As a result, non-entitlement communities in most states apply to their state for project funds. Non-entitlement areas are generally cities with populations of 50,000 or less and counties with populations of 200,000 or less. The State CDBG program's purpose is to develop smaller communities by providing decent housing, a suitable living environment, and economic opportunities principally for persons of low or moderate income. Under unique circumstances, states may also use their funds to meet urgent community development needs. A need is considered urgent if it poses a serious and immediate threat to the health or welfare of the community.
States fund local governments through a competitive process or on a formula basis.
Demands for grants far exceed the available funds. Applications are ranked according to national standards as well as state criteria to ensure that grants are fairly and equitably awarded. Applicants are funded based on the final ranking of the application, to the extent funds are available. Rating factors vary from state to state but may include absolute number and percent of persons in poverty, impact of the proposed program, and past performance in meeting national objectives in housing and equal opportunity. State CDBG grants can be used for some rural housing development activities, including site clearance and rehabilitation of housing and of public or private buildings.