Treasury to shift rental assistance to places with demand

The Treasury Department on Monday announced plans to start reallocating the billions of dollars in federal rental assistance in a bid to get more money into the hands of tenants facing eviction.

The plan is a response to the slow distribution of rental assistance in many parts of the country. A little more than 16.5% of the tens of billions of dollars in federal assistance reached tenants in August, compared with 11% a month earlier.

Lawmakers have approved $46.5 billion in spending on rental assistance and Treasury is targeting the first tranche of money known as ERA1 which amounts to $25 billion. States and cities are mostly allocating ERA1 money, which must be spent by Sept. 30, 2022. Allocation of the second installment of $21.5 billion, can go through Sept. 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.

Those entities that have not obligated 65% of their ERA1 monies or are found to have an expenditure ratio below 30% as of Sept. 30 based on a Treasury formula will face having the money reallocated. Grantees can avoid losing the money if they submit a plan by Nov. 15 showing how they will improve distribution or are able to get their distribution numbers above the 65% or 30% threshold.

There will also be the option of entities voluntarily returning the money, with the goal that it could be redistributed to the same state, territory or tribal area.

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.

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 tranche 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.