COVID Stimulus Relief Allocation Depends on One Surprising Factor
When looking at national trends, one way to get a less abstract and better grasp of what is going on is to start at the local level. When the Biden administration announced a few months ago that it was granting billions to cities nationwide as part of the American Rescue Plan, I looked at how much the city where I live—Lakewood, Ohio—was getting.
It is getting about $47 million, and with a population of a little under 50,000 people, that means roughly $950 federal money per person.
That seemed a bit of a high dollar amount for a suburb of Cleveland that professes to be economically better off than other inner-ring suburbs in the Rust Belt. Were other similar cities receiving this kind of money? I looked at another city I knew quite well—Grapevine, Texas—that is similar in population to Lakewood (55,000) and not much different in terms of the income of its residents and the level of poverty.
Grapevine is getting $6.8 million in total funds from the American Rescue Plan, which works out to be about $125 per person.
The big question in my mind was why a city in Ohio would get about 7.5 times the amount per person for pandemic-related economic issues that a similar city of the same size in Texas was allocated.
What I found out was quite odd and extends across the country regardless of the city sizes. The Biden administration is using 45-year-old “Community Development Block Grant” formulaic equations to determine how much each city gets. One of the prime measurements for those funding applications is how much of a city’s housing was built 1939 or earlier.
Thanks to a strange set of outdated bureaucratic requirements if you want to figure out why one city gets a lot more money under this huge federal grant payout and why others get a lot less, look first at the percentage of their housing built before 1940.
In this case, Lakewood has 64.2 percent of its housing built before 1940, and Grapevine has 1.3 prevent. That’s why Lakewood gets $825 more money per person than Grapevine.
This is not an anomaly. Of the 25 most-populous cities in the United States, 7 of them (New York City, Chicago, Philadelphia, San Francisco, Washington, Boston, and Detroit) have older housing coming in at 35 percent and higher. They average $686 per person.
Of the other 18 big cities (with Indianapolis being the furthest north and east), most are in single digits for older housing—all have less than 30 percent. Collectively, those 18 big cities with newer homes are averaging $222 per person.
That is a huge difference, about 200 percent higher for the olds.
“There is always politics involved when money is allocated, and this is not any different,” says Michael Rich, a political science professor at Emory University who has studied CDBG funding and its history. “But what has happened is that Congress knows that redoing the funding mechanisms will result in all-out political warfare and will ultimately kill the [CDGB] program.”
“But the result we are seeing here is that they aren’t taking into account need and don’t even address the question as to how we define need here,” Rich told The Bulwark.
How did old housing become a standard on how much money to award cities for infrastructure and poverty needs?
When the CDBG program began in 1974, the leadership that had been pursuing this for a long time under the auspices of civil rights in big cities, was very much centered in the Midwest and Northeast. Thus, the early applicants and grants came from cities like Trenton and Cleveland and Boston.
But other cities across the country started applying too, and the old cities could see that there was a limited amount of money available each year. In response, in the late 1970s, Congress added the age of housing formula to determine how much each city would get. It was explained that older housing was a good determinate for aging infrastructure (the logic being old houses mean the streets must be old too), but most knew it was a carefully crafted way to keep the money in the Northeast and Midwest.
“If you determine that the way you distribute money to cities is based on aging infrastructure, then politically, you cannot for a second convince anyone that this funding should be the same for southern growth cities,” Edward “Ned” Hill a professor of public policy at Ohio State University. “For some time, the two sides fought this at times, but they gave up in the mid-1990s.”
How $60 billion in public money is passed out has largely been ignored by both sides, but just recently, in late March 2021, the Congressional Research Service called this housing age criteria for CDGB funding into question.
The study pointed out that “the pre-1940 housing factor is not currently as effective at indicating need as it was when adopted . . . in 1977” and that “local planning decisions, concentrations of wealth, and residential market demand” determine the age of housing in particular cities. In other words, in some cities older housing adds to the economy because of an uptick in value, while in other cities, old housing is a sign of decline.
You can see this when comparing Cambridge, Massachusetts and Macon, Georgia on how much they got in these urban stimulus grants. Cambridge, home to Harvard University and MIT, has a population of about 120,000 and 47.3 percent of its housing was built before 1940. Its poverty rate most recently is 12.7 percent. The average home value is about $880,000 and it is receiving about $540 per person from the American Rescue Plan funds.
Macon, with a population of 150,000, has an old housing rate of 9.8 percent and poverty at 24.9 percent. The average home value is about $95,000, and it is receiving about $300 per person.
Why would a rich suburb of Boston get 80 percent more cash per person than a city with more obvious need? Simply because Cambridge has almost five times as many old houses than Macon.
We could go on with disparities. Las Vegas (0.4 percent pre-1940 housing) gets $200 per person, while Boston (51.3 percent) gets $612. Cleveland, Ohio (53.7 percent) gets $1,343, while Columbus, Ohio (12.1 percent) gets $158. Buffalo (64.1 percent) gets $1,298 per person and Nashville (6.3 percent) gets $186.
The biggest question is why the left and the right are both silent on this. Both have a dog in this hunt. Biden’s recent trillion-dollar cash drops are the largest in U.S. history, but there is little inquiry into the “hows” and the “whys” of who gets what and how much. The political elites might question why the older cities with unchanging or declining populations in the North East and Midwest are getting larger shares than the growing newer cities of the South and West.
One could make the argument it should be the opposite. But that doesn’t seem to be on anyone’s radar screen right now.