States with unallocated Emergency Rental Assistance Program (ERAP) funds could wind up losing them as the U.S. Department of the Treasury prepares to reevaluate where the money is needed most.
The Treasury will start assessing how it will reallocate “excess” ERAP funding that Congress approved to help distressed tenants and property owners on Sept. 30. The process is part of a legal requirement that Congress set when it allocated $26.5 billion under the Consolidated Appropriations Act of 2021 (ERA 1) in December 2020.
“Congress anticipated that there would be a need to reallocate ERA 1 funds in the fall of 2021 in order to address evolving needs for rental assistance over the course of the ERA program and to reflect the greater capacity of some recipients to deploy funding,” wrote Adewale Adeyemo, deputy secretary of the Treasury, in a Sept. 24 letter offering initial insight into how the department will approach the reallocation process.
“Our overarching goal is for ERAP grantees to deliver as much assistance to as many eligible renters as possible,” Adeyemo continued. “This requires us to direct these resources to state and local agencies demonstrating the greatest capacity for delivering funds to tenants and landlords and to places experiencing the highest needs.”
Congress approved two rounds of ERAP funds in the past year totaling $46.5 billion. Thus far, programs have distributed $7.7 billion of rental assistance to 1.4 million households, according to recent Treasury data.
The Treasury report showed that state and local programs distributed $2.3 billion in ERAP funds to roughly 420,000 households in August. While that is an improvement from previous months, there is still more work to be done, according to Gene Sperling, American Rescue Plan coordinator and senior advisor to President Biden.
“There is still a meaningful and painful gap that could still lead to hundreds of thousands of unnecessary evictions and heartbreak and devastation that results from them,” Sperling said during a recent national call with the National Low Income Housing Coalition.
The Treasury notes that numerous state and local grantees will use up their ERA 1 funds in the coming weeks and months, while others are on pace to exhaust their second round funds of the ERAP (ERA2).
“Though we have a long way to go, the Emergency Rental Assistance Program and other steps are on track to protect millions of households from eviction,” wrote Adeyemo. “Reallocation, as required by the statute, is an important step to ensure that resources are available in areas with the greatest news and the highest capacity to deliver these resources.”
Along with requiring the Treasury to reallocate “excess” ERA funds, the statute allows the department to develop reallocation procedures governing this process.
The department will determine excess funds by using a grantee’s “expenditure ratio.”
The Treasury will calculate ratios by dividing the amount of funds a grantee has distributed since January 2021 by 90% of its original ERA 1 allocation.
Grantees can qualify for reallocated funds if they’ve committed at least 65% of their total ERA 1 allocation and demonstrate a need for additional funds.
The Treasury will seize state and local grantees’ “excess” ERAP gradually over months. The first determination of expenditure ratios will occur after grantees submit their September reports on ERAP distribution on Oct. 15.
The department will also repeat the process periodically, increasing the minimum expenditure ratio each time, with a final reallocation occurring in Spring 2022.
While the Treasury indicated that it will create a fair process designed to make additional funds available to high-performing grantees, housing advocates are also urging the agency to consider how it will continue to provide relief to renters and housing providers in areas with under-performing grantees.
“Ultimately, the reallocation process should ensure that those who need to be made whole ultimately are regardless of where they live and the effectiveness of their local grantee in disbursing the funds,” says Nicole Upano, director of Public Policy at the National Apartment Association.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news to jgrice@rismedia.com.