception?
    Mr. Furth. CDBG has been very popular with recipients, and 
a lot less popular with Congress. I think that makes sense. The 
recipients get a ton of flexibility. Those who are favored by 
the existing formulas love it. And the growing number of 
entitlement communities reflects a growing national population. 
That is not surprising.
    But the flexibility and the sort of privileging of certain 
communities over others means that the people who represent 
those privileged communities are going to yell very loudly if 
they are disfavored, if they lose any funding, relative to 
communities that Congress decides have more need.
    And I think as Congress has come back to poverty community 
needs over the decades, it looks at CDBG and says, actually, 
this does not target the problem that I want to solve. You want 
to target, say, lead abatement or child poverty, CDBG isn't 
targeting that. So that is why Congress has chosen to fund 
other things instead.
    Mr. Posey. Thank you.
    I see my time has expired, and I yield back, Mr. Chairman.
    Chairman Cleaver. Thank you, Mr. Posey.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    And let me just say, Mrs. Beatty, on behalf of the 
subcommittee--and, of course, our chairperson, Ms. Waters, who 
was at the funeral service for your husband Otto--that all of 
us are still wishing you the very best as you move through this 
period of loss.
    In my world, it is not a loss, but you just simply don't 
see the loved one anymore. But we are supporting you.
    I recognize you now for 5 minutes.
    Mrs. Beatty. Thank you so much, Mr. Chairman.
    And to Chairwoman Waters, thank you, and to all of our 
witnesses.
    Today is a difficult day for me, and I really appreciate 
your condolences, but it is also a good day. My husband, Otto, 
was a long-time developer and fought hard for increasing 
housing for low-income and extremely low-income persons.
    And for the witnesses, I have a long history of being a HUD 
consultant, doing a lot of work in the public housing space, 
doing relocation work, and have been a long-time fan of 
Community Development Block Grant work.
    So much so--no offense to the mayors and those from city 
and State--that you like the funding and the work so much that 
oftentimes you take a lot of credit for it, and we don't see 
the behind-the-scenes work that people like Chairman Cleaver 
and Chairwoman Waters advocate for, that funding that really 
comes from our legislative work and our fight for Community 
Development Block Grants.
    So, Mr. Jaroscak and others, I am going to state the 
question and give you the reason why.
    Roughly what percentage of Community Development Block 
Grant funding is used for affordable housing construction?
    And the reason I ask this question is, according to the 
National Low Income Housing Coalition, my district in Ohio only 
has 32 affordable housing units available per 100 extremely 
low-income households, which roughly means that 32 percent of 
those extremely low-income households can find affordable 
housing in my district.
    And that is why I led a delegation appropriation letter 
with 70 of my colleagues requesting $1.85 billion for a home 
investment partnership program, and I drafted--and thanks to 
our chairwoman for supporting it--the GROW Affordable Housing 
Act, to provide more funding to build more affordable housing.
    So with that, can you answer that question Mr. Jaroscak?
    And then, Mr. Mensah and Ms. Breed and Ms. Robinson.
    Mr. Jaroscak. Thank you, Congresswoman.
    Housing-related activities broadly represent about 26 
percent of the funds expended year to year through the State 
entitlement and the insular areas program.
    In terms of specific construction of new affordable 
housing, I am not sure of the percentage, but I can definitely 
follow up.
    Mrs. Beatty. Okay. Thank you.
    Mr. Jaroscak. I would say there are some restrictions, and 
only eligible community-based development organizations can 
implement those new construction-related activities.
    Mrs. Beatty. Okay.
    Mr. Mensah?
    Mr. Mensah. Congresswoman, as you can see, [inaudible] To 
answer that question because of the fact that the CDBG program 
doesn't really allow you to build new construction because of 
the [inaudible]. And that is the reason why we suggested that 
the program be changed to allow new construction without any 
limitations whatsoever. And I think if we do that, then 
entities that receive [inaudible] funds can still use their 
CDBG for affordable housing construction.
    Mrs. Beatty. Thank you. That gives us something certainly 
that we can work on legislatively or taking a look at that.
    I have an issue. When you talk about low- and extremely 
low-income individuals, we always appear to make that 
problematic and their fault, and they have to live within the 
confines of what they have, versus how we live. We move upwards 
and buy newer or more, step up in our housing. And I think we 
should be working to help those who live in poverty have access 
to the same opportunities in housing as us.
    Ms. Robinson, any comments?
    Ms. Robinson. Yes. Thank you very much, Representative 
Beatty.
    Really quickly, I would like to support what Mr. Mensah 
described in terms of the need to support affordable housing 
construction with CDBG.
    I would like to point out that we consistently do housing 
rehabilitation here in western Massachusetts. We kept 115 
families in their homes last year. And these are not residences 
that are then being turned over onto the private market. These 
are actually homes that are being lived in.
    Thank you.
    Mrs. Beatty. Thank you.
    My time is up. Thank you, Mr. Chairman
    Chairman Cleaver. Thank you.
    The Chair now recognizes Mr. Huizenga of Michigan for 5 
minutes.
    Mr. Huizenga, you may be muted.
    Mr. Huizenga, if you are having some technical problems, we 
may have to proceed, and we will come back to you shortly.
    We will go to Mr. Hollingsworth from Indiana, and we will 
come back to you, Mr. Huizenga, as we try to work out whatever 
the technical problem is.
    Mr. Hollingsworth, you are now recognized for 5 minutes. 
Mr. Hollingsworth of Indiana, you are now recognized for 5 
minutes.
    I don't know if that represents a couple of technical 
issues we are having, but I am sure the staff is already trying 
to address those issues. We apologize. This won't be the last 
time something like this happens, until we are able to recover 
from the COVID issues and have just in-person meetings, but 
right now, we are still going to have to have virtual meetings.
    So we will move on, continue on, and come back to Mr. 
Huizenga and Mr. Hollingsworth after the technical difficulties 
have been worked out.
    And if there is a chance that we won't get that worked out 
until the end of the hearing, we will still continue.
    We will now recognize Mr. Taylor of Texas for 5 minutes.
    Mr. Taylor. Thank you, Mr. Chairman. Can you hear me?
    Chairman Cleaver. Yes.
    Mr. Taylor. Thank you, Mr. Chairman. I really appreciate 
the opportunity to be at this hearing. I think this is really 
important as we think about how taxpayer dollars are used.
    Mayor Breed, I wanted to just query you on your leadership 
of San Francisco, clearly a very important City in America. I 
have had many friends, classmates, and family members call San 
Francisco home, and it is a really important City and community 
for the future of our country.
    And in reviewing for this hearing, I was really surprised 
to see that--I think this is right--your City is spending 
approximately $15,000 per person in the City budget, whereas, 
my own community of Plano, Texas, is spending about $1,000.
    Does that $15,000 number per person sound about right, 
Mayor?
    Ms. Breed. And what are you referring to as it relates to 
the $15,000 per person? For housing assistance?
    Mr. Taylor. Your per capita budget.
    Ms. Breed. Just to be clear, San Francisco is both a City 
and a County, and we have a population of close to 900,000 
people. But we are part of a major Bay Area City and we manage 
a number of significant dollars for an airport, a public 
utilities commission, and a port. These are enterprise 
departments and there are restrictions within their budget. So, 
it is not necessarily fair to imply a per-person spending cap.
    Mr. Taylor. Okay. It seems to me that you are spending a 
lot of money. You might say you are not, but just looking at a 
quick rush at the numbers would indicate that. And I wanted to 
share a perspective that you probably don't hear very often, 
because I speak to people who leave your City and come to mine.
    Collin County, Texas, is a recipient of many people who 
describe themselves as blue State refugees, people who say that 
they are fleeing high taxes, they are fleeing regulations, they 
are concerned about crime, they are concerned about drug 
overdoses, and they are concerned about communities that they 
feel no longer serve them, so they come to my community.
    And what my concern is, as an American, is I don't see how 
we have a winning America if we have a losing California, 
particularly if we have a losing San Francisco. San Francisco 
is an important community, and I appreciate your willingness to 
lead it in these troubling times.
    Actually, the one other thing I will throw in here, and I 
don't believe this is your responsibility, is traffic. That 
actually comes up very frequently, as businesses come from your 
portion of the country to my portion of the country.
    And just to quantify this, I was looking at the U-Haul 
website last night, and if I wanted to rent a U-Haul trailer 
and drive from Plano, Texas, to San Francisco, it would be 
$1,300. To get that exact same U-Haul for the same period of 
time, would be $3,300 to go from San Francisco to Plano. So 
very clearly, the market is speaking to the influx of people 
leaving your community and coming to mine.
    And I also know you are receiving a tremendous number of 
CDBG grants. I think you are a top ten city in the United 
States in terms of the CDBG grants.
    And my question to you is, what were you going to use that 
money to do to try to turn the tide and go in a different 
direction than you are going now?
    Ms. Breed. Just so you know, I want to make it clear, San 
Francisco is not a losing city. In fact, San Francisco produced 
me. I grew up in poverty in San Francisco. I lived in public 
housing, in fact, over 20 years of my life raised by my 
grandmother.
    These kinds of investments can have an impact on changing 
people's lives. And the fact is our budget and the way that our 
City works as a County is a lot more complicated than what the 
budget implies, as I said. An airport and the expense of--
    Mr. Taylor. Actually, as I was looking at your written 
testimony, you talk about five priorities that you had. And 
what I was intrigued by is none of the priorities listed are 
the reasons that people tell me they are leaving your 
community.
    So, people leave your community, and they come to mine. And 
I look good for it. I am adding jobs. Plano, Texas, is a very 
safe City. Actually, in 2019, it was the safest city in 
America. We are the highest per-capita income city in North 
America, with over a quarter million people, a very successful 
community.
    And, unfortunately, a lot of those people are people like 
you who are leaving, they are leaving California, and they are 
coming to Plano, they are coming to Frisco, they are coming to 
Allen, they are coming to McKinney, they are coming to my 
community to build a better life for themselves, and they tell 
me about all the problems they find.
    Again, what is interesting to me is, of the five things 
that you list in your written testimony, I didn't see anything 
about traffic, about drug abuse, about regulation, about taxes.
    These are the reasons that people tell me they are leaving 
your community and they are coming to mine. What are you doing 
to address those issues?
    Ms. Breed. Congressman, just to be clear, there was a point 
where we had a significant tech boom. And what happened during 
that time is, a lot of people were pushed out.
    And I think the fact that you are attributing the fact that 
folks are coming to your community and leaving San Francisco--
you perceive that as a problem. I don't necessarily perceive 
that as a problem because our economy is still thriving, and we 
are still making the appropriate adjustments to address the 
inequities and the challenges.
    I know there isn't enough time to expand on that. But at 
the end of the day, it is not as much of a problem as you 
believe that it is.
    Chairman Cleaver. Thank you very much.
    Mr. Taylor. Thank you, Mr. Chairman.
    Chairman Cleaver. Yes. I look forward to working with this 
committee. We have some very similar views on some of the 
things that need to be done with CDBG. So, I appreciate it very 
much. I want to do it with the minimum amount of partisanship, 
but I kind of feel like I have to correct the record.
    Mr. Hill had stated that the Biden Administration submitted 
a change to the Office of Management and Budget (OMB) to alter 
the threshold definition of metropolitan statistical areas 
(MSAs), including MSAs with populations of at least 50,000 to 
100,000. And this was, in fact, a change submitted by the Trump 
Administration just before leaving office back in January.
    I would like to submit to the record the OMB notice to the 
Trump Administration proposed changes.
    Without objection, it is so ordered.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Chairman, I greatly appreciate the hearing as well, and 
I do want to associate myself with the ranking member with 
reference to his comments about flexibility.
    And I would like to direct my question to you, Mr. 
Jaroscak, at an appropriate time, but let me lay a proper 
predicate for the question.
    In Houston, back in August of 2017, we had a trillion 
gallons of water flow in, in about a 4-day period, with 68 
deaths, and $125 billion in damages. This was Hurricane Harvey.
    Nearly 4 years later, of the funds that were sent to 
Houston to assist with our recovery, some $4.3 billion, not all 
of this has been properly allocated. In fact, the money came to 
Houston by way of the Government Land Office (GLO). The GLO, in 
making decisions about proper allocation, concluded initially 
that Houston should get zero dollars--zero dollars--for CDBG-
MIT funds. These are mitigation funds.
    It is not unusual for us to use CDBG for something other 
disaster relief. Mitigation is one aspect of it. And we also 
use it for COVID as well.
    But, zero dollars for Houston. Of course, this is 
unacceptable. And currently, the GLO has the responsibility of 
doing an obligation to amend its action plan with HUD. And 
until the action plan is amended, no one gets any money. For 
whatever reasons--inexplicable reasons, I might add--GLO has 
not amended the action plan.
    My concern is this: Do we need some sort of means by which 
we can reclaim those funds, the funds can be forfeited, a 
requirement that they be returned? This can go on indefinitely 
and the people of Houston are suffering.
    So my question, Mr. Jaroscak, is, do you foresee a means by 
which this can be done? And is this an unacceptable way for us 
to do business, to allow funds to just be allocated and depend 
upon the whims of the recipient as to when they will be 
properly allocated to the end users?
    Mr. Jaroscak. Thank you, Congressman.
    I would want to look into this in a little more detail and 
follow up, because each CDBG-DR supplemental appropriation, as 
you are aware, may be slightly different and have different 
provisions in it that provide different processes and methods. 
And then, HUD also develops individual rulemaking for each 
supplemental appropriation of DR funds and MIT funds.
    So, my colleagues and I would be happy to do some more 
analysis on this issue.
    Mr. Green. Thank you. I greatly appreciate it.
    Permit me to ask you this. We agree that each supplemental 
is done on a case-by-case basis. So, this is why we have CDBG-
DR legislation that will be filed--again, it passed in the last 
Congress, and Mr. Hill referenced it, and we would like to pass 
it again. It streamlines this process, and it does require 
action within a 6-year period.
    I believe that this is an appropriate way for us to manage 
the government dollars in a responsible way. Your thoughts on 
such a means of management?
    Mr. Jaroscak. Thank you, Congressman.
    I think proposals related to permanent authorization of 
CDBG-DR would potentially provide some structure and the 
potential ability for HUD and Congress to provide a predictable 
oversight of the program and monitor performance.
    It would also potentially--there may be some tradeoffs 
regarding flexibility of and the ability to provide funding 
based on the individual event and the context therein.
    So, those are some of the different things that we have 
observed in analyzing--
    Mr. Green. Let me thank you, as my time is running out.
    And I also would like to thank Mrs. Wagner. She has been a 
cosponsor of this legislation and I have also been a cosponsor 
with her.
    So thank you, Mrs. Wagner, for staying with us.
    Chairman Cleaver. Thank you Mr. Green.
    We will now recognize the gentleman from Michigan, Mr. 
Huizenga, for 5 minutes.
    Mr. Huizenga. Thank you, Chairman Cleaver. I appreciate 
that.
    And, Mr. Furth, I want to kind of expand a little bit or 
have you expand a little bit on the conversation that was 
happening with my colleague from Texas, Mr. Taylor, about sort 
of the use of CDBG funds and those kinds of things.
    I am curious if you could comment on how local zoning laws 
interact with and affect choices regarding the use of CDBG 
funding? That has been a major focus that we have talked about 
here in this subcommittee and on the committee, housing 
affordability. How do we make sure that people have the 
opportunity to live in good homes, that are reasonably priced?
    And this has been an emerging theme, sort of the local 
barriers. I am wondering if you could expand on that a little 
bit?
    And then, how can we in Congress, if at all, do a better 
job of eliminating barriers like local development exclusionary 
zones to help communities meet the housing affordability 
challenges?
    Mr. Furth. Thank you so much, Congressman. Zoning is my 
favorite topic and--
    Mr. Huizenga. That is a pretty thin group of people in this 
world, but I am glad you are because it is so important.
    Mr. Furth. No, that is right.
    I think the really positive thing right now about zoning 
reform is that it is being recognized on both sides of the 
aisle and all around the country. I know Mayor Breed has been a 
champion in her own City of making it easier to build multi-
family housing. I have worked with people from both parties in 
the Northeast on Statewide bills and on local efforts.
    I think it is best when cities lead. And sometimes, the 
States need to get involved. I am more hesitant about Federal 
involvement, because ultimately, the incentives and the 
realities of how the Federal Government works are probably not 
going to produce great outcomes at the local level.
    I know Chairman Cleaver and this committee have a bill, 
part of which would be incentives similar to CDBG for 
communities that remove barriers. And I actually worked 
extensively with colleagues commenting on the Affirmatively 
Furthering Fair Housing (AFFH) rule. Whether that is the right 
vehicle for this is, I think, an open question. But we worked 
really, really hard to think about how we could compare cities 
across the country on a fair basis.
    Cities are in different positions, different points in 
their life cycle. And how can we compare them fairly in terms 
of their housing market outcomes?
    So I think, Chairman Cleaver and others, as you look at how 
to deal with Federal involvement here, my number-one 
recommendation is to look at outcomes rather than inputs. It is 
very easy to say that you have changed something, but if you 
actually look at outcomes, you get some very, very different 
results. It is easy to say, but it is hard to do.
    Mr. Huizenga. I am with you philosophically, and I, too, 
have a natural healthy skepticism of the Federal Government 
coming in and ``bigfooting'' and, frankly, putting in a sort of 
blanket policy that doesn't work in every community.
    I think we do understand that this formula needs to be 
updated. It has some failings and some challenges. And I am 
curious, what factors should be considered to ensure that the 
CDBG program is meeting its stated goals and eventually the 
outcomes?
    Mr. Furth. I would love to see CDBG under stricter scrutiny 
or limited in its amount for communities where rent rises above 
a certain level and construction does not. If you are expensive 
in your building, the formula should be revisited.
    I understand it is very hard to take away funding from 
anyone. But if Congress raises the allocation in nominal 
dollars, the new dollars should use a different formula, so 
nobody is losing funding, but the new funding is going to be 
distributed according to a formula that really reflects needs 
and isn't going to people who are lucky enough to have old 
housing at a low rate of growth because of zoning.
    Mr. Huizenga. I think that is a very prescient and clear 
view into one of those issues that we have.
    And in my last remaining seconds, how do we then maybe ease 
that transition? You had suggested one thing. Is there anything 
else where we would have new criteria for new money, but can we 
not reform that current dollar?
    Mr. Furth. I would put a sunset date on the old formula 
beyond the political lives of current leaders who can then 
accept that sometime in the future, that money is not going to 
be allocated according to a 1970s formula.
    Thank you so much.
    Mr. Huizenga. No, thank you. That is great.
    Chairman Cleaver. The Chair now recognizes Mr. Vargas of 
California for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. Again, I 
thank you and the ranking member for putting on this very 
important hearing. And I thank the witnesses.
    But I do want to help you a little bit, Mr. Chairman. When 
you said, ``Praise,'' you couldn't remember the next term. It 
is, ``Praise Jesus,'' that is what it is, ``Praise Jesus.'' You 
never go wrong with that. You always go right with that. It is 
called, ``Praise Jesus.''
    It is just like you can never go wrong by saying, ``Just 
vote me with the Chair,'' because he always knows what is going 
on, ``Vote me with the Chair.''
    With that being said, I do want to rehabilitate my State a 
little bit. My good friend, Mr. Taylor, was talking about 
California.
    Mr. Taylor, I believe that the surplus in California, just 
the surplus alone, is bigger than the State budget of Texas, 
just our surplus. We have a $75 billion surplus this year in 
the State of California. I believe that the biannual budget of 
Texas is $121 billion. It is a biannual budget.
    But that being said--it may be incorrect, Mr. Taylor, what 
is the budget? I will give you the opportunity to correct the 
number. What is the budget, Mr. Taylor, of the State of Texas, 
if you don't mind?
    Mr. Taylor. A $250 billion biannual budget was passed this 
year.
    Mr. Vargas. I thought it was $121 billion. Okay. I stand 
corrected.
    Mr. Taylor. I think $121 billion will be last year's annual 
budget.
    Mr. Vargas. Okay. I stand corrected.
    But I would also say this, which is interesting, about home 
prices. In San Diego, where I live, the prices are very, very 
high because that is where people want to live. And that is the 
reality. The truth of the matter is that we get a lot of people 
coming to California and they are high-wage earners. And that 
is a problem because we don't have enough affordable housing. 
That really is a problem.
    I seldom agree with my good friend, Mr. Huizenga, although 
I love him to death, but I seldom agree with him. But I agree 
with him on this: Zoning is a problem. Density is a problem. It 
really is.
    In California, when they say you are going to destroy the 
character of this community, it basically says, don't put 
anything that is attached product. We want single-family, 
detached homes. And that is a problem, especially when you are 
close to the city, close to transportation. We have been trying 
to change that. It has been very, very difficult. Mr. Huizenga, 
I totally agree with you on that, that we have to change 
density.
    But the reason, again, that California people are leaving 
is that they can't afford the housing. Housing is just too 
expensive. People want to live in California. They just can't 
afford it. That is why they do second or third choice and move 
to Texas.
    I am just kidding, Mr. Taylor. I love Texas. It is a 
wonderful State. Plano, in particular, is a wonderful City.
    But I do want to ask about this. I looked at an inflation 
calculator. If we did, in fact, spend, I think it was $2.4 
billion in 1974, with the inflation calculators that I put the 
numbers into, I think we would be spending over $13 billion 
today.
    I believe, Ms. Robinson, you said over $10 billion, but I 
think it is $13 billion that we would be spending today on CDBG 
if we just figured out inflation. So, I think we are 
underspending.
    I do want to ask this, though, and I will ask this, again, 
to Mr. Furth, you said that we cannot use money for new 
construction, but it is used for new construction; it is just 
that some people can't use it for new construction. Some groups 
can't use it. And you say that private entities shouldn't be 
able to, but what about a 501(c)(3), would you be against that?
    Mr. Furth. Let me clarify. When I am talking about giving 
money to private entities, it is businesses for their own 
business purposes.
    In Maine, where I did a lot of research, there is money 
going to a distillery, Sebago Lake Distillery. There is also 
money going to the Gelato Fiasco, which is a Gelato shop. So, 
they aren't building something for the public; they are just 
doing their own business. And that is what I don't like.
    I have no problem--Mr. Mensah suggested expanding the 
ability to build housing through CDBG, and I would have to look 
at the details, but in spirit, I certainly support that idea.
    Mr. Vargas. I agree with that.
    Now, Mayor Breed, I have to tell you, I love San Francisco. 
It is a beautiful City. And, again, you have even a worse 
problem than we do. People love it so much that your prices 
have gone higher than San Diego, and that is problematic.
    But you did bring up something that I found very 
interesting, the issue of helping people legally stay in their 
homes. And that has been very effective. Because usually it is 
not the legal aspect, it is the paying aspect; you can't pay 
the rent or you can't pay the mortgage.
    So, how were you able to be so successful just by helping 
legally?
    Ms. Breed. I think when you think about it, especially 
people who live in poverty, and in San Francisco over 300,000 
people file for unemployment, yes, we had a rent moratorium, 
but what about those mom-and-pop landlords who can't afford to 
wait to pay their mortgage because they are not receiving rent? 
It is very complicated. But what we have done is provided 
alternatives, and with the legal assistance, we also provide 
rental assistance.
    So if the dispute is maybe back rent for a couple of 
months, that is the difference. Just imagine paying that back 
rent versus someone who is homeless and then needing to invest 
a significant amount of money to get them housed again. It is a 
better investment.
    Mr. Vargas. Thank you. I agree.
    Again, thank you, Mr. Chairman. I appreciate it. Praise 
Jesus.
    Chairman Cleaver. Amen.
    The Chair now recognizes Mr. Hollingsworth from Indiana.
    Mr. Hollingsworth. Good morning. I appreciate everybody 
being here.
    Dr. Furth, I am going to talk mostly with you, and talk 
about the Yes In My Backyard (YIMBY) Act that you mentioned in 
an op-ed last year entitled, ``Will Congress Make a Significant 
Move on Housing Affordability?''
    I really appreciated that you mentioned the YIMBY Act, 
which is a bipartisan piece of legislation that I recently 
introduced to encourage more affordable housing and bring some 
transparency to restrictive zoning laws.
    I know you and Mr. Huizenga recently talked about that in 
this very hearing. I think earlier today, I saw an article in 
The Wall Street Journal where the Board of REALTORS said 
nationally, we are about 5.5 million housing units short of 
where we should be, given some underbuilding over the last 15 
years or so. I wanted to ask you a few questions about that.
    One of the statements that you made in that op-ed was, 
``Local leaders should see clearly that their national 
representatives are on the side of inclusive, market-led 
housing construction. Such an effort will require more two-way 
communication with federally-funded cities, which use Federal 
grants responsibly.''
    Dr. Furth, can you elaborate a little bit about what you 
mean by two-way communication, and how those signals coming 
from cities are very important in forming public policy that 
goes back out to those cities?
    Mr. Furth. Yes. Thank you, Congressman Hollingsworth. And 
thank you especially for your work on the YIMBY Act. I think it 
is really important, as I wrote.
    It is not highly consequential. It is clearly a step in the 
direction of transparency and communication. And so, I think 
what is valuable about that--and some of my colleagues who are 
pro-housing folks have said, ``Why are they wasting their 
time?''
    But I don't think you are wasting your time, and I do think 
that it is a very worthwhile effort to make it clear that--we 
just heard from Congressman Vargas. He represents people in a 
district that is strictly zoned, and there is a very active 
debate within the local politics of San Diego and the 
surrounding suburbs of whether they should up-zone or not.
    And knowing that sort of the national leaders they look up 
to, maybe the job they want to hold in a few years, those 
folks, you in Indiana, and other Representatives who are here 
on the call, support more housing that tilts the scales. It 
changes, it frames the debate. It helps define, what does it 
mean to be a pro-Indiana, pro-growth, pro-free marketer?
    I hear from conservative friends of mine sometimes, ``Oh, 
getting rid of zoning impinges on my property rights.'' I don't 
think those words mean what you think they mean.
    On the two-way communication, that means you talking to 
them and saying, ``Hey Carmel, Indiana, or Indianapolis, 
Indiana, I love what you are doing in this area,'' or, ``Hey, 
we would love to support--the Federal Government has these 
goals of achieving affordable housing, but right now when I 
talk to developers, they can't find a site in this community.'' 
Talking to folks and making it clear where you stand.
    And then, listening. Obviously, it is really important to 
listen to the mayors and local officials and try to help them 
assuage their concerns and communicate with their constituents.
    Members of Congress are in an enviable position because you 
don't actually have to make the hard calls on zoning. So in one 
sense, you can say some of the harder truths to constituents 
that a mayor or a council member might get a lot of blowback 
for if they said the same things.
    Mr. Hollingsworth. Exactly. I think, as you well said, Dr. 
Furth, the reality is we need to be leaders on this issue, help 
be conduits on this issue, help educate on this issue, 
especially citizens who live in particular areas, and I really 
appreciate that.
    It was disheartening to hear that it may not be entirely 
consequential, this legislation, but I do understand that it is 
incremental but is important progress to showing the direction 
that I think we want to head.
    Would you agree that this reporting framework works in 
tandem with private market-driven housing investment?
    I think you made that point already, but I really want to 
drive that home for all of my friends here to understand that 
this is a reporting framework not to drive Federal Government 
direction necessarily, but to work in tandem with good private 
market investment to expand supply.
    Mr. Furth. Right. The great thing about housing is that 
people right down through the working class can get good 
quality housing provided by the private market, provided that 
the local government is not imposing zoning that is so strict 
that the private market can't build. So, having transparency 
enables the private market to do its job, and let the Federal 
Government focus on only those who are in the most need.
    Mr. Hollingsworth. Right. And I presume you would also 
agree, given your background, that the reality of large-scale 
housing subsidies, given the inelastic supply in housing, would 
only lead to increased costs for consumers, not more 
affordability. Is that true or untrue, quickly?
    Mr. Furth. Yes, that is right. If you push on a rigid 
supply curve [inaudible].
    Mr. Hollingsworth. Perfect.
    Mr. Chairman, I will yield back, but I would like to ask 
unanimous consent to submit a letter for the record in support 
of my YIMBY Act before I do so. Is that acceptable?
    Chairman Cleaver. Without objection, it is so ordered.
    Mr. Hollingsworth. Thank you, sir.
    I yield back.
    Chairman Cleaver. Thank you very much.
    We will now recognize Mr. Torres, the gentleman from New 
York.
    Mr. Torres. Thank you, Mr. Chairman.
    I am a strong supporter of the CDBG program and the 
flexibility it provides to State and local governments, which 
are on the front lines of providing critical public services.
    The New York City Department of Housing Preservation and 
Development, most commonly known as HPD, uses CDBG funding to 
maintain the largest system of housing code enforcement in the 
nation. If a tenant in New York City has a condition that 
violates the housing maintenance code and the landlord refuses 
to correct the condition, a tenant reserves the right to call 
311 to request a housing inspection, and a housing inspector 
often follows up within a matter of days.
    I got my start in politics as a housing organizer, and as a 
housing organizer I found the CDBG-funded housing code 
enforcement to be a powerful tool for holding landlords 
accountable for making long-overdue repairs.
    In 2019, in New York City, the CDBG program funded 650,000 
housing inspections, 15,000 housing litigation cases, and 
11,000 emergency repairs, which are often a matter of life and 
death.
    Housing quality matters as much as housing affordability, 
and the CDBG program has been an indispensable safeguard of 
housing quality in America's largest city.
    When it comes to CDBG, the more flexibility, the merrier.
    I have a question about the CDBG program as it applies to 
disaster recovery. Do any of the witnesses have experience with 
both CDBG and FEMA funding with respect to disaster recovery? I 
am curious to know which program is more user-friendly from the 
standpoint of State and local government?
    Mr. Mensah. This is George Mensah. Definitely, the CDBG 
program is much more user-friendly than the CDBG-DR.
    One of the things that Congress can do is at least have a 
permanent or some type of regulation governing the CDBG-DR. 
Currently, when Congress provides funding through the CDBG-DR, 
it takes a long time for HUD to be able to do regulation 
governance. So the funds come to communities [inaudible] And 
not when they really need it.
    One of the things that Congress can do is to ensure that we 
have, just like we have statutes for the CDBG program, there is 
a separate statute for the CDBG-DR program so that when the 
funds are allocated, HUD can easily provide the funds out the 
door. I think that probably would be very helpful.
    Mr. Torres. And I have a question for the Congressional 
Research Service. Do we know what share of CDBG funding is 
allocated to States versus localities? Do we know the 
distribution?
    Mr. Jaroscak. Sure. Entitlement communities or localities 
with populations above 50,000 receive 70 percent of the CDBG 
funds and States receive 30 percent. Both formulas are run 
after a $7 million set-aside for insular areas for U.S. 
Territories.
    Mr. Torres. Are those funds received directly or through 
the States?
    Mr. Jaroscak. The funds for entitlement communities, so 
major metropolitan cities, cities with populations of 50,000 or 
more, or urban counties with populations of 200,000 or more 
when subtracting any entitlement communities within the 
boundaries, those go directly to those communities. And then, 
States receive the 30-percent allocation, and States 
suballocate those funds to non-entitlement communities.
    Mr. Torres. And I am curious to know--anyone on the panel 
can answer--what is the single most important reform that we 
can make to enhance the flexibility of the CDBG program?
    Ms. Breed. Can you repeat the question? I didn't hear you 
clearly.
    Mr. Torres. What is the single-most important reform that 
we can make to enhance the flexibility of CDBG funding?
    Ms. Breed. I just would add--thank you, Congressman, for 
the opportunity--I do think that what was mentioned is the need 
to increase the amount of funding that we received and to 
maintain a level of flexibility.
    I would definitely be open to increasing options of ways in 
which we can use these funds to invest in communities, but the 
need is very great. So, an increase in funding is most 
significant.
    Mr. Torres. Does anyone else on the panel have any thoughts 
on how to make the program work better?
    Mr. Mensah. Yes. Congressman, I wanted to add that you did 
describe the public services, as we talked about the use of 
CDBG funds in New York City. So, I think that increasing that 
cap for the public service is very important to help New York 
City in the work that they do using CDBG funds.
    Mr. Torres. My time is about to expire. Thank you, 
everyone.
    Chairman Cleaver. Thank you, Mr. Torres.
    The Chair now recognizes Mr. Rose from Tennessee for 5 
minutes.
    Mr. Rose. Thank you, Chairman Cleaver and Ranking Member 
Hill, for holding this important hearing.
    At home in middle Tennessee, our rural communities heavily 
depend on the Community Development Block Grant program and 
they consider it vital to provide services that all Americans 
should have access to, including something as basic as running 
water.
    In the rural areas of my district, these grants are far 
more competitive to secure than they used to be. Only about 40 
percent of applicants actually get funded, which means our 
rural communities continue to struggle to complete essential 
projects.
    I believe that we should consider setting aside funding in 
the CDBG program specifically for rural projects, because we 
cannot continue to leave Americans, like those in my district, 
behind.
    After talking to folks back in Tennessee who facilitate the 
CDBG program, the major regulatory hurdles in place are their 
biggest concern. They told me about how complying with wage 
rate and environmental requirements slows down the process 
considerably and makes it even harder to distribute the aid 
that they receive.
    They also discussed how many of the requirements in place 
are geared more towards private entities on the entitlement 
side as opposed to the State side, making them difficult to 
adhere to.
    Dr. Furth, could you discuss how we could eliminate some of 
this red tape and tailor these requirements to reduce undue 
burden on our States and rural communities?
    Mr. Furth. Congressman Rose, thank you so much for the 
question. I appreciate it.
    One of the things that you mentioned is the Federal 
prevailing wage standards. And if you look at the actual 
numbers that go into those, they are really low quality from a 
data perspective.
    If we simply used Federal data that already exists from 
other occupational sources, and had accurate prevailing wage 
rates, that would in some cases raise and in some cases lower 
the required prevailing wage by region.
    In the cases where it is too low, it is just dumb. Nobody 
will work for that wage. In the cases where it is too high and 
it is just sort of bad data, it requires the government to pay 
more than it should, more than the market rate, for doing 
reasonable work on public projects.
    So, that is absolutely a step that the Federal Government 
could take far beyond the scope of just CDBG, but it affects 
CDBG and everything else that is federally-funded.
    Mr. Rose. Thank you, Dr. Furth.
    By statute, CDBG funds are split, with 70 percent going 
directly to the 1,200 or so nationwide urban entitlement 
communities with populations over 50,000 and only 30 percent to 
States, which must disburse that funding to every other small 
community in the State.
    That means that places with populations as large as 49,999, 
like Smith and Putnam Counties in my district, are forced to 
compete for an already small share of CDBG funding with very 
small rural locations of less than 2,500, where almost 60 
million people or 19 percent of all Americans live.
    Dr. Furth, should very small rural locations like those 
with populations of less than 2,500 have their own specific 
set-aside of CDBG funds to help meet their local needs?
    Mr. Furth. I would set it up so that every place has 
predictable funding. Very small places might not get funding 
every year because the allocations would be too small. But if 
you are a really small place, you should know, hey, every 3 
years we get the minimum grant level, something like that, 
provided that we have a good way to use the money. I think that 
would be much more fair than the current system.
    And it is not strictly urban-rural. I mentioned Chelsea, 
and Everett, Massachusetts, in my testimony. Those are 
extremely urban, very dense immigrant towns, but they have less 
than 50,000 people. And on the flip side, you go to, say, 
Auburn, Maine, which has 24,000 people, but its name shows up 
in an MSA name, and because its name is in an MSA name at OMB, 
it gets an entitlement fund.
    And the counties you mentioned, they would actually have to 
get to 200,000 before they got to be entitlement communities.
    So, it depends on how your governments are organized. 
Massachusetts and Tennessee organize local governments very 
differently, but the funding formulas don't take that into 
account and are not fair just on a per capita or a per low- and 
moderate-income capita basis, which is, I think, the way that I 
would want to do it.
    Mr. Rose. Thank you, Dr. Furth.
    Something that folks back home emphasized to me was that 
right now our local communities are getting a massive influx of 
funding for infrastructure projects from COVID relief funds, 
however, once that windfall is over, we will still need the 
CDBG program in those areas to ensure that we not only maintain 
that infrastructure, but continue to develop our rural 
communities.
    Thank you, Mr. Chairman. I yield back.
    Chairman Cleaver. Thank you very much.
    The Chair now recognizes Mr. Steil from Wisconsin.
    Mr. Steil. Thank you very much, Mr. Chairman. We all look 
forward to meeting in person again, soon. I know it has been a 
long time on Zoom for some of our witnesses.
    But let me dive in. Dr. Furth, if I can ask you, I am 
looking at how we really address housing in the United States 
and some of the policies, in particular how these grants have a 
role in making sure that housing is affordable for folks in the 
United States.
    As we have seen, cities around the country receive millions 
in CDBG funds from the Federal Government each year, and at the 
same time more and more of these cities are experiencing severe 
housing shortages and increasing costs. It is bad for families. 
It makes it harder to build wealth. It ultimately makes it 
difficult for people to become really rooted in their 
communities.
    When we look at the data, it seems many local governments, 
in particular, are making it difficult to build housing for 
more people and to keep housing prices in check. We are having 
a supply problem in some of our largest cities.
    And so, I looked into the data. I looked at San Francisco. 
In the metropolitan area, an area of about 5 million people, 
including San Francisco, Oakland, and Berkeley, in 2020 they 
permitted 10,000 new housing units. That is roughly in line 
with Boise, Idaho, which permitted 9,700.
    Metro Boston, an area of roughly 5 million, permitted just 
15,000 units. And you compare that to Houston metro, 7 million 
people, that permitted 70,000 new units, roughly 5, 6, 7 times 
more.
    So, one of the questions I had for you is, should Congress 
be looking at its use of CDBG funds as it relates to 
municipalities that are clearly failing to take steps to enact 
policy changes needed to really address the supply side of 
housing?
    Mr. Furth. Yes. Thank you. Thank you, Representative Steil.
    That is absolutely right. Those numbers are shocking. I did 
some research at one point and found the California Bay Area--
this was in 2011 through 2018--had a growth rate in terms of 
the number of housing units built the same as the Flint, 
Michigan, metro area, which was in a major crisis at the time.
    The coastal cities are building so little housing--and I 
live in one, I live in the D.C. area--that people here act like 
it is an apocalypse when someone puts up a fourplex, because 
they are so unaccustomed to seeing construction. And that is 
very, very different in Texas, in southern Wisconsin, and in a 
lot of other places.
    In terms of CDBG, it is not the best tool to incentivize 
housing construction. We have to be really clear about that. I 
do think that it would make sense to have limits on the uses, 
especially for high-income, low-growth jurisdictions. If your 
rents are high--
    Mr. Steil. Mr. Furth, let me dive in, because I think you 
actually bring up a really good point here that I want to dive 
into a little bit with you, if I can.
    CDBG grants were created 50 years ago to help low-income 
communities by giving them access to relatively flexible funds. 
So we are talking about this not really driven on the housing, 
it is just one of the things I am concerned with, and we talk a 
lot about it on the committee.
    I am really concerned about the supply side. Some of our 
larger metro areas are restricting supply, driving prices up, 
and we see policy solutions being offered here in committee 
often to provide additional funds for people, which I think 
would actually just bid up the prices further rather than 
addressing the supply side.
    Let's go back into the flexibilities offered, how these 
funds are originally intended to be used. I looked at the funds 
for 26 different, broadly-defined eligible purposes, ranging 
from construction of public facilities to assistance for 
private and for-profit entities.
    Does this structure really prioritize certain fundings over 
others? It doesn't, correct?
    Mr. Furth. No. That is right.
    Mr. Steil. So knowing that, saying it doesn't really 
prioritize it, when housing is a concern of this committee, I 
think we are really missing the boat, in particular on our 
opportunity to add housing permits in some of our more high-
priced communities.
    Should Congress, in your opinion, prioritize certain uses 
of CDBG funds? And if so, which ones?
    Mr. Furth. That is absolutely right. I think that they 
should in these really high-rent places.
    There was a conversation earlier saying that, well, more 
flexibility will help New York City to do the most important 
things, and I think that is wrong. It will allow New York City 
to do the most important things, but it is already allowed to, 
largely.
    And more flexibility allows communities that don't want to 
do the right thing to continue not doing it. Cupertino, 
California, where Apple is headquartered, a few years ago used 
their CDBG to build sidewalks.
    Now, they have Apple there. They can tax as much as they 
need to. I don't think 70 percent of the shoes on that sidewalk 
are low- and moderate-income shoes.
    Mr. Steil. Mr. Furth, I appreciate your time.
    And Mr. Chairman, I yield back.
    Chairman Cleaver. Thank you very much. And that brings us 
to the end of this hearing.
    Let me thank everybody for participating. One of the 
reasons I am so thankful is that I think that we have a chance 
to do something significant that will make a difference all 
over this country, and that is because I think many of us have 
some very similar ideas on the updating that we need to do.
    I would like to also thank our witnesses. You have been 
very, very helpful.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
I  would  also  like  to  submit  for  the  record  a  statement
from  the Council of State Community Development Agencies.
Without objec- tion, it is so ordered.
Again, I thank all of the witnesses. I appreciate all of you.
This hearing is now adjourned.
[Whereupon, at 11:59 a.m., the hearing was adjourned.]


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