On October 4, the U.S. Treasury Department published new guidance outlining the process for reallocation of Emergency Rental Assistance funds designed to mitigate the effects of the COVID-19 pandemic on renters and landlords, pushing state and local governments to expedite the distribution of the $46 billion in emergency rental assistance funds.
In December 2020, the Consolidated Appropriations Act of 2021, was signed into law and included $25 billion in emergency rental assistance (ERA 1). The March 2021 American Rescue Plan Act further supplemented these funds with an additional $21.6 billion in emergency rental assistance (ERA 2).
As states continue to administer ERA 1 funding and the ERA 2 program, NMHC remains engaged with Congress, the Treasury Department and HUD to ensure the programs are administered in an efficient and effective manner that works for both residents and property owners/managers.
In an effort to clarify specific provisions set forth as part of the program, Treasury has released guidance on an ongoing basis. On October 4, the Treasury Department published the “Emergency Rental Assistance Under the Consolidated Appropriations Act, 2021 Reallocation Guidance” which is focused on ERA 1 funds. The Consolidated Appropriations Act/ERA 1 requires the Treasury to reallocate “excess” ERA 1 funds on September 30, 2021. With less than 17 percent of the $46 billion in rental assistance funds having been disbursed as of August 2021, the Treasury Department, plan gives grantees that failed to obligate at least 65 percent of the ERA 1 funding until November 15, 2021, to submit a Performance Improvement Plan to the Treasury for approval, to avoid a federal clawback of their allocation. If grantees do not submit an adequate plan, 10 percent of their ERA 1 funds will be considered to be “excess” and subject to recapture. Grantees with expenditures less than 30 percent as of September 30, will be subject to recapture amounts for the difference between its reported expenditures and the amount of expenditure needed to reach the 30 percent threshold. Grantees can also avoid recapture by the November 15 deadline if they are able to certify that their expenditure ratio is at least 30 percent, or if they have obligated at least 65 percent of their allocation.
NMHC continues to provide feedback to Treasury and HUD regarding implementation. Importantly, Treasury addressed issues identified in industry real estate letters, allowing residents to demonstrate eligibility for rental assistance through self-attestation, establishing guidelines for providing bulk payments to landlords and allowing past arrears at previous addresses to be covered. The October 4 guidance specifically highlights the use of “self-attestation” an industry priority as a “best practice.”
NMHC continues to spearhead real estate coalition meetings with the Administration where we provide updates from NMHC members on implementation efforts as a follow-up to specific recommendations provided to the Administration via letters sent on August 18, April 20, February 9, February 26 and January 7.
Key Resources
- Treasury Department “Emergency Rental Assistance Under the Consolidated Appropriations Act, 2021 Reallocation Guidance” (October 4, 2021)
- Treasury Department FAQ and Fact Sheet (updated August 25).
- Treasury Department List of Funding Distributed to States, Localities and More.
- National Council of State Housing Agencies (NCSHA) State Level Emergency Assistance Programs. https://bit.ly/302vfjn
- IRS Emergency Rental Assistance FAQ (most recent version dated March 26). https://bit.ly/2PD5Hrl
- Treasury Department Centralized Portal for Emergency Rental Assistance
- Consumer Financial Protection Bureau (CFPB) Resources:
The information provided herein is general in nature and is not intended to be legal advice. It is designed to assist our members in understanding this issue area, but it is not intended to address specific fact circumstances or business situations. For specific legal advice, consult your attorney.
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- The funds have actually been spent providing financial assistance and housing stability eligible households;
- The funds are needed to pay for assistance promised in a commitment letter issued to induce a landlord to enter a rental agreement with an eligible household; or
- The grantee has entered into a binding agreement or funding commitment requiring the grantee to disburse the funds to a third party for eligible ERA1 purposes (a Contractual Obligation)
Why is the Treasury Department releasing Guidance reallocating Emergency Rental Assistance funds?
Under the Consolidated Appropriations Act/ERA 1 statute, the Treasury Secretary may recapture funds not obligated by grantees as of September 30, 2021, and reallocate those amount to grantees who have obligated as least 65 percent of their original grant.
What impact will the of October 4 Treasury Department guidance have on states that have failed to commit at least 65 percent of rental aid by September 30? In addition, what happens for programs spending less than 30 percent of their rental aid?
The plan gives grantees that failed to obligate at least 65 percent of the ERA 1 funding until November 15, 2021, to submit a Performance Improvement Plan to the Treasury for approval, to avoid a federal clawback of their allocation. Grantees that have spent less than 30 percent, can also avoid recapture if they spend at least 30 percent, or commit 65 percent of the money by November 15.
Can states with an obligation rate of at least 65 percent of their ERA 1 grants, request additional reallocated funds?
Treasury will begin accepting requests from grantees, that have obligated at least 65 percent of their own initial ERA 1 allocations on October 15, 2021.
How does the Treasury Department define the “obligated” funds?
Treasury has provided a definition for the term “obligated” as it relates to ERA funding. Treasury will consider funds to be obligated if they meet any of the following conditions:
A Contractual Obligation will include situations in which assistance has been approved for an eligible household but the payment to the landlord or utility provider has not yet been disbursed, or assistance has been approved but not yet disbursed under a bulk payment arrangement with a large landlord or utility provider.
Does the guidance address both ERA 1 and ERA 2?
The guidance is focused on ERA 1 funding. Funding provided under the March 2021 American Rescue Plan known as ERA 2 is not subject to this clawback deadline. Treasury will publish guidance for the reallocation of ERA 2 funds, which will not begin until March 31, 2022, at a later date.
For landlords that receive funds under an ERA program for prospective rent or for rental arrearages, “the grantee must prohibit the landlord from evicting the tenant for nonpayment of rent with respect to the period covered by the assistance.” In addition, for landlords receiving funds for rental arrears, Treasury strongly encourages grantees “to prohibit the landlord from evicting the tenants for nonpayment of rent for some period of time.” Finally, Treasury also “strongly encourages grantees to require landlords that receive funds under the ERA, as a condition of receiving the funds, not to evict tenants for nonpayment of rent for 30 to 90 days longer than the period covered by the rental assistance.”
The Emergency Rental Assistance program (ERAP) approved under the Consolidated Appropriations Act enacted in 2020 (ERA 1) makes available $25 billion and the American Rescue Plan enacted in 2021 includes $21.5 billion to assist households that are unable to pay rent and utilities due to the COVID-19 pandemic. The funds are provided directly to States, U.S. Territories, local governments, and Indian tribes. Grantees use the funds to provide assistance to eligible households through existing or newly created rental assistance programs.
The measure allocates both the $25 billion approved in ERA 1 and the $21.5 billion approved in ERA 2, to the Treasury Department to create an Emergency Rental Assistance Program. Many states and localities have already established their own renal assistance programs using prior CARES Act funds, and this model will replenish those programs (with some modifications) instead of trying to create a new federal program from scratch.
ERA 1 funds were provided to every state that applied in January 2021, with states receiving at least $200 million; although higher population states received more funding. Cities with populations over 200,000 were allowed to request to receive their allocations directly.
ERA 2 funds were provided to the states on May 7, 2021, with allocations for smaller states reduced from $200 million to $152 million.
On June 15, Treasury announced that they established an online hub of local emergency rental assistance program links to make it easier for renters and landlords to find programs in their area.
Treasury Department Centralized Portal:
To find help in your area, search for your state at https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program/program-index
Access all Emergency Rental Assistance fund disbursements by visiting USAspending.gov. In addition, you may also view state and local allocations by accessing the U.S. Treasury Department, Payments to States and Eligible Units of Local Government document
Finally, the National Council of State Housing Agencies (NCSHA) has created a map with links to state rental assistance programs.
The Treasury Department has provided state and jurisdictional allocations on their website for both ERA 1 and ERA 2 funds. Every state that applied for ERA 1 funds has received funding. In early May, Treasury opened the application process for states to apply for ERA 2 funding. Treasury has urged grantees to apply by May 10, as the American Rescue Plan requires the Department to disburse 40 percent of funds by that date. Applications submitted after May 10, may not be approved as quickly.
Emergency Rental Assistance payments for ERA 1 were made directly to states by the Treasury Department in January 2021. On May 7, the Treasury Department released state allocation amounts for ERA 2 funds and opened the application process for states to apply for funding.
Under ERA 1, eligible households may receive up to 12 months of assistance, plus an additional three months if necessary, to ensure housing stability. Assistance can only be allowed in three-month increments, after which point an eligible household must re-apply for funds. The aggregate amount of financial assistance an eligible household may receive under ERA 2, when combined with financial assistance under ERA 1, must not exceed 18 months.
The ERAP program can be used to cover rental payments and arrears beginning after March 13, 2020.
Each state and locality is charged with creating its own program and determining allocation priorities. The Treasury Department has established an online hub of local emergency rental assistance program links to make it easier for renters and landlords to find programs in their area.
Treasury Department Centralized Portal:
To find help in your area, search for your state at https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program/program-index
A chart with links to existing state programs is available from NCSHA at https://www.ncsha.org/wp-content/uploads/2021-Updated-State-Level-ERA-Administrative-Entities.pdf. Firms are encouraged to research how their state or locality is distributing their aid so they can share that information with residents.
Under the ERA 1 program, federal law makes it clear that if your resident does not apply for the relief directly and is behind on their rent, you, as a housing provider, can apply on their behalf and receive the funds directly. The law says you will need the resident’s signature/permission to do so, however, and provide documentation of such application to the resident. In terms of practical application, though, this specific issue will likely be determined by each jurisdiction distributing the federal funds.
Unlike the first round of funding for ERA 1, the May 7 Treasury guidance states that ERA 2 funding must be made available to renters “first and immediately.” Implications for this new requirement are still unclear. However, many are interpreting this to mean that renters may now receive funding directly—rather than the current practice of housing providers receiving it on their behalf.
As long as your firm is participating in your jurisdiction’s program, any relief approved for your residents will be paid directly to you. Some jurisdictions are requiring owners to erase some amount of past-due rent or forego their ability to evict a non-paying resident, which may cause your firm not to actively participate in the program. In that case, the resident can apply on their own and will be directed to deliver any relief they receive to their housing provider. Enforcement of this requirement is undetermined at this point.
The May 7 Treasury guidance makes clear that ERA 2 funds “must be offered directly to renters when landlords do not accept payment.” ERA 2 does not require grantees to seek the cooperation of the landlord before providing assistance directly to the resident.
No. You do not have to participate. If you choose not to participate, your resident may receive funds directly, which they are supposed to use to pay the property owner. The enforcement mechanisms to make this happen are unclear, however. Importantly, per the Treasury May 7 FAQ, once an owner is notified that a resident has applied for the assistance, they have a 7-calendar-day window to decide whether to participate in the program (if notified by mail) and 5 calendar days if notified by phone, text or email.
Jurisdictions are directed to prioritize households that are currently unemployed and have been unemployed for 90 days as well as households earning 50 percent of area median income (AMI) and below. Importantly, the measure bases qualifying income on the income the household is receiving at the time of application for assistance and not their prior income. Despite this preference, jurisdictions do have some flexibility to serve those with incomes up to 80 percent of AMI and can establish additional criteria. Furthermore, the May 7 Treasury FAQ allows administering entities to verify the income eligibility of renters by using any reasonable fact-specific proxy, such as the average income in the neighborhood in which renters live.
- Qualifies for unemployment benefits or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship due directly or indirectly to the COVID-19 pandemic;
- Demonstrates a risk of experiencing homelessness or housing instability; or
- Has a household income at or below 80 percent of the area median.
- Qualifies for unemployment benefits or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship during or due directly or indirectly to the COVID-19 pandemic;
- Demonstrates a risk of experiencing homelessness or housing instability; or
- Qualifies as a low-income family (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)). [1]
An “eligible household” for ERA 1 is defined as a renter household in which at least one or more individuals meets the following criteria:
An “eligible household” for ERA 2 is defined as a renter household in which at least one or more individuals meets the following criteria:
Importantly, in ERA 1 residents must show financial hardship “due, directly or indirectly, to” COVID-19. The definition for eligibility was expanded in ERA 2 to include a financial hardship “during” the pandemic.
Beyond that, jurisdictions are directed to prioritize households that are currently unemployed and have been unemployed for 90 days as well as households earning 50 percent of area median income (AMI) and below. Importantly, the measure bases qualifying income on the income the household is receiving at the time of application for assistance and not their prior income. Despite this preference, jurisdictions do have some flexibility to serve those with incomes up to 80 percent of AMI and can establish additional criteria.
[1] As of the date of these FAQs, the definition of “low-income families” in 42 U.S.C. 1437a(b) is “those families whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary [of Housing and Urban Development] with adjustments for smaller and larger families, except that the Secretary may establish income ceilings higher or lower than 80 per centum of the median for the area on the basis of the Secretary’s findings that such variations are necessary because of prevailing levels of construction costs or unusually high or low family incomes.”)
Household income is determined as either the household’s total income for calendar year 2020 or the household’s monthly income at the time of application. For household incomes determined using the latter method, income eligibility must be redetermined every three months. If an applicant’s household income has been verified to be at or below 80 percent of the area median income for ERA 1, or if an applicant’s household income has been verified as a low-income family as defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b) for ERA 2, grantees are permitted to rely on a determination letter from the government agency that verified the applicant’s household income, as long as the determination was made on or after January 1, 2020. Importantly, the May 7 Treasury FAQ clarifies how applicant income should be documented and verified.
ERA 1 requires that payments not be duplicative of any other federally funded rental assistance. With respect to ERA 2, grantees must not refuse to provide assistance to households on the basis that they receive assistance, due to the disproportionate effect such a refusal could have on populations intended to receive assistance under the ERA and the potential for this practice to violate Title VI of the Civil Rights Act.
Past arrears at a previous address may be covered. In order to remove barriers a household may face in accessing new house, a grantee may, at the tenant’s request, provide assistance for rental arrears after an otherwise eligible tenant has vacated a unit.
- Internet service provided to the rental unit;
- Relocation expenses (including rental security deposits2);
- Rental fees (including application or screening fees);
- Reasonable accrued late fees;
- Utilities and home energy costs; and
- Utilities and home energy costs arrears.
ERA 1 and ERA 2 permit the enrollment of households for prospective rent. ERA 1 requires grantees not make commitments for prospective rent unless it has also provided assistance to reduce the rental arrears, this requirement does not apply to ERA 2.
Per the Treasury FAQ, funds may used for “other expenses related to housing” including:
Importantly, the Treasury FAQ, acknowledged “that there may be increased need over the coming months for more hard-pressed renters to find new housing,” a recognition that alternative housing options will be an important consideration for some individuals. To that end, Treasury has widened the scope of qualified expenses to include “moving expense, security deposits, future rent, utilities and the cost of a transitional stay in a hotel or motel when a family has been displaced." The Treasury FAQ also defines terms and how these costs should be documented.
In addition, the August 25, Treasury FAQ address “rent bonds.” A tenant’s costs associated with obtaining a hearing or appealing an order of eviction may be covered with ERA funds. Many states and localities require tenant payments of rent to a court on behalf of the landlord, often referred to as “rent bonds,” where a tenant posts a bond with a court as a condition to obtaining a hearing, reopening an eviction action, appealing an order of eviction, reinstating a lease, or otherwise avoiding an eviction order, may also be considered an eligible expense.
[2] Grantees are encouraged to establish a policy with regard to the payment and disposition of security deposits. To the extent that the security deposit is not returned to the tenant, Treasury has advised that the funds be returned to the grantee.
Grantees may establish prudent information sharing arrangements with utility providers and landlords for determining household eligibility. Grantees may also establish reasonable procedures for combining the assistance provided for multiple households into a single “bulk” payment made to a utility or landlord.
In addition, to speed the delivery of assistance, grantees may adopt policies and procedures enabling landlords and utility providers to receive assistance based on reasonable estimates of arrears owed by multiple households before their application and documentation requirements are satisfied.
An application for rental assistance may be submitted by either an eligible household or by a landlord on behalf of that eligible household. Households and landlords must apply through programs established by grantees/states or the entity the state has selected to administer the program. Administering entities have placed additional requirements on program participation, including rules regarding evictions and rental payments. In general, funds will be paid directly to landlords and utility service providers. If a landlord does not wish to participate, funds may be paid directly to the eligible household.
Unlike the first round of ERA 1 funding, the new Treasury guidance states that ERA 2 funding must be made available to renters “first and immediately.” Implications for this new requirement are still unclear. However, many are interpreting this to mean that renters may now receive funding directly—rather than the current practice of housing providers receiving it on their behalf. Both the household and landlord should not submit applications for assistance to Treasury.
This will vary by state and locality, however; the Treasury Department did clarify in its FAQ that residents may self-attest as to their eligibility for the program. Specifically, the FAQ reads, “... given the challenges presented by the COVID-19 pandemic, grantees may be flexible as to the particular form of documentation they require, including by permitting photocopies or digital photographs of documents, e-mails, or attestations from employers, landlords, caseworkers, or others with knowledge of the household’s circumstances. Grantees must require all applications for assistance to include an attestation from the applicant that all information included is correct and complete.”
The May 7, Treasury FAQ specifically states that, “Treasury strongly encourages grantees to avoid establishing documentation requirements that are likely to be barriers to participation for eligible households.”
Yes. Per the IRS FAQ, Section 501 Emergency Rental Assistance payments received – whether from a tenant or from a Distributing Entity on a tenant’s behalf – are includible in your gross income.
Treasury has encouraged grantees to establish a policy with regard to the payment and disposition of security deposits, which should include a reasonable limit on the amount of a security deposit to be paid using ERA program funds. To the extent that the security deposit is not returned to the tenant, it should be returned to the grantee.
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