To get a Community Development Block Grant, you apply through your local or state government rather than directly to the U.S. Department of Housing and Urban Development. HUD sends CDBG money to units of government on an annual formula, and those governments then run their own application cycles, often passing funds through to nonprofits and other sub-recipients that carry out specific projects.1U.S. Department of Housing and Urban Development (HUD). Community Development Block Grant Program The path to funding runs through your city hall, county administrator, or state community development agency, and the project you propose has to fit a fairly specific set of rules before anyone will read your narrative.
Who Can Actually Apply
Individuals cannot receive CDBG grants. Most nonprofits cannot receive them directly from HUD either. HUD awards the money to units of government, and those governments choose which projects and organizations to fund locally.2eCFR. 24 CFR Part 570 – Community Development Block Grants
There are two tracks. Entitlement communities get their allocations directly from HUD. These are principal cities of Metropolitan Statistical Areas, other cities with populations of at least 50,000, and urban counties with populations of at least 200,000 (excluding the population of entitled cities within them).3HUD Exchange. CDBG Entitlement Program Eligibility Requirements They set their own deadlines and pick their own projects.
Non-entitlement communities, meaning smaller cities and rural areas below those thresholds, receive CDBG dollars through their state government, which runs a separate competitive process.4HUD Exchange. CDBG State Program
Nonprofits and community organizations fit in as sub-recipients. Local governments that receive CDBG funds often pass portions to nonprofits or specialized public agencies to carry out specific work. If you run a nonprofit and want to rehabilitate housing or provide job training, you would apply to your local entitlement community or state CDBG office as a potential sub-recipient.
Find the Agency That Controls the Money in Your Area
Your first step is identifying who administers CDBG funds where your project would happen. In an entitlement community, contact your municipal planning department, community development office, or county administrator’s office. Local priorities, application deadlines, and submission instructions vary significantly.
If your community does not qualify as an entitlement jurisdiction, your state government administers the funds. The HUD Exchange website maintains a searchable database of participating CDBG grantees so you can identify exactly which agency handles your area.4HUD Exchange. CDBG State Program State-administered cycles are annual and competitive, and deadlines often come months earlier than applicants expect. Reach out well before the cycle opens.
What Your Project Has to Do to Qualify
Every CDBG-funded activity must satisfy at least one of three national objectives. Failure to tie your project clearly to one of them is the fastest way to get rejected.2eCFR. 24 CFR Part 570 – Community Development Block Grants
- Benefit to low- and moderate-income persons. This is the dominant objective. Activities can qualify by serving an area where at least 51% of residents are low- or moderate-income, by providing direct benefits to eligible individuals, by creating or retaining jobs held primarily by lower-income workers, or by addressing housing needs of lower-income households.
- Prevention or elimination of slums and blight. Projects that address deteriorated buildings, code violations, or physically blighted areas in a designated zone can qualify even if the direct beneficiaries are not low-income.
- Urgent need. Serious and immediate threats to community health or welfare, such as disaster recovery, where no other funding is available. The hardest to justify and least commonly used.
The number that matters most in practice: grantees must certify that at least 70% of their CDBG expenditures over a defined period benefit low- and moderate-income persons.5eCFR. 24 CFR 570.484 – Overall Benefit to Low and Moderate Income Persons Local grantees therefore heavily favor proposals that serve lower-income populations. If your project does not clearly do that, you face an uphill battle regardless of how well the proposal is written.
What CDBG Will and Won’t Pay For
Eligible activities include acquiring real property for public purposes; building or improving public facilities like community centers, water and sewer systems, streets, and shelters; demolition and environmental cleanup of deteriorated or contaminated structures; rehabilitating residential and commercial buildings, including energy efficiency upgrades; providing public services such as job training, health care, childcare, and substance abuse treatment; supporting economic development through loans or grants to businesses that create jobs for lower-income workers; and code enforcement in deteriorating neighborhoods.6eCFR. 24 CFR 570.201 – Basic Eligible Activities
Two spending caps constrain how grantees distribute their money. No more than 20% of the annual grant can go toward planning and administrative costs.7eCFR. 24 CFR 570.489 – Program Administrative Requirements Public services spending is capped at 15% of the grant amount plus 15% of the prior year’s program income. Bricks-and-mortar projects get most of the money, and competition for public services dollars is especially fierce.
Ineligible activities include new housing construction (rehabilitation of existing buildings is fine, but new permanent residential construction is off limits except in narrow circumstances), routine government operating expenses such as filling potholes or paying utility bills for government facilities, political activities of any kind, standalone equipment purchases like vehicles and furniture not permanently attached to a structure, and ongoing subsistence payments to individuals for food, rent, or utilities.8eCFR. 24 CFR 570.207 – Ineligible Activities
Fit Your Project to the Local Consolidated Plan
Every CDBG grantee develops a Consolidated Plan spanning three to five years, laying out community development priorities and goals based on an assessment of local housing and economic conditions.9HUD Exchange. Consolidated Plan Process, Grant Programs, and Related HUD Programs The grantee then produces Annual Action Plans describing specific projects each year.
Your proposal must align with those priorities. If the plan emphasizes affordable housing rehabilitation and you propose a new community center, you are swimming against the current. Before you write a word of your application, get the current Consolidated Plan and Annual Action Plan. They are public documents, usually posted on the grantee’s website. Read the priority needs section closely and frame your project against those stated goals.
Building the Application
Register First
Any organization handling federal money needs a Unique Entity Identifier, generated free through SAM.gov.10SAM.gov. Entity Registration Registration can take several weeks, so start early if you have never worked with federal funding before. The Unique Entity ID replaced older identification systems and is now the standard across all federal award programs.11U.S. General Services Administration. Unique Entity ID is Here
Core Documents
The standard federal application form is the SF-424, “Application for Federal Assistance.” It collects basic information about your organization, proposed funding sources, and a project description. Most administering agencies deliver it through an online grant management portal. Errors in financial figures or legal status information can get an application thrown out before anyone reads your narrative.
Beyond the SF-424, expect to assemble:
- Detailed project budgets breaking down labor, materials, administrative overhead, and any matching funds.
- Evidence that the project benefits low- and moderate-income people, which may require census tract data or income surveys of the target population.
- Site maps, architectural plans or cost estimates, and environmental assessments if applicable.
- Proof of nonprofit status or legal standing of the applicant organization.
- A project narrative explaining scope, timeline, and expected outcomes tied to the grantee’s Consolidated Plan priorities.
Income Verification
If your project directly serves individuals under the low- and moderate-income national objective, you need a plan for verifying beneficiary income. Acceptable documentation generally includes tax returns, earnings statements, unemployment benefit letters, and documentation from other means-tested programs with income requirements at least as strict as CDBG.12HUD Exchange. CDBG-CV Toolkit – Documentation – Income For some public services like food banks or health screenings, self-certifications may be acceptable, but check your local grantee’s specific requirements. Build your verification system before the project starts.
Conflict of Interest Disclosures
Federal regulations prohibit anyone involved in CDBG decision-making from benefiting financially from the activities they oversee. This covers employees, officers, consultants, and elected officials of the grantee or sub-recipient, extends to their immediate family members and business associates, and continues for one year after they leave their position.13eCFR. 24 CFR 570.611 – Conflict of Interest HUD can grant exceptions case by case, but only after public disclosure and a legal opinion. If a potential conflict exists in your organization, disclose it up front rather than have it surface during monitoring.
Compliance Obligations That Shape Your Budget and Schedule
Environmental Review
Before any CDBG money can be committed to a project, the responsible entity (usually the local government) must complete an environmental review. No one can commit HUD funds or take any action that would limit future alternatives until HUD approves a formal Request for Release of Funds.14eCFR. 24 CFR Part 58 – Environmental Review Procedures for Entities Assuming HUD Environmental Responsibilities The level of review depends on the project: exempt for administrative work, categorically excluded for minor rehabilitation, a full Environmental Assessment for most construction and substantial rehabilitation, and an Environmental Impact Statement for the rare project with potentially significant effects.
If your project involves physical work on a property that could contain historic structures, the grantee must also consult with the State Historic Preservation Officer under the National Historic Preservation Act.15Federal Highway Administration. Section 106 Tutorial Overview – National Historic Preservation Act Historic preservation review alone can add months. Build the time in.
Davis-Bacon Prevailing Wages
On federally assisted construction contracts exceeding $2,000, the Davis-Bacon Act requires contractors and subcontractors to pay workers the locally prevailing wage rates. For contracts over $100,000, overtime rules also apply, requiring time-and-a-half for hours worked beyond 40 in a week.16U.S. Department of Labor. Davis-Bacon and Related Acts The $2,000 threshold is low enough that virtually every CDBG construction project triggers prevailing wage requirements, and Davis-Bacon rates can run substantially higher than what local contractors normally charge. Factor this into cost estimates from the start.
Section 3 Hiring
When total HUD assistance to a project exceeds $200,000, Section 3 requirements apply. The grantee and its contractors must make best efforts to provide employment and training opportunities to low- and very low-income residents of the area where the project is located.17eCFR. 24 CFR Part 75 – Economic Opportunities for Low- and Very Low-Income Persons HUD tracks Section 3 compliance, and grantees who fail to meet benchmarks face consequences during monitoring reviews.
Review, Public Comment, and Scoring
Federal regulations require local governments to hold public hearings on proposed uses of CDBG funds, with a public comment period of at least 30 calendar days.18eCFR. 24 CFR 91.105 – Citizen Participation Plan – Local Governments Grantees must actively encourage participation from low- and moderate-income residents, minorities, non-English-speaking persons, and people with disabilities. This applies not just to individual project approvals but to the broader Consolidated Plan and any substantial amendments.
For competitive state-administered programs, applications are scored and ranked. Criteria and weights vary by state and program type, but reviewers consistently look at community need, project feasibility (including financial viability and local support), and the applicant’s track record.2eCFR. 24 CFR Part 570 – Community Development Block Grants Past performance carries real weight. An organization that previously received CDBG funds and met its benchmarks on time has a meaningful advantage over a first-time applicant. First-time applicants can offset this by demonstrating capacity through other successful grant-funded projects.
The review period can take several months. Applicants receive a formal notification of approval or denial, and approved projects then move into a grant agreement phase before any funds are released.
After the Award
Winning the grant is where the real work begins. Grantees and sub-recipients report accomplishments in HUD’s Integrated Disbursement and Information System (IDIS). Annual reporting is required at minimum, though HUD recommends quarterly updates.19HUD Exchange. Guidance for Reporting CDBG Accomplishments and Performance Measures in IDIS Reported data includes the race, ethnicity, and income of beneficiaries, jobs created or retained, and performance measures specific to the activity type. Late or sloppy reporting is a common trigger for monitoring findings.
If your CDBG-funded activity generates revenue, such as loan repayments from a housing rehabilitation program or rental income from an acquired property, that money is program income and remains subject to CDBG rules. Program income must be spent on eligible activities before you draw down additional federal funds from the Treasury.20eCFR. 24 CFR 570.504 – Program Income At the end of each program year, excess program income above one-twelfth of the most recent grant must be returned to HUD. Sub-recipients who retain program income need written agreements specifying what activities it will fund.
HUD also tracks spending pace. Sixty days before the end of a program year, undisbursed funds in a grantee’s line of credit cannot exceed 1.5 times its current annual grant amount. Grantees that fail this timeliness test face corrective action and risk having future grants reduced.2eCFR. 24 CFR Part 570 – Community Development Block Grants For a sub-recipient, this means your local grantee has strong incentive to fund projects that can move quickly. Proposals with realistic timelines and demonstrated readiness to begin work have a clear edge over projects still in the planning stage.
Organizations that spend $1,000,000 or more in federal awards during a fiscal year must undergo a Single Audit, a comprehensive review of financial statements and federal program compliance.21eCFR. 2 CFR Part 200 Subpart F – Audit Requirements Even if your CDBG grant alone does not reach that threshold, it gets combined with all other federal awards your organization receives. Organizations below the threshold are exempt from the Single Audit requirement but must still maintain adequate financial records.
HUD monitors grantees, and grantees monitor their sub-recipients.22HUD Exchange. CDBG Subrecipient Oversight Guidebook – Monitoring Strategies and Procedures Findings can lead to disallowed expenses, repayment demands, probation, termination of funding, or federal debarment. The organizations that avoid those outcomes build compliance systems before the grant starts rather than reconstruct records after the fact. Maintain meticulous records of expenditures, beneficiary income documentation, procurement decisions, and Davis-Bacon payroll certifications from day one.