Community Development Grant Funds Emerge as Housing Incentive Lever in New Law, Realtor.com® Report Finds
Smaller, post-industrial cities in the Midwest and Northeast stand to see the biggest impact from new construction incentives tied to Community Development Block Grants
AUSTIN, Texas, Aug. 5, 2026 /PRNewswire/ -- A new report from Realtor.com® examines how the 21st Century ROAD to Housing Act's Community Development Block Grant (CDBG) payout program could shape local housing policy, finding that the incentives are likely to be most consequential in smaller, post-industrial markets across the Midwest and Northeast, where CDBG funding represents a larger share of city budgets and new construction is relatively scarce.
The Act ties CDBG allotments to local housing growth, providing larger allocations to communities that expand their housing stock and reducing awards for those that do not meet delivery standards. But for most cities, the financial stakes are modest: the median city receives a CDBG award equal to just 0.33% of total revenue, or roughly one-three-hundredth of its budget. With the maximum penalty set at 10% of a grant, the median potential penalty is about $84,000.
"CDBG funding can be a meaningful tool for local governments, particularly because communities have flexibility in how they put those dollars to work," said Joel Berner, senior economist, Realtor.com®. "But the current payout structure is unlikely to change housing policy in most large cities when the potential penalty is a tiny fraction of their overall budgets."
The analysis compares 2023 HUD grant data with Census Bureau city budget and population data, as well as Realtor.com® listing data and household-growth estimates. The nation's largest cities receive the greatest total CDBG awards, led by New York City at $169.3 million, followed by Chicago at $75.1 million and Los Angeles at $50.2 million. Yet funding is more consequential relative to city budgets in smaller communities, including Altoona, Pennsylvania; Franklin and Camden, New Jersey; Johnstown, Pennsylvania; and Saginaw, Michigan.
Where CDBG Incentives Could Have the Largest Impact
For large cities with more than 250,000 residents, Realtor.com® identified markets where CDBG funding is comparatively important to local revenue and where the share of for-sale listings that are newly constructed is low. The 10 markets most likely to see a meaningful effect from the CDBG payout program are:
CDBG Amount |
CDBG as |
New |
New |
Household |
|
Milwaukee, WI |
$15,931,961 |
1.15 % |
1.3 % |
42.1 % |
1.0 % |
Detroit, MI |
$34,030,759 |
1.10 % |
1.3 % |
321.2 % |
1.7 % |
Toledo, OH |
$7,355,028 |
1.01 % |
1.3 % |
144.5 % |
-0.2 % |
Newark, NJ |
$6,851,649 |
0.87 % |
1.3 % |
49.7 % |
5.6 % |
Cleveland, OH |
$20,779,240 |
1.40 % |
3.0 % |
259.3 % |
1.2 % |
Buffalo, NY |
$13,154,000 |
0.79 % |
1.3 % |
142.6 % |
0.8 % |
Pittsburgh, PA |
$13,597,804 |
1.77 % |
3.9 % |
157.2 % |
0.9 % |
Jersey City, NJ |
$5,112,176 |
0.70 % |
1.9 % |
21.3 % |
6.3 % |
Saint Louis, MO |
$18,096,578 |
1.11 % |
3.8 % |
340.9 % |
-0.5 % |
Minneapolis, MN |
$10,994,064 |
0.94 % |
3.6 % |
187.5 % |
1.9 % |
National |
$839,525 |
0.33 % |
17.9 % |
12.4 % |
1.6 % |
These markets generally have substantially lower new-construction shares than the national figure. The new-construction share of listings is 17.9% nationally, compared with 1.3% in Milwaukee, Detroit, Toledo, Newark and Buffalo. At the same time, new homes command sizeable premiums in many of these cities, signaling that available new inventory is scarce relative to demand.
"Targeting incentives at places where homebuilding is least active could help unlock development where it is needed most," Berner said. "The key question is whether cities can reduce regulatory barriers and make it easier to build. If Congress wants this program to drive broader change, however, the financial stakes will likely need to be larger."
Four of the 10 large cities identified are growing household counts faster than the national 1.6% rate: Jersey City (6.3%), Newark (5.6%), Minneapolis (1.9%) and Detroit (1.7%). Slower household formation elsewhere does not necessarily mean additional housing is unnecessary, as affordability constraints can prevent households from forming independently.
A Self-Funding Program With Limited Financial Leverage
The CDBG payout program is designed to be self-funding, with penalties supporting bonuses for communities that meet their housing-growth targets. Cities are exempt if they lack statutory zoning authority, have high rental vacancy rates, have low fair-market rents or have experienced a federally declared disaster within the prior 365 days.
CDBG funds have historically supported infrastructure and public facilities, housing rehabilitation and buyer assistance, economic development, and public services. Total CDBG funding has not kept pace with inflation since the program was created in 1974, while the number of eligible recipients has increased. The median grant among cities analyzed was $839,525 in 2023.
Read the full report: The Role of Community Development Block Grants in Modern Housing Policy
Methodology
Community Development Block Grant amounts for 2023 were sourced from HUD's Find a Grantee data. City budget data came from the U.S. Census Bureau's 2023 state and local government finance datasets. New-construction data represent a trailing 12-month average as of June 2026, based on new and existing home listings on Realtor.com®. Household-growth estimates are based on 2025 and 2026 counts provided by Claritas.
About Realtor.com®
For over 30 years, Realtor.com® has connected buyers, sellers, and renters with trusted insights, professional guidance and powerful tools to help them find their perfect home. Recognized as the No. 1 real estate site REALTOR® agents recommend, Realtor.com® delivers consumer connections and a robust suite of marketing tools to support business growth. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc.
Media Contact: Mallory Micetich, [email protected]
SOURCE Realtor.com
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