The formula used to allocate Community Development Block Grant (CDBG) funds has not changed in over forty years, despite concerns about whether it distributes funds equitably (defined here as based on community need). An equitable formula under the CDBG program would distribute funds proportional to an area’s community development needs as implied by the statutory objectives of the CDBG program. Put briefly, the statutory objectives of the CDBG program are to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons. The formula still relies on factors that are unlikely to accurately predict community need, such as pre-1940 housing and population growth lag from 1960. This report constructs a community needs index based on 20 variables for CDBG entitlement and nonentitlement communities, then assesses how well the current CDBG allocation formula aligns with the community needs index. The report finds significant disparities, suggesting funding inequities in the current formula. Such inequities include communities with similarly high levels of need receiving very different levels of funding on a per capita basis and communities whose allocated funding is very high relative to their need. The report then discusses the main problems with the current formula that contribute to these inequities.