Why Some States are Running Out Of Rental Aid and Others Have Millions Left Over

On the surface, it made sense when the Treasury Department in January took back $1.1 billion in federal rental assistance aid from states like South Dakota that weren’t using all their funds and gave the moneythem to states like New York that needed more.

But to housing experts and government officials in smaller states, the fact that Idaho, for instance, had $33 million more in rental aid than it needed, while others like Texas ran out of money and stopped taking applications, underscores flaws in how the federal government spread around $46.5 billion in aid to prevent evictions.

“The funds were not distributed across the country based on the need borne by low-income renters,” said Sarah Gallagher, a senior project director at the National Low Income Housing Coalition, which is aimed at ending evictions.

Congress distributed $25 billion in rental assistance in the Trump administration’s 2020 coronavirus relief package, including tens of millions to states that didn’t spend all the funds. The money languished in those states before the Treasury Department last month began redirecting a portion of the unused funds to the areas that need them.

For instance, South Dakota got $21.6 million more in the 2020 stimulus rental aid than it needed, according to the Treasury Department. 

Because the Biden administration and the Democratic-controlled Congress used the same method to dole out another $21.5 billion rental assistance in last year’s American Rescue Plan Act, that money is taking a circuitous route to states like Idaho, South Dakota and West Virginia that say they don’t need all they have gotten, before it, too, will be redirected.

NLIHC’s president and CEO, Diane Yentel, wrote in a letter to Commerce Secretary Janet Yellen last week that rental assistance dollars aren’t getting to the parts of the country where they’re needed. “Texas, New York, New Jersey, and Illinois, for example, have all paused their programs, and California has indicated that it does not have enough funds to meet the existing need,” she said. 

A combined 2.6 million people are behind on their rent in those five states, Yentel wrote, making up about 40% of those nationally in that predicament.

“An inequitable initial allocation formula, the slow redistribution of funds, and delays in the disbursement of obligated funds are creating critical gaps in the emergency rental assistance (ERA) program that must be immediately addressed by the U.S. Department of the Treasury,” Yentel wrote. 

The problem, said Peter Hepburn, a researcher who heads an effort to track evictions at Princeton University’s Eviction Lab, is that Congress, in the 2020 Consolidated Appropriations Act and in ARPA, took an overly simplistic approach in determining how to spread rental assistance funds to governments. Both measures apportioned the money to jurisdictions in proportion to their populations. 

But, Hepburn said, that did not take into account critical differences between different parts of the country in how much rental help residents need. 

“Some states have proportionally more rental units. In New York, almost half the households are rental units. That’s not true in a state like Utah, where well under a third of the households are rentals,” he said. 

Other factors were not considered as well, like higher rents in big cities like New York City, said Hepburn and some state officials, who are critical about having been given too much money. Also, some areas were more heavily hit economically by the pandemic than others.

The approach worked against large urban areas, which Hepburn noted are where there are more minority and low-income households.

The Eviction Lab considered the amount states received and their rental households. It found New York gave less than $800 per rental household, but in Wyoming, that figure was $5,000 per household.

NLIHC estimated that unless they receive more money, five states—California, Minnesota, New Jersey, New York and Texas – and Washington, D.C. will have spent all their rental assistance funds by next month. In contrast, if South Dakota, North Dakota and Montana continue to disburse their rental aid at the same rate they have been, they can give assistance to all low-income households and still have $400 million left over when the federal programs end in September 2025.

Democratic spokespeople for the U.S. House and Senate housing committees didn’t respond to inquiries about the programs.

States and Localities Under Fire

States and local governments have come under fire for not getting money to landlords fast enough. Through July, only about $5.1 billion of the $46.5 billion in aid had been spent.

The attention on the states and local governments only grew when the Supreme Court in August threw out a nationwide moratorium on evictions, which caused evictions to rise, according to the Eviction Lab. After the Biden administration and Congress failed to extend the moratorium, officials urged states and localities to get the money to people in need faster.

Brian Abraham, chief of staff to Republican West Virginia Gov. Jim Justice, for instance, wrote Agriculture Secretary Tom Vilsack in October, after Vilsack urged the state to do a better job in disbursing the rental assistance funds. 

Abraham noted that Vilsack said that “West Virginia's distribution lags behind the distribution in many other states.”

Abraham, however, pushed back, saying the state was not dragging its heels; it just didn’t need all it received from Washington.

“We believe [the West Virginia Housing Development Fund] has done incredible work to promote the program and get these dollars to West Virginia's renters and landlords,” Abraham wrote Vilsack. 

Abraham noted that the state had run two statewide television ad campaigns promoting the aid was available and worked with the United Way’s emergency assistance call center to spread the word. The state denied only 3% of the claims it received and handed out on average $4,563 to 5,273 households.

The problem was that Congress, in the 2020 coronavirus recovery package, had given small-population states, including West Virginia, a minimum of $200 million in rental assistance funds, without conducting “any analysis of actual renter need in this State,” Abraham wrote. 

“West Virginia is not a ‘renter’ state,” he said, adding it “has the highest percentage of homeownership in the country.”

A spokeswoman for Idaho Republican Gov. Brad Little, whose state leads the nation in unspent rental assistance redistributed by the Treasury Department, did not return inquiries from Route Fifty. But Press Secretary Marissa Morrison Hyer told the Idaho Statesman that the state has less need than others. 

The federal funding left “appears more than sufficient to meet the demand, likely in part due to Idaho’s low unemployment rate and strong economy relative to other states,” Hyer told the newspaper.

Ian Fury, spokesman for Republican South Dakota Gov. Kristi Noem, also criticized Congress for giving the state too much. Noem had not ordered businesses to shutter, and Fury said that led to a 2.9% unemployment rate.

“South Dakota was given $200 million—far more than we need—despite the fact that we have the nation’s strongest economy, a small population, a high percentage of homeowners, a booming economy, and one of the lowest unemployment rates in America,” Fury said. “South Dakotans have the best form of rental assistance—a job.”

Lorraine Polak, executive director of the South Dakota Housing and Development Authority, wrote the Treasury Department last November, saying the reason why the state didn’t spend more of its rental assistance funding wasn’t because it hadn’t tried.

“Our state has done an exceptional job standing up these programs and getting financial or housing assistance out to those who need it,” Polak wrote. She said the state had approved three-fourths of the applications for assistance and handed out aid to 5,200 households. But it still had more than $21 million left over.

Polak also criticized that states weren’t allowed to decide what type of federal housing help they needed, which in South Dakota, she said, was to create more affordable housing. 

“If South Dakota was able to retain even $50 million of the [Emergency Rental Assistance] funding for housing development, this would assist with developing more than 500 housing units, which would have a substantial impact on our housing market and affordability,” she wrote.

Fury said the Treasury Department never responded. A department spokeswoman did not return Route Fifty’s inquiry about South Dakota’s letter.

At the same time, the governors of New York, California, Illinois and New Jersey sent a joint letter to the Treasury Department Jan. 13, saying “it is clear our states’ remaining need is far greater than the funding initially allocated through the ERA program. The current funding gap our states and local governments face is in large part a result of the ERA program allocating funding based on a grantee’s total population instead of grantees share of low-income renters, the target population of the program.” 

No Redistribution Mechanism Included 

Congress did include a mechanism in both measures to allow the Treasury Department to shift money for rental assistance around. 

The 2020 stimulus measure required the Treasury Department to begin redistributing unused funds and give them to jurisdictions that demonstrated need by spending at least two-thirds of their money by last September. 

After prodding jurisdictions to spend the money or voluntarily give it back, Treasury redistributed the unused funds for the first time in January—more than a year after the Consolidated Appropriations Act was enacted.

“There is a reallocation process,” Hepburn said. ”But that process is only seeing the first round of reallocation.”

Jurisdictions had a Jan. 21 deadline to submit requests for a second round. 

ARPA, meanwhile, does not allow the Treasury Department to begin redistributing unused rental funds until March 31—also a little more than a year after the measure was enacted.

The Treasury Department is emphasizing that after a slow start, the distribution picked up last September, leading to three straight months in which at least 500,000 in payments and $2.8 billion in assistance were given out. The $2.9 billion in payments in November was the latest month for which data is available.

Evictions Improve, but Rising

Overall, the Treasury Department noted that improvement in getting renters aid has helped keep evictions from skyrocketing.

According to data compiled by the Eviction Lab, the 34,675 eviction filings between June 27 and July 26 hovered at around half of the historical average. Filings rose after the federal eviction moratorium was lifted in late August but stayed at a high of 63% of pre-pandemic levels, which the researchers attributed in part to the rental assistance as well as local eviction moratoriums that remained in place.

However, since the national moratorium ended, evictions in 23 of the 31 cities the researchers monitor have risen more than 10% higher than historical norms. And the researchers noted that as governments begin running out of federal rental assistance funds, the number of evictions will increase.

Some states also are not getting nearly as much through the redistribution as they say they need. “Unquestionably, there is significant unmet need for more rent relief in New York,” said Daniel Tietz, acting commissioner of the state’s Office of Temporary and Disability Assistance. “Without substantial additional federal funding, tens of thousands of tenants will be left without assistance.” 

New York, for instance, asked the Treasury Department for a billion dollars in additional funding but was only given $27 million. The state on Jan. 27 asked for $1.6 billion in the next round of reallocation, saying it was out of money and needed help to pay 174,000 applications.

Yentel, in her letter to Yellen, urged the Treasury Department to make changes. While it took the department four months to begin redistributing 2020 stimulus dollars after the date set in the act, Yentel urged checks redistributing ARPA funds be written as close as possible to March 30, the day that acts calls for the process to begin.

In addition, she said the department should change how it decides how much jurisdictions receive. Instead of prioritizing them based on how much they have spent, she said those with large numbers of low-income renters should have priority, an idea governors also have pushed. 

Priority should go to “high-need states and jurisdictions that received disproportionately low ERA allocations and that have larger populations of low-income renters and people of color,” Yentel urged.

The Treasury Department did not reply to a request for comment from Route Fifty.