The U.S. Department of the Treasury on October 4 issued guidance on reallocating the $25 billion in Emergency Rental Assistance (ERA), referred to as “ERA1,” appropriated under the Consolidated Appropriations Act of 2021. Additionally, Treasury published a one-pager summary of the guidance and a letter from Deputy Secretary Adeyemo to ERA grantees on reallocation. The reallocation guidance will, as NLIHC recommended, require poor-performing program administrators to submit improvement plans outlining how they will adopt proven best practices to expedite the delivery of assistance to renters and landlords. Importantly, the Treasury guidance makes clear it will hold renters harmless for slow spending programs by looking to other grantees in the states or jurisdictions to deliver the funds.
The guidance addresses how Treasury will implement the statutory requirement that the department begin reallocating excess ERA1 funds on September 30, 2021. Treasury aims to use the reallocation process to help more renters stay housed and avoid eviction by making more resources available to high-performing grantees based on need, incentivizing adoption of best practices among grantees, and working to ensure funds do not go unused by grantees unwilling or unable to assist tenants and landlords in need.
The reallocation guidance includes many specific provisions:
- Obligations and Excess Funds: Treasury will not recapture funds a grantee has “obligated” – a measure that includes both spent and committed funds.
- Grantees that have not “obligated” at least 65% of their ERA1 funds by September 30, 2021, must submit a program improvement plan by November 15 that outlines how they will speed ERA distribution. Grantees that do not submit a program improvement plan by November 15 will have 10% of their allocation considered “excess funds.”
- Grantees that have not obligated at least 65% of ERA1 funding and have expenditure ratios below 30% as of September 30, based on the program data submitted to Treasury by October 15, will be determined to have “excess funds” subject to potential recapture. The expenditure ratio is a measure of funds actually spent on financial assistance and housing stability services. Programs that spent less than 30% of funds by September 30 will be considered to have excess funds equal to the difference between the percentage spent by the program and the 30% threshold.
- Program Improvement Plans: In evaluating program improvement plans, Treasury will consider whether grantees plan to implement the best practices identified in Treasury’s ERA guidance, including self-attestation of income and other eligibility requirements, eviction diversion partnerships, and other effective strategies employed by effective ERA programs nationwide. Grantees must submit a report on their progress within 60 days of Treasury approving the program improvement plan. Treasury will publish more information on program improvement plans in the near future.
- Administrative Costs: For reallocation purposes, Treasury will consider 10% of each grantee’s initial allocation as having been obligated for administrative costs regardless of the grantee’s actual expenditures, commitments, or obligations.
- Subrecipient Agreements: Treasury’s guidance makes clear grantees cannot use subrecipient agreements to avoid meeting the statutory “obligation” percentages. In other words, funds are not considered obligated based solely on the fact they are given to a subrecipient to administer. Funds administered by either the grantee or a subrecipient will only be counted as obligated if: the funds have been spent providing financial assistance and housing stability services under ERA; assistance has been approved for an eligible household but the payment to the landlord or utility provider has not yet been disbursed; or assistance has been approved but not yet disbursed under a bulk payment arrangement with a large landlord or utility provider.
- Subsequent Assessments: The expenditure ratio programs must meet to avoid recapture will increase by 5% each month and be assessed every two months. The threshold as of November 30 will be 40%. Any funds not obligated by March 31, 2022, may be deemed excess funds subject to potential recapture, helping to ensure funds do not go unused given the September 30, 2022, statutory deadline for obligating ERA1 funds.
- Mitigating Factors: Grantees that have inadequate obligations and insufficient expenditures will have several ways to mitigate the amount Treasury would otherwise recapture. The grantee can prevent recapture if they certify by November 15, 2021, that they have spent at least 30% or obligated at least 65% of their ERA1 allocation. Additionally, in cases where Treasury approves a grantee’s program improvement plan, the department will recalculate the grantee’s excess funds by assuming a one-time 15% addition to their expenditure ratio to help them meet the minimum threshold of 30%. This recalculation will allow grantees to accelerate spending before losing funds as they implement new ERA policies to improve distribution.
- Requesting Additional Funds: Treasury will begin accepting requests from grantees for reallocated funds on October 15, 2021. Reallocated funds will be available only to grantees that have obligated at least 65% of their initial ERA1 allocation. Treasury will publish a request form through which grantees must indicate the amount requested and confirm the need for such funds in their jurisdiction.
- Distributing Recaptured Funds: Treasury will distribute recaptured funds approximately every two months based on availability of funds and confirmed need. Each request for additional funds will be evaluated based on the grantee’s demonstrated capacity to meet and exceed the minimum expenditure ratio and on other indications of ERA need within the jurisdiction. Treasury will prioritize, when feasible, requests to reallocate funds to other grantees in the same state. The remainder of funds will be available for reallocation nationwide, with priority given to grantees already on track to expend their remaining ERA1 and ERA2 funds.
- Voluntary Reallocation: Beginning September 30, 2021, grantees may request to transfer some or all of their allocations to another grantee in their state that has obligated or spent at least 65% of its own allocation.
- Administrative Expenses: Grantees may spend up to 10% of their initial ERA1 allocation for administrative expenses only if they obligate at least 30% of their initial allocation for the provision of financial assistance and housing stability services by September 30, 2022. If, by September 30, 2022, a grantee obligates less than 30% of its initial allocation providing financial assistance and housing stability services, Treasury will presume the grantee’s administrative expenses were not attributable to providing those services if administrative costs exceed 10% of the grantee’s allocation after deducting amounts recaptured or reallocated.
Read Treasury’s ERA reallocation guidance at: https://bit.ly/2YmNa7r
Read Treasury’s one-pager on the guidance at: https://bit.ly/3mxYNAn
Read Treasury’s letter to ERA grantees on the guidance at: https://bit.ly/3uJLhgw
Read NLIHC’s fact sheet on the reallocation guidance at: https://bit.ly/3oGukTm