Why States Have Been Slow Paying Out Billions in Federal Rental Aid

States and localities have barely tapped billions of dollars in federal aid meant to help financially stressed renters pay back what they owe. It’s a situation that highlights the difficulties state and local agencies face getting huge sums of money out the door quickly, at a time when they’re receiving unprecedented amounts of cash from the feds.

In many cases, program administrators say delays with the emergency rental assistance payments are due to the fact that states and local governments are having to establish programs from scratch, building up the infrastructure and staff needed to manage hundreds of millions of dollars, while also adhering to federal guidelines.

Landlords and tenants, meanwhile, remain in limbo as a federal eviction moratorium is set to expire at the end of the month.

“We have a lot of money,” said Debra Carlton, the executive vice president for state government affairs and compliance for the California Apartment Association. “But it’s super slow, the process of delivering the money.”

California is due to receive $2.7 billion in federal rental assistance, with another $2.1 billion allocated for local governments in the state.

Geoffrey Ross, deputy director of the California Department of Housing and Community Development, said the state had never administered any kind of rental assistance program, and had to create one for the billions of dollars it is now overseeing, along with fraud protections and other safeguards.

“A rental assistance program of this size and scale, and with the ability to de-duplicate and reduce fraud, this is unlike anything that’s been done before,” he said.

But that has left renters in need without the money Congress appropriated to help them. Many landlords have yet to see much of the funding either.

As of June 17, California had spent only about $50 million of $1.4 billion the federal government has so far provided. Members of Carlton’s organization have received as little as 3% of what they’ve applied for in state funds, she said.

Other states are running into similar challenges.

Since December, Congress has approved $46.55 billion in two coronavirus relief laws to help cover lost rent payments for people who were behind as a result of the pandemic. The relief bill and year-end spending law former President Donald Trump signed in December provides $25 billion for rental assistance. The $1.9 trillion package President Biden enacted in March provides another $21.55 billion.

The vast majority of those funds have yet to be delivered, even as the federal moratorium on evictions is set to expire at the end of the month. Wyoming, for example, had released just $686,000 of the $200 million it received in the first federal assistance law—or just 0.3% —as of June 17.

In 13 states with public-facing dashboards that track the percentage of funds distributed, states had only disbursed 10.4% of the total provided to those states in the December coronavirus relief law as of June 7, according to data compiled by the National Low Income Housing Coalition and provided to Route Fifty. The second tranche was untouched.

Progress in Texas

Texas has been among the most successful states in distributing funds so far, according to Diane Yentel, the National Low Income Housing Coalition’s president and CEO. The state has released about $259 million, roughly 22% of the $1.1 billion the federal government provided in December, according to its public dashboard. Bobby Wilkinson, the executive director of the Texas Department of Housing and Community Affairs, said the dashboard lags real-time figures, which show $336 million had been paid out by June 17, with nearly $18 million going to renters and landlords every day.

Texas’ relative success came after a slow start. When the state launched its program in February, it was slammed with applications and vendor software wasn’t able to keep up, Wilkinson said. 

“I think it’s not obvious when you get started how much time and manual review time it takes per application,” he said. “We got burned early and it kind of scared me.”

States and landlords each must apply for funds. State workers are responsible for matching those applications, approving them and processing payments – all of which takes extra time for agencies without experience running such programs.

“It’s unusual for us to do any kind of direct-to-the-end-user payments,” Wilkinson said. “We’re usually just a funder, like a bank. So, this is a learning curve for us.”

The agency was able to use 10% of its allocation, more than $130 million, for administrative expenses and “threw money” at the issues it ran into, hiring more vendors and beefing up staffing, Wilkinson said.

Moratorium extension

The federal eviction moratorium has helped provide a safety net for renters, but it will mean little to help those who lost jobs or otherwise dealt with financial hardships once it expires.

An estimated 13% of renters are behind on rent, and though the eviction ban has kept them in their homes for now, it did not provide the back rent owed to most landlords that will be due on July 1.

“It was always a half-measure,” said Yentel.

One in ten respondents to a U.S. Census Bureau survey of renters said they had “no confidence” they’d be able to pay rent next month. An additional 14% said they had only “moderate confidence,” while 13% reported they were behind on rent payments. The survey was conducted from May 26 to June 7.

As insufficient as the moratorium has been for renters, landlords are also growing impatient with a system that doesn’t allow for recourse when renters miss payments. Some have received no rent since March 2020, Carlton said.

California Gov. Gavin Newsom and legislative leaders are considering extending the state’s eviction ban.

Carlson said if a moratorium is extended, it should come with changes, including a stronger verification system, a higher share of back rent sent directly to landlords and better communication between the state, renters and landlords.

Other funding options

Besides the $46.55 billion in emergency rental assistance funds, there is other federal aid that could help with housing issues.

The $2.2 trillion CARES Act approved in March 2020, did not include funding specifically for rent assistance. But that law did create a $150 billion fund for states and local governments, a more flexible pot of money meant to help them address any pandemic-caused needs or gaps.

According to a National Conference of State Legislatures analysis, 39 states used nearly $3 billion from that fund for housing programs, including Philadelphia, which used CARES Act dollars to set up a rental assistance program in May of 2020.

That program has helped the city distribute more than $85 million in federal money for rental assistance, even though only $20.3 million came from the emergency funding in the December bill.

The Philadelphia Housing Development Corporation, a city-affiliated nonprofit is administering the city’s program. To support the initiative, the corporation hired 45 full-time staff to assist with it last year and invested in information technology upgrades, senior vice president Gregory Heller said.

“We basically built our program to become permanent infrastructure, not knowing, of course whether there is going to be funding in the future,” Heller said. “But the only way to get this kind of money out the door at this volume is to build a program as if it’s permanent.”

So far, only two states, Vermont and Washington, have used a total of just over $750 million for housing programs from a $350 billion state and local government aid fund created in this year’s major relief law, according to the NCSL analysis, which included information through June 16.

The limited housing spending from the new funding is probably because states are still figuring out how to use the money provided in this year’s $1.9 trillion package, said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers.

Federal regulators are still finalizing guidance for the money, and states have until 2024 to spend it, which has them considering a wider range of uses compared to the CARES funds.