Unraveling Treasury’s Rental Assistance Redistribution Plan
October 12, 2021
On October 4, Treasury published guidance on its procedures for reallocating a portion of the $25 billion Emergency Rental Assistance passed as part of the yearend 2020 stimulus. This first bucket of money is known as “ERA1” and is treated separately from the additional $21 billion supplied by the American Rescue Plan. Under the law, Treasury had to begin reallocating excess ERA1 funds from state and municipalities (grantees) on September 30, 2021. Highlights from the procedures are as follows:
- Key Thresholds
- States/counties/cities (grantees) that have obligated at least 65% of their ERA1 funds will be eligible to receive reallocated funds.
- Grantees that have distributed less than 30% of their ERA1 funds may be subject to losing a portion of their funds.
- Excess Funds:
- Grantees that have spent less than 30% of their ERA1 funds as of September 30, 2021, will be subject to reallocation. The ratio to be reallocated will increase by 5% each calendar month.
- Grantees below the 65% obligation threshold are required to submit a Program Improvement Plan, regardless of how much they have spent. Failing to submit a plan will result in a reallocation of 10% the original grant amount.
- A grantee below the 30% expenditure threshold can submit a Program Improvement Plan to potentially gain a 15% boost to its expenditure ratio and avoid reallocation.
- On March 31, 2022, a final assessment may sweep any unobligated funds.
- Obligated Funds: Obligated funds (spent funds and committed funds) will not be recaptured. Treasury’s conditions for obligated funds are:
- Funds have actually been spent providing financial assistance and housing stability services under ERA for eligible households;
- 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
- Contractual obligations, including assistance that has been approved but not distributed, or if a Grantee entered into a binding agreement or funding commitment requiring the Grantee to disburse the funds to a third party for eligible ERA1 purposes.
- Mitigating Factors: Treasury may waive reallocation if the grantee declares by November 15 it has obligated 65% or spent at least 30%, develops a Program Improvement Plan, or if Treasury determines exigent circumstances delayed distribution.
- Reallocation Process
- Eligible grantees (65%+ funds obligated) can request additional funds starting October 15.
- Treasury will evaluate requests based on demonstrated capacity and amount of reallocated funds available and award funds accordingly.
- If requests exceed amount of reallocated funds, Treasury will still calculate the approved amount for each grantee, aggregate that amount, calculate a percentage based on available funds, and reduce the reallocation awards across the board by the shortfall.
- Treasury will prioritize reallocating funds within the same state.
- Grantees may voluntarily request to reallocate some or all of their funds to an eligible grantee in the same state.
Distribution Data
Treasury has not yet released the September distribution report, which will be critical in demonstrating which jurisdictions could gain or lose funds. The August data provide a preview of jurisdictions in the running for additional funds. Excluding the city and state allocations from the total, the following states are at or near the 65% threshold, which counts expenditures and not obligations, and could be eligible for reallocation.
FHFA Housing Proposal and Current Level
The following states are more than 10% below the 30% expenditure and could be in danger of reallocation.
FHFA Housing Proposal and Current Level
CREFC continues to monitor state moratorium and rental assistance distribution.
For additional updates, please see CREFC’s State Legislation and Policy Tracker.