Community Development Block Grant Public Service Expenditure Cap: In Brief

October 19, 2022 R47287

Community Development Block Grant Public
Service Expenditure Cap: In Brief
October 19, 2022
Congressional Research Service
https://crsreports.congress.gov
R47287

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link to page 12 Community Development Block Grant Public Service Expenditure Cap: In Brief

Introduction
The Community Development Block Grant program (CDBG), administered by the U.S.
Department of Housing and Urban Development (HUD), is a primary source of flexible federal
funding to states and localities for economic and community development-related purposes. The
program was originally authorized under Title I of the Housing and Community Development Act
of 1974, P.L. 93-383, with the primary purpose of establishing and maintaining viable
communities through the implementation of activities that benefit low- and moderate-income
persons.1
CDBG’s flexibility as a block grant program allows grantees to use their program funds for a
broad range of activities. Although grantees have broad flexibility in determining how to spend
CDBG dollars within statutory and regulatory parameters, the law explicitly limits the use of
CDBG dollars for only one non-administrative category of activity: public service activities.
Typically, a grantee’s expenditure on public service activities must not exceed 15% of its CDBG
funding amount, plus 15% of any CDBG program income generated in the previous program
year, with some exceptions.2 The cap on CDBG public service activity expenditures has been the
subject of some debate throughout its existence.
Public Service Activities
Public services are one of the six primary categories of eligible CDBG program activities set out
in Title I of the Housing and Community Development Act of 1974:
1. planning and administrative activities;
2. public improvement activities;
3. housing-related activities;
4. public services;
5. economic development; and
6. acquisition, demolition, and disposition of real property.
As outlined in the CDBG program’s statute, grantees may use program funds for a wide variety
of public service activities, “including but not limited to those concerned with employment, crime
prevention, child care, health, drug abuse, education, energy conservation, welfare or recreation
needs.”3 CDBG public service expenditures may also cover operations and maintenance costs of
facilities that are used to provide public service activities.4 CDBG regulations require that a
grantee’s public service expenditures provide a new service or a measurable expansion of an
existing service.5 In other words, CDBG public service funds cannot be used to replace or
supplant municipal expenditures for an existing program or activity.

1 For more information on the CDBG program and its funding processes, see CRS Report R46733, Community
Development Block Grants: Funding and Allocation Processes, by Joseph V. Jaroscak.
2 42 U.S.C. §5305(a)(8).
3 Ibid.
4 HUD, Basically CDBG Manual, Chapter 7, July 2012, p. 2, https://files.hudexchange.info/resources/documents/
Basically-CDBG-Chapter-7-Public-Services.pdf#page=2.
5 HUD may grant exceptions to this requirement if the change in funding levels was outside of the grantee’s control.
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Table A-1 provides an overview of eligible CDBG public service activities, with expenditure data
for FY2021 and FY2020.
CDBG’s authorizing statute requires states and local governments to certify that all proposed
activities—including public service activities—meet one of the program’s national objectives:
1. principally benefit low- and moderate-income (LMI) persons;6
2. aid in the prevention or elimination of slums or blight; or
3. meet an urgent need by addressing conditions that pose a serious and immediate
threat to the health and safety of residents.7
The statute governing the program requires states and entitlement communities to allocate at least
70% of their CDBG allocation to eligible activities principally benefitting low- and moderate-
income persons.8 Compliance with this requirement is certified during a one-, two-, or three-year
period as specified by the grantee.9
Consistent with overall CDBG program requirements, public service expenditures cannot fund
political activities. CDBG regulations also prohibit most forms of subsistence grant payments to
households or individuals for food, clothing, housing, utilities, or similar costs. The regulations
do allow temporary three-month emergency payments to be made on behalf of a family or
individual for such costs, in some cases.10
Expenditure Cap
The CDBG program’s authorizing statute limits a primary grantee’s public service activity
expenditures to no more than 15% of its funding amount, plus 15% of CDBG program income
from the previous year.11 The public service expenditure cap is consistent with the program’s
original intent to prioritize physical development activities, as opposed to providing services.12
Initially, the CDBG program did not have a public service expenditure cap. However, the
program’s original authorizing act restricted funding for public service activities to novel services
supporting the implementation of other CDBG activities (P.L. 93-382, Section 105(a)(8)). In the
Omnibus Budget Reconciliation Omnibus Budget Act of 1981 (P.L. 97-35), Congress set the first
public service expenditure cap at 10%. Congress subsequently expanded the public service
expenditure cap to 15% in the Supplemental Appropriations Act, 1984 (P.L. 98-181), which was
enacted in November of 1983.

6 The LMI benefit national objective is required to total 70% of a grantee’s projects under the conventional CDBG
program, although waivers may be obtained in extenuating circumstances. For information on HUD’s definitions for
low and moderate income, see https://www.hudexchange.info/programs/cdbg/cdbg-low-moderate-income-data/.
7 42 U.S.C. §§5301 et seq., as interpreted by HUD at 24 C.F.R. §570.200 and the HUD Guide to National Objectives
and Eligible Activities for CDBG Entitlement Communities.
8 42 U.S.C. §5301(c). Typically, low- and moderate-income under CDBG is defined as a family or household income at
or below 80% of the area median income.
9 24 C.F.R. §570.200(a)(3).
10 24 C.F.R. §570.207(b)(4). For expenditure data on eligible short-term emergency subsistence payments, see Table
A-1.
11 42 U.S.C. §5305(a)(8). CDBG program income, as defined in 24 C.F.R. §570.500, is “gross income received by the
recipient or a subrecipient directly generated from the use of CDBG funds.”
12 HUD, Housing and Community Development Act of 1974: Community Development Block Grant Program, First
Annual Report, Washington, DC, December 1975, p. 31, https://archives.hud.gov/offices/cpd/communitydevelopment/
congress/1975.pdf.
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Community Development Block Grant Public Service Expenditure Cap: In Brief

Exceptions, Programmatic Flexibilities, and Waivers
Although CDBG statute and regulations restrict public service activities, there are several
exceptions and programmatic flexibilities. Additionally, the public service expenditure cap has
been modified or waived on a temporary basis in certain emergency cases.
Statutory Exceptions
Congress has restricted expenditures on CDBG public service activities for most of the program’s
existence. However, the program’s statute provides some alternatives for entitlement grantees that
expended more than 15% of their FY1982 or FY1983 CDBG allocation for public service
activities in 1982 and 1983.13 The statute allows the eligible grantees to use 15% of the previous
year’s program income plus the greater of the following:14
 the actual dollar amount obligated in program year 1982 or program year 1983;
or
 the percentage of program year 1982 or program year 1983 public service
obligations multiplied by the upcoming program year allocation amount.15
Congress has also amended the CDBG program’s authorizing statute to provide temporary
expansions of the cap for certain grantees in response to specific events. For example, in response
to the 1992 Los Angeles riots, Congress raised the cap to 25% for Los Angeles City and Los
Angeles County from 1993 through 2003.16
Programmatic Flexibilities
CDBG regulations provide some additional exemptions to the 15% public services expenditure
cap for certain types of activities. For example, public service activities designed to assist
microenterprise or expand employment opportunities associated with an eligible CDBG special
economic development activity may be exempt from the cap.17 Certain public service activities
carried out by eligible nonprofit development organizations are also exempt from the expenditure
cap, under the following circumstances if:18
1. the activity is related to employment services;19 or
2. the eligible organization carries out the activity in an area designated by the
grantee and approved by HUD as a Neighborhood Revitalization Strategy Area

13 42 U.S.C. §5305(a)(8). According to data provided to CRS by HUD, 41 entitlement grantees are eligible under this
provision.
14 For HUD guidance on this exception, see HUD, Guide to National Objectives and Eligible Activities for Entitlement
Grantees, Chapter 2: Categories of Eligible Activities, p. 23, https://www.hudexchange.info/sites/onecpd/assets/File/
CDBG-National-Objectives-Eligible-Activities-Chapter-2.pdf.
15 HUD, Guide to National Objectives and Eligible Activities for CDBG Entitlement Communities, Chapter 2:
Categories of Eligible Activities, 2001, p. 22, https://www.hudexchange.info/sites/onecpd/assets/File/CDBG-National-
Objectives-Eligible-Activities-Chapter-2.pdf.
16 42 U.S.C. §5305(a)(8).
17 24 C.F.R. §570.201(o)(2); 24 C.F.R. §570.203(c).
18 For nonprofit eligibility in entitlement communities, see 24 C.F.R. §570.204(c). For nonprofit eligibility in
nonentitlement communities, see 42 U.S.C. §5305(a)(15).
19 24 C.F.R. §570.204(b)(2)(i); 24 C.F.R. §570.481(c)(2)(ii).
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(entitlement communities) or Community Revitalization Strategy Area
(nonentitlement communities).20
In addition to regulatory flexibilities, HUD guidance encourages grantees to examine whether a
proposed public service activity could also qualify under a category that is not subject to an
expenditure cap.21
Waivers
Congress or HUD have waived or modified the public service expenditure cap to provide grantees
with additional flexibilities, in response to some urgent events. The Coronavirus Aid, Relief, and
Economic Security (CARES) Act (P.L. 116-136) included $5 billion in supplemental CDBG
funds (CDBG-CV) “to prevent, prepare for, and respond to coronavirus.” The act also included a
provision waiving the public service expenditure cap for CDBG-CV funds and for CDBG funds
appropriated for FY2020 and FY2019.22 In its CDBG-CV rulemaking, HUD also extended the
eligible period for the provision of emergency subsistence-type payments—which are a form of
public service expenditure—from three months to six months.23
In some cases, HUD has granted waivers or alternative requirements related to public service
activities supported by supplemental CDBG funds for Disaster Recovery (commonly referred to
as CDBG-DR), as authorized by Congress in supplemental appropriations acts.24 HUD has also
used statutory authority to temporarily waive the public service expenditure cap for conventional
CDBG grantees recovering from Presidentially Declared Disasters.25
HUD Monitoring of Compliance
HUD assesses individual grantee compliance with the public service expenditure cap on a
program year basis. Grantee compliance is determined by assessing individual grantee reporting
and measuring public services expenditures against any relevant exemptions or flexibilities.
Although HUD publishes data on grantee expenditures at the individual and aggregate levels,
these publicly available sources do not provide a clear indication of cap compliance, for a number
of reasons. For example, HUD’s published aggregated data are typically on a fiscal year basis,

20 24 C.F.R. §570.204(b)(2)(ii); 24 C.F.R. §570.481(c)(2)(iii).
21 HUD, Basically CDBG Manual for Entitlements, Chapter 7, July 2012, p. 3, https://files.hudexchange.info/resources/
documents/Basically-CDBG-Chapter-7-Public-Services.pdf#page=3; and HUD, Basically CDBG Manual for States,
April 2012, p. 3, https://www.hudexchange.info/sites/onecpd/assets/File/Basically-CDBG-State-Chapter-7-Public-
Services.pdf.
22 HUD reporting indicates that public service expenditures made up 67.8% of the overall CDBG-CV expenditures in
FY2021 and 43.0% of CDBG-CV expenditures in FY2020. Overall, conventional CDBG public service expenditures
did not exceed 15% of the total expenditures during the covered fiscal years.
23 HUD, “Notice of Program Rules, Waivers, and Alternative Requirements Under the CARES Act for Community
Development Block Grant Program Coronavirus Response Grants, Fiscal Year 2019 and 2020 Community
Development Block Grants, and for Other Formula Programs,” 85 Federal Register 51457, August 20, 2020.
24 For an example, see HUD, “Allocations for Community Development Block Grant Disaster Recovery and
Implementation of the CDBG-DR Consolidated Waivers and Alternative Requirements Notice,” 87 Federal Register
31648, May 24, 2022.
25 42 U.S.C. §5321. For an example, see HUD, Availability of Waivers of Community Planning and Development
Grant Program and Consolidated Plan Requirements to Facilitate Recovery from the Severe Storms, Straight-Line
Winds, Flooding, and Tornadoes, December 21, 2021, pp. 5-6, https://www.hud.gov/sites/dfiles/CPD/documents/
CPD_KYDisasterWaivers_12_21_2021.pdf.
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Community Development Block Grant Public Service Expenditure Cap: In Brief

rather than a grantee prior year basis. Further, they do not reflect the application of the
aforementioned cap exceptions and waivers.26
CDBG Public Service Expenditures
Although HUD’s public CDBG activity expenditure reports do not necessarily provide insight on
public service expenditure cap compliance, they may provide some insights on broad trends in
public service expenditures over time. Public service activities made up 13.9% of overall CDBG
expenditures during FY2021. Since FY2001, conventional CDBG fiscal year public service
activity expenditures have ranged between 9.9% (FY2007) and 13.9% (FY2021) of overall
program expenditures.27 Figure 1 illustrates public service expenditure amounts and share of total
CDBG expenditures, by all grantees between FY2001 and FY2021.
Figure 1. CDBG Public Service Expenditures
All CDBG Grantees

Source: HUD, CDBG Activity Expenditure Reports, https://www.hudexchange.info/programs/cdbg/cdbg-
expenditure-reports/.
Public service activity expenditures are most common among entitlement community grantees. In
FY2021, public service activities made up 17.9% of entitlement community expenditures, as
compared with 3.9% for states and 5.1% for insular areas.28 Figure 2 provides an illustration of
trends in public service expenditure by grantee type between FY2001 and FY2021.

26 During some fiscal years, the aggregated public service expenditure amount for entitlement communities has
exceeded 15% of the total entitlement CDBG expenditure amount, potentially due to these factors.
27 HUD, CDBG Activity Expenditure Reports, https://www.hudexchange.info/programs/cdbg/cdbg-expenditure-reports/
.
28 As defined in 42 U.S.C. §5302(a)(24), CDBG insular areas are Guam, the Northern Mariana Islands, the U.S. Virgin
Islands, and American Samoa.
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Community Development Block Grant Public Service Expenditure Cap: In Brief

Figure 2. Public Service Expenditures by Grantee Type: FY2001-FY2021
Share of CDBG Activity Expenditures Within Grantee Type

Source: HUD, CDBG Activity Expenditure Reports, https://www.hudexchange.info/programs/cdbg/cdbg-
expenditure-reports/.
Notes: As mentioned earlier in the report, fiscal year CDBG expenditure data are not indicative of program
compliance under the public service expenditure cap.
The difference in expenditure levels by grantee type may be attributed to a variety of factors
including but not limited to the statutory cap flexibility for some entitlement grantees, described
above. Further, states and territories may have more alternative options for funding services
activities than entitlement communities, since most major service-related block grants are
allocated to them (e.g., Department of Health and Human Community Services Block Grants and
Services Social Services Block Grants).
As noted previously, the CDBG program allows for a broad range of eligible public services
activities. Since FY2017, operating costs of homeless and AIDS patient programs, youth services,
and senior services typically have been among the most common types of CDBG public service
expenditures.29 Figure 3 illustrates the share of selected public service activity types, by all
CDBG grantees in FY2020 and FY2021.

29 Ibid.
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Community Development Block Grant Public Service Expenditure Cap: In Brief

Figure 3. Share of Public Service Expenditures
Dollars in Millions

Source: CRS graphic with data provided by HUD from the Integrated Disbursement and Information System.
Notes: For a detailed overview of FY2020 and FY2021 public service activity expenditures, see Table A-1.

Discussion
Program Intent
Since CDBG’s establishment, Congress and HUD have limited public service activities within the
program through statutory and regulatory controls. Congress and HUD have also revised and
revisited these restrictions throughout their existence. Past reporting and hearing testimony
suggests that limitations on CDBG public service activities were aligned with local priorities in
the early years of the program. A 1981 General Accounting Office (GAO) study surveyed local
officials and analyzed a range of topics related to local CDBG implementation including targeting
of funds, residential rehabilitation, and performance monitoring. The GAO report indicates that at
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Community Development Block Grant Public Service Expenditure Cap: In Brief

that time, city officials generally found public services to be a lower priority in urban
revitalization efforts.30
In a 1983 hearing before the Senate Committee on Banking, Housing, and Urban Affairs,
Subcommittee on Housing and Urban Affairs, the mayor of Norfolk, VA, provided testimony on
behalf of the U.S. Conference of Mayors. The mayor expressed support from the Conference for
the public services cap, but with inclusion of a process for granting waivers. The mayor stated
that the cap was “an appropriate indication of the focus on physical development which always
characterized the basic CDBG program.”31 As noted above, Congress and HUD have granted
waivers and temporary flexibilities from the cap in certain cases.
On June 16, 2021, the House Committee on Financial Services, Subcommittee on Housing,
Community Development and Insurance held a hearing to examine the CDBG program and
discuss potential reforms, which included discussion of modifications to the public services
expenditure cap.32 State and local priorities—associated with CDBG-eligible activities—might
have shifted since the inception of the program and the establishment of the public services
expenditure cap. On the other hand, the program’s inherent flexibility may allow grantees to
address potential adjustments in priorities without a statutory change to the public service
expenditure cap.
Recent Proposals
Some Members of Congress have proposed options to remove or modify the public services
expenditure cap on a temporary or permanent basis. Congress has considered modifying the
definition or list of public service activities, to narrow or expand the range of activities subject to
the cap. Congress has also considered permanently or temporarily changing the cap. Title II of
H.R. 8294, the version of the Transportation, Housing and Urban Development, and Related
Agencies Appropriations Act, 2023, which passed the U.S. House of Representatives on July 20,
2022, includes a provision that would expand exemptions to the cap for FY2023. Specifically, the
provision would exclude FY2023 expenditures on activities addressing homelessness and
emergency rental assistance needs from the public services cap. In the 112th (H.R. 2183, S. 887)
and 113th (H.R. 1758, S. 855) Congresses, substantially similar “Public Service Flexibility Acts”
were introduced in the House of Representatives and the Senate. These bills would have
increased the public services expenditure cap to 25%.
Large-scale changes to the current CDBG public service activity structure could pose duplication
of benefits risks, or other coordination concerns, with federal programs more directly intended to
address local public service needs, such as the Community Services Block Grant program
(administered by the Department of Health and Human Services).33 However, additional
flexibilities for the provision of public service activities could also further enable braiding of
federal resources to enhance support for these activities.

30 U.S. Government Accountability Office, The Community Development Block Grant Program Can Be More Effective
in Revitalizing The Nation’s Cities, CED-81-76, April 30, 1981, https://www.gao.gov/assets/ced-81-76.pdf.
31 U.S. Congress, Senate Committee On Banking, Housing, and Urban Affairs, Subcommittee on Housing and Urban
Affairs, Fiscal Year 1984 HUD Authorizations: Funding Authorizations for Housing and Community Development
Programs for Fiscal Year 1984, 98th Cong., 1st sess., March 1983, S.Hrg. 98-146 (Washington: GPO, 1983), p. 208.
32 U.S. Congress, House Committee on Financial Services, Subcommittee on Housing, Community Development, and
Insurance, Flexible Federal Funding: Examining the Community Development Block Grant Program and Its Impact on
Addressing Local Challenges, 117th Cong., 1st sess., June 16, 2022, Serial No. 117-31 (Washington: GPO, 2021).
33 For information on the Community Services Block Grant Program, see CRS Report RL32872, Community Services
Block Grants (CSBG): Background and Funding, by Conor F. Boyle.
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Community Development Block Grant Public Service Expenditure Cap: In Brief

Potential changes to the CDBG public service expenditure cap relate directly to questions of the
program’s intent, which have come up in the context of congressional oversight and
appropriations. However, Congress has not thoroughly examined the intent of the CDBG program
since its last reauthorization in the Housing and Community Development Act of 1992 (P.L. 102-
550).

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Table A-1. CDBG Public Service Activity Expenditures: FY2021 and FY2020
FY2021
FY2021
FY2020
FY2020
Public Service
FY2021 CDBG
% of Total CDBG
% of Public Service
FY2020 CDBG
% of Total CDBG
% of Public Service
Activity
Expenditure
Expenditures
Expenditures
Expenditure
Expenditures
Expenditures
Other Public Servicesa
$75,391,719
2.2%
15.6%
$67,245,067
2.0%
17.7%
Senior Services
$63,285,582
1.8%
13.1%
$38,133,270
1.1%
10.0%
Operating Costs of
$53,133,046
1.5%
11.0%
$45,821,319
1.4%
12.1%
Homeless/AIDS
Patients Programs
Youth Services
$45,310,200
1.3%
9.4%
$43,815,243
1.3%
11.5%
Food Banks
$37,694,595
1.1%
7.8%
$12,902,165
0.4%
3.4%
Short-Term
$34,683,063
1.0%
7.2%
$14,564,667
0.4%
3.8%
Emergency
Subsistence Payment
Employment Training
$31,563,096
0.9%
6.5%
$31,574,049
0.9%
8.3%
Health Services
$25,176,317
0.7%
5.2%
$12,240,502
0.4%
3.2%
Housing Counseling
$13,918,910
0.4%
2.9%
$16,283,655
0.5%
4.3%
only, under 24 C.F.R.
5.100
Services for Victims of
$11,932,837
0.3%
2.5%
$13,884,401
0.4%
3.7%
Domestic Violence,
Dating Violence,
Sexual Assault, or
Stalking
Child Care Services
$11,538,789
0.3%
2.4%
$11,242,546
0.3%
3.0%
Mental Health
$10,852,064
0.3%
2.2%
$9,991,583
0.3%
2.6%
Services
Crime Awareness
$9,072,260
0.3%
1.9%
$9,539,953
0.3%
2.5%
Legal Services
$7,917,009
0.2%
1.6%
$7,290,867
0.2%
1.9%
Fair Housing Activities
$6,824,059
0.2%
1.4%
$5,894,909
0.2%
1.6%
CRS-2

link to page 15
FY2021
FY2021
FY2020
FY2020
Public Service
FY2021 CDBG
% of Total CDBG
% of Public Service
FY2020 CDBG
% of Total CDBG
% of Public Service
Activity
Expenditure
Expenditures
Expenditures
Expenditure
Expenditures
Expenditures
Tenant/Landlord
$6,669,249
0.2%
1.4%
$4,101,909
0.1%
1.1%
Counseling
Abused and Neglected
$6,544,023
0.2%
1.4%
$3,508,449
0.1%
0.9%
Children
Services for Persons
$6,338,956
0.2%
1.3%
$7,019,159
0.2%
1.8%
with Disabilities
Substance Abuse
$5,414,303
0.2%
1.1%
$6,205,860
0.2%
1.6%
Services
Screening for Lead-
$4,980,851
0.1%
1.0%
$3,755,644
0.1%
1.0%
Based Paint/Lead
Hazards Poisoning
Transportation
$4,366,237
0.1%
0.9%
$4,936,721
0.1%
1.3%
Services
Housing Information
$3,973,148
0.1%
0.8%
$3,649,700
0.1%
1.0%
and Referral Services
Homebuyer
$2,551,795
0.1%
0.5%
$2,991,650
0.1%
0.8%
Downpayment
Assistance—Excluding
Housing Counseling,
under 24 C.F.R. 5.100
Rental Housing
$1,877,847
0.1%
0.4%
$1,133,212
0.0%
0.3%
Subsidies
Neighborhood
$1,557,878
0.0%
0.3%
$1,646,142
0.0%
0.4%
Cleanups
Housing Counseling,
$619,485
0.0%
0.1%
$391,666
0.0%
0.1%
under 24 C.F.R. 5.100,
Supporting
Homebuyer
Downpayment
Assistanceb
CRS-3

FY2021
FY2021
FY2020
FY2020
Public Service
FY2021 CDBG
% of Total CDBG
% of Public Service
FY2020 CDBG
% of Total CDBG
% of Public Service
Activity
Expenditure
Expenditures
Expenditures
Expenditure
Expenditures
Expenditures
Security Deposits
$147,283
0.0%
0.0%
$199,133
0.0%
0.1%
Total Expenditures
$483,334,600
13.9%
—
$379,963,441
11.3%
—
for Public Services
Total Expenditures
$3,482,789,572
—
—
$3,350,182,226
—
—
for Fiscal Year
Source: CRS Analysis of data provided by HUD from the Integrated Disbursement and Information System.
Notes: Expenditure figures and percentages in this table are inclusive of all CDBG grantees. For guidance on CDBG public service activity eligibility, see HUD, Basically
CDBG Manual for Entitlements, Chapter 7, July 2012; and HUD, Basically CDBG Manual for States, April 2012.
a. This category consists of public service activities not listed in CDBG matrix codes 05A-05Y, 03T. For CDBG matrix code definitions, see HUD, CDBG Matrix Code
Definitions, https://files.hudexchange.info/resources/documents/Matrix-Code-Definitions.pdf.
b. Homebuyer Downpayment Assistance is defined in 05R of the CDBG matrix codes.

CRS-4

Community Development Block Grant Public Service Expenditure Cap: In Brief

Author Information

Joseph V. Jaroscak

Analyst in Economic Development Policy

Disclaimer
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