NLIHC Report Finds $1.2 Billion at Risk of Reallocation, Recommends Actions for Recapture and Reallocation

NLIHC released a report, Emergency Rental Assistance Spending and Performance Trends, on the progress of the U.S. Department of Treasury’s Emergency Rental Assistance (ERA1) programs in their distribution of funds appropriated under the 2021 Consolidated Appropriations Act. The report analyzes ERA1 grantee spending progress, describes Treasury’s reallocation process for ERA1 grantees, and provides recommendations to ERA administrators and Treasury on how best to serve low-income renters. ERA grantee performance has varied widely: though one-fifth of grantees have spent more than 80% of their ERA1 allocations, 28% of grantees have spent less than 30% and are at risk of having funds recaptured and reallocated.

Treasury is statutorily required to reallocate ERA1 money from grantees with “excess” funds to grantees in need of additional resources. Grantees that have not obligated 65% of their funds and have also not met a 30% expenditure ratio by September 30 are determined to have “excess funds.” The expenditure ratio is the amount grantees have distributed divided by 90% of their total allocation, and the amount of funds recaptured will be based on the difference between a grantee’s expenditure ratio and the 30% threshold. The expenditure ratio required of grantees to avoid recapture will increase by 5% each month and by the end of March, Treasury will conduct a final assessment of each grantee’s spending. At that time, Treasury may determine any unobligated ERA1 funds to be “excess funds.”

The NLIHC analysis finds that 28% of ERA1 grantees, including 32 state grantees and 80 local grantees, have spent less than 30% of their ERA1 allocations and are at risk of losing funds through reallocation. Treasury could potentially recapture and reallocate a total of $1.2 billion from these states and local grantees. This amount decreases to $257 million if all grantees submit a complete Performance Improvement Plan.

The report also assesses the relationship between spending and the number of potentially eligible households served within states. Several high-spending state grantees have significantly more need than their ERA1 allocations will likely cover. State grantees in New York, California, Illinois, and New Jersey, for example, have spent between 71% and 90% of their state’s total allocation but have served fewer than 10% of low-income, housing cost-burdened renter households statewide. In comparison, states that received the small-state minimum and spent their funding quickly have served much higher proportions of housing cost-burdened low-income renters, and potentially have less need for additional resources. State grantees in Alaska and D.C. have spent 50% and 89% of their ERA1 allocations, respectively, and the number of renters they have assisted represent more than two-thirds of their cost-burdened low-income renters.

Reallocation is an opportunity for Treasury and ERA program administrators to address uneven ERA performance and ensure low-income renters have access to much needed assistance. It is also a chance to correct for the initial disproportional ERA1 allocation, which gave small states relatively higher funding than large states. Treasury’s recently initiated reallocation process should follow three guiding principles:

  1. Reallocate funds to grantees that are utilizing best practices and quickly getting assistance to households in need
  2. Reallocate funds to jurisdictions with high levels of need by considering the number of low-income renters and people experiencing homelessness, populations that are disproportionately people of color
  3. Ensure renters across all jurisdictions maintain access to ERA

The report also offers specific recommendations related to program improvement, within-state fund redistribution, out-of-state fund redistribution, and data transparency for future research and evaluation. For example, when reallocating funds within a state, low-spending state grantees should reallocate a portion of funds to high-spending local grantees with continuing need. Local grantees already implementing ERA are well-positioned to administer this funding, as they likely have connections to community-based organizations and specific knowledge of local needs. Treasury should require slow spending states with no local grantees but existing need to subaward ERA1 funds to organizations with experience in rental assistance administration. When redistributing funds out of a state, Treasury should prioritize sending funds to states and jurisdictions that received disproportionately low ERA1 funding and have large renter populations.

Access the report at: