Measuring the impact of community development block grant spending on urban neighborhoods

Regression analysis of Community Development Block Grant (CDBG) spending in 17 large cities reveals strong statistical associations between spending from 1994 to 1996 and changes in three indicators of neighborhood conditions: the home purchase mortgage approval rate, the median amount of the home purchase loans originated, and the number of businesses. However, there is no consistent association between spending and indicators of subsequent neighborhood change unless CDBG spending is sufficiently spatially targeted that it exceeds a threshold of the sample mean expenditure and is measured relative to the number of poor residents. In addition, associations vary according to neighborhood trajectories before investment and changes in the local economy. Nevertheless, even in the least hospitable contexts—highly concentrated neighborhood poverty, preexisting declines in home values, weak city job growth—our estimates are consistent with the hypothesis that above‐threshold CDBG spending produces significant neighborhood improvements. We discuss the implications for such spatially targeted spending and connections between our work and the emerging literature on the dynamics of poor neighborhoods.