Criteria for Participation in the Urban Development Action Grant Program Should Be Refined

The Housing and Urban Development's (HUD) Urban Development Action Grant Program helps revitalize severely distressed cities by using public funds to attract private investment in industrial, commercial, or neighborhood projects. About $1.5 billion has been provided for the program through fiscal year 1980. The Housing and Community Development Act of 1977, which established the program, did not specify the number of cities to which the program should be targeted. HUD established the following six eligibility criteria to determine which metropolitan and urban counties were to be selected for the program: age of housing, poverty rate, population growth, per capita income growth, unemployment rate, and employment growth. To be eligible, most cities must be ranked in the lower half of all cities for three of the six criteria. This has resulted in 333 of the Nation's large cities and urban counties being eligible for the program.

Available data for the six eligibility criteria are often old and/or of varying degrees of reliability. Because they are based on 1970 census information and later estimates which are not completely accurate, the data are weak. Some criteria are based on questionable time frames and assumptions. A significant correlation exists among three of the six criteria, age of housing, employment growth, and population growth. As a result, there may be some redundancy among these criteria. The current HUD eligibility process does not take into account the degree of severity of distress for most of the individual criteria. Cities having relatively high levels of distress for any one of the criteria are not given more points than cities barely meeting the threshold level of distress, except for poverty. In testing alternative eligibility formulas which are sensitive to relative degrees of distress, it was noted that about 50 of 646 communities would have their eligibility status changed.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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