Urban Action Grants

Pursuant to a legislative requirement, GAO evaluated the standards and criteria that the Department of Housing and Urban Development (HUD) used to measure the comparative degree of economic distress of urban areas and subsequently select projects for its Urban Development Action Grant program.

GAO found that: (1) HUD based areas' grant eligibility on their meeting three or four of seven distress measures involving age of housing, poverty, population growth lag, per-capita income, unemployment rates, job lags, and labor surplus; (2) criticisms of those standards cited their inadequacy for determining relative degrees of distress, tendency toward regional bias, and use of outdated and inaccurate data; and (3) alternative eligibility standards would only minimally affect the list of cities that would be eligible for the grants. GAO also found that: (1) as of November 1988, HUD had awarded 2,947 grants totalling $4.6 billion; (2) 44 percent of those projects were finished, with reported results of $10.6 billion in private investment, 174,144 jobs, about $111 million in annual local taxes, and 28,052 housing units; (3) although the completed projects collectively exceeded the expected amount of private investment and almost met employment and housing expectations, they fell short of local revenue expectations; (4) inflated or changed expectations, changing economic conditions, developer noncompliance, and inaccurately reported data could account for the differences between individual projects' expected and achieved goals; and (5) while, prior to 1987, HUD primarily selected projects based on relative economic distress, recent program changes placed greater emphasis on potential economic benefits in selecting projects.