Treasury Says Cities, States Can Return Money Meant for Rental Assistance

The Treasury Department said that city and state governments could voluntarily return the federal funding approved as rental assistance during the COVID-19 pandemic, with the goal that the money would be redistributed to the same area.

The Treasury announced its plans to start reallocating the rental assistance funds in an effort to get money to tenants facing eviction, as distribution of the billions of dollars has been slow in many parts of the country. The first installment, known as ERA1, needs to be spent by September 30, 2022.

Local or state governments that have not distributed 65 percent of their money from ERA1, or have an expenditure ratio below 30 percent as of September 30 based on a Treasury formula, may face their funding being reallocated, the Associated Press reported. To avoid reallocation, grantees can submit a plan by November 15 showing how they will improve distribution or are able to get distribution numbers above those thresholds.

Entities that do not wish to create plans to allocate the money can voluntarily return it, under the idea that the Treasury would then be able to redistribute it to the same state, territory or tribal area.

For more reporting from the Associated Press, see below.

Rental Assistance
The Treasury Department announced that states and cities can voluntarily return funds meant for federal rental assistance as it works to reallocate the funds to tenants facing eviction. Activists hold a protest against evictions near City Hall on August 11, 2021 in New York City. Spencer Platt/Getty Images

A little more than 16.5 percent of the tens of billions of dollars in federal assistance reached tenants in August, compared with 11 percent a month earlier.

Lawmakers have approved $46.5 billion in spending on rental assistance and Treasury is targeting the first portion of the money which amounts to $25 billion. Allocation of the second installment of $21.5 billion, can go through September 30, 2025.

The goal, Treasury officials said, is to reallocate money from those programs that either don't need it or don't have the desire to set up a program.

Treasury officials did not identify any places that could lose money, but the August data suggest there are a whole host of places that have been slow in getting money out. There was also an expectation that some money would be shifted, based on demand, once the program was up and running.

Ohio, which started strong, saw its distribution decline slightly. Kentucky saw a slight drop in spending from $13.1 million in July to $11.9 million in August. Iowa only distributed $7 million in August. The state of Georgia, meanwhile, only got $13 million out in August and $9 million in July.

But they said that several larger cities, including Houston and Philadelphia, had already exhausted their ERA1 money and were concerned about running through the second portion in the coming months. Virginia also is in need of additional funds.

Housing advocates blamed the slow rollout on the Treasury Department under President Donald Trump, saying his administration was slow to explain how the money could be spent. They say the guidance is clearer from the Biden administration but the process still seems more focused on preventing fraud than helping tenants.

The Treasury Department credited the increased spending in August to changes that allow tenants to assess their income and risk of becoming homeless, among other criteria. Many states and local governments, fearing fraud, have measures in place that can take weeks to verify an applicant qualifies for help.

Treasury Department Reallocation
The Treasury Department has announced plans to start reallocating rental assistance money in a bid to get more cash into the hands of families facing eviction. In this January 13, 2021 file photo, tenants' rights advocates demonstrate outside the Edward W. Brooke Courthouse in Boston. Michael Dwyer, File/AP Photo