New CDBG Formula Heavily Weights Poverty and Old Housing: $3.4 Billion Authorized for FY 2026

The Community Development Block Grant Equity Act of 2025 is basically a major overhaul of how the federal government distributes billions of dollars in Community Development Block Grant (CDBG) funds. If you live in a city or county that relies on these funds for everything from fixing up community centers to funding housing assistance programs, this matters to you. This bill completely rewrites the formula that decides who gets what, shifting the focus heavily toward areas with deep poverty and older housing stock.

The New Math of Community Development

Under the existing setup, CDBG funds are allocated to metropolitan cities, urban counties, and states (for nonentitlement areas) based on a mix of factors. This bill (Sec. 2) keeps four main metrics, but changes how they are weighted. The biggest change is how much emphasis is now placed on two specific indicators. The first is the poverty rate (for families and elderly households), which is now counted five times in the calculation. The second is the extent of housing built before 1950 that is occupied by a household in poverty, which is counted three times. The factors for female-headed households with children and housing overcrowding are each counted only once.

Think of it this way: If your city has a lot of low-income families living in aging infrastructure—say, 70-year-old apartment buildings—that city’s share of CDBG funding is likely going to increase significantly. The bill explicitly prioritizes areas struggling with both high poverty and the costs associated with maintaining or replacing old housing. For a small business owner relying on CDBG funds to revitalize a main street in a historically neglected neighborhood, this could mean faster access to capital. Conversely, jurisdictions that previously received significant funding based on other metrics that are now de-emphasized might see their share shrink, forcing them to scramble to cover existing community projects.

Inflation-Proofing the Budget

Beyond the formula change, the bill addresses the practical issue of inflation (Sec. 3). For Fiscal Year 2026, it authorizes $3.425 billion for the CDBG program. Crucially, for every year from 2027 through 2029, that authorized amount will be automatically adjusted upward based on the Consumer Price Index for All Urban Consumers (CPI-U). This is a big deal because it means the program’s funding is protected against the erosion of purchasing power. If inflation pushes up the cost of construction materials or labor, the authorized funding level is designed to keep pace. For the local community development office trying to budget a three-year project, this inflation indexing provides much-needed stability and predictability.

The Fine Print: Definitions and Discretion

While the formula changes are straightforward, Section 2 also includes a less flashy but potentially impactful detail: it strikes several paragraphs (11 through 16) from the definition section of the underlying Housing and Community Development Act of 1974. We don't know exactly what was in those paragraphs without seeing the full context of the original law, but removing established definitions can create administrative headaches and ambiguity. Existing rules or programs that relied on those specific definitions might suddenly find themselves operating in a gray area, potentially leading to confusion for local administrators and delays in getting funds out the door.

Furthermore, the new formula grants the Secretary of HUD the authority to calculate the “average of four ratios” for every city and county. While the weights are set (5x, 3x, 1x, 1x), the sheer complexity of gathering and calculating these ratios across thousands of jurisdictions gives HUD significant administrative power. This means the specific data sources and methods HUD uses to crunch those numbers will determine exactly who wins and who loses under this new funding structure.