Getting Rental Assistance Out the Door

Or, how to give people money

Back in March of 2020, Congress passed the CARES Act, which, among other things, created a new Treasury stream called the Coronavirus Relief Fund (CRF). These funds were sent to state and local governments across the country and are intended to be used for various types of relief programs to mitigate the economic fallout from the pandemic.

There was surely some creative liberty taken in implementing programs funded with CRF (as it should be), partly due to the lax statutory requirements and guidelines on uses of the funds issued by the Treasury. Basically, if a cost can be demonstrated as being “due to the public health emergency", it’s fair game.

In particular, the rental assistance programs that several jurisdictions created using CRF provided immediate, direct relief, and were highly effective at doing so. Unfortunately, many others were not. If the successes are to be replicated in future rental assistance programs, creating a regulatory environment that makes that success possible must be considered for statute and guideline writing. Unfortunately, the statutory environment for the newest batch of rental assistance money is stricter than CRF, and legislative fixes or strong guidance from the new Treasury will be necessary to make good programs possible, lest we unnecessarily block money at the door when it’s ready to help keep families in their homes.

Existing rental assistance programs

The Department of Housing and Urban Development (HUD) regularly provides funds that can be used for short-term, emergency rental assistance in the form of block grants to state and local governments through the Community Development Block Grants (CDBG) and Emergency Solutions Grants (ESG) programs. These HUD programs, like all HUD programs, have very strict requirements, means-testing rules, and eligible uses. As such, they can be difficult to administer at the scale our current situation requires.

Partially as a response to the difficulty of administering these federal funds, many cities, including Los Angeles and Chicago have created “flexible” housing subsidy programs with philanthropic grants and local dollars which, for the most part, help to defray the costs of transitioning people to permanent supportive housing.

When the coronavirus pandemic struck, many cities resorted to the typical rental assistance models that HUD prescribes to try to help people who fell behind on rent. Some cities, however, took a novel approach allowed by the flexibility of CRF which proved far more successful.

The direct-to-tenant model

Just before the CARES Act passed, the Chicago Department of Housing launched an emergency program, the COVID-19 Housing Assistance Grant. These grants, first $1,000 and later $2,000 to $3,000 apiece, were paid directly to tenants or homeowners who could demonstrate that they had lost their job, hours, gigs, or had incurred new costs due to the pandemic. The grants were intended to defray, broadly, grantees’ housing costs.

Consider the two tenants below: imagining all else equal, Tenant 1 chose to pay their rent and forego their other housing expenses. Tenant 2 chose to pay all of their expenses besides rent. Should Tenant 1 be ineligible for rental assistance dollars since they made a different household budget decision than Tenant 2?

Typical federal rules would make it so, but low-barrier programs like Chicago’s saw these tenants, rightly, as being in basically the same situation and permitted grants to be disbursed to both applicants.

The other key distinction between this program and most other programs is to whom grant funds are disbursed. In Chicago, approved applicants with bank accounts provided direct deposit information and received the funds directly, while unbanked applicants worked with community based organizations to receive their funds in other forms, such as temporary debit cards.

Across the country, however, programs were designed to deposit rental arrears directly into property owners’ accounts rather than in applicants’ accounts. In order to achieve this, several time-consuming steps were added to the administrative process—steps that, at least for the Treasury’s CRF, were not required. While there were some differences among cities using this standard approach, for the most part, programs adhered to the generalized model on the right below.

It should be clear which of these models gets emergency funds to households in need more quickly and efficiently. It is also important to reiterate that CRF, the funding stream for most coronavirus response rental assistance programs, did not prescribe one model or another—as long as the demonstrated need was due to the pandemic, it was an eligible use of the funds. Noting that, there are several issues with the standard approach worth discussing.

  1. It does not make any sense for the owner of a building to determine whether an eligible applicant for an aid program should receive the assistance the applicant has demonstrated that they need. Many cities—including several that used this approach! (I’m looking at you, New York, L.A., and Philly)—have banned so-called “source of income discrimination”, barring landlords from discriminating based on sources of income, such as HUD vouchers. Emergency rental assistance is a legitimate, legal source of income, and declining to accept it may be illegal in cities with such laws. I’ll also wager a cliché to say that this aspect of the model is pretty feudalistic.

  2. Landlord non-response was an unexpected issue, often making up the majority of ultimately denied applications. Like flat-out declines, it makes no sense to deny an eligible household aid simply because the person who owns the building they live in did not respond to an email or letter. Instead of denying aid to tenants, cities could fine landlords for ignoring legitimate government requests.

  3. The administrative and technological capacity to run these emergency programs is already slim. In Chicago, staff with existing duties split their time to make the program possible, and in many other jurisdictions temp staffers were hired for things like document review. Putting together technology platforms to handle intake and automate the landlord process take time, and the more complex the process, the slower and more expensive the technology development will be.

  4. Finally, the reflex to give aid to property owners rather than tenants harkens back to regressive attitudes toward welfare that have plagued American politics for decades. As the conventional wisdom goes, those in need of assistance must be irresponsible, so a responsible party must step in to micromanage their budget for them. Unfortunately for proponents of such thinking, recent research on the topic suggests direct transfers are highly effective, though Americans still overwhelmingly hold on to their paternalistic attitudes on welfare.

    The very poor—those eligible for aid from antipoverty programs—overwhelmingly prefer cash benefits. Support quickly drops off as income levels cross the poverty line to those who are ineligible for antipoverty programs.

Despite the difficulties with the standard model design, very few jurisdictions chose the direct-to-tenant approach, and problems administering the complex model plagued housing agencies across the country. Headlines like those below peppered local newspapers throughout the waning months of 2020.

As the initial December 30th deadline to spend the funds drew near, jurisdictions who were unable to get the funds out the door took a few different approaches to working around the issues. While Atlanta and Pennsylvania reappropriated their funds for other uses, Los Angeles was able to make the shift to a direct-to-tenant model, and successfully got all of their aid into tenants’ hands by the deadline.

New rental assistance funds from Congress

The aid package passed by Congress last month does give some statutory directive on these important program design questions, such as what to do when a landlord declines or is non-responsive. Unfortunately, in so doing, it precludes to possibility of running streamlined direct-to-tenant programs. Under the new law and guidelines from the Treasury, payments to tenants may only be made as a last resort:

Grantees must make reasonable efforts to obtain the cooperation of landlords and utility providers to accept payments from the ERA [Emergency Rental Assistance] program. Outreach will be considered complete if a request for participation is sent in writing, by certified mail, to the landlord or utility provider, and the addressee does not respond to the request within 21 calendar days after mailing; or, if the grantee has made at least three attempts by phone or email over a 21 calendar-day period to request the landlord or utility provider’s participation. All efforts must be documented. The cost of the mailing would be an eligible administrative cost.

While the new law appears to be an improvement on the standard model that many jurisdictions opted for, nothing prevented those jurisdictions from opting for simpler models beforehand—in fact, we saw Los Angeles switch models in real time as their wise administrators realized the direct-to-tenant approach would allow them to put their funds in the hands of families in need more immediately.

In service of correcting the worst approaches, what Congress has actually done is outlaw the most successful approach: direct-to-tenant.

Well-intentioned changes to the law have actually outlawed the most effective means of putting needed assistance in the hands of families in need.

The new law also “allows” property owners to apply for funds—again, something that was not prohibited by CRF last year—which landlords can accept to cover their tenants’ rent if the tenants approve. The law also allows renters to apply for assistance to cover utility bills, like electric and gas bills, but the Treasury’s guidance explicitly denies the right to use the funds for any kind of telecommunications bills despite the fact that the vast majority of public school students are currently in virtual classes.

What can be done to fix this?

President Biden has proposed doubling the $25 billion Emergency Rental Assistance program to $50 billion. In order to do so, Congress will need to approve new legislation authorizing the additional funds. To resolve this problem, the House of Representatives could simply amend the authorizing legislation, Section (501)(c)(2)(C)(i)(I) from

…an eligible grantee shall make payments to a lessor or utility provider on behalf of the eligible household, except that, if the lessor or utility provider does not agree to accept such payment … the grantee may make such payments directly to the eligible household for the purpose of making payments to the lessor or utility provider.


…an eligible grantee shall make payments to the eligible household, or alternatively to a lessor or utility provider on behalf of the eligible household, except that, if the lessor or utility provider does not agree to accept such payment … the grantee may make such payments directly to the eligible household.

Frankly, this is an easy fix—a gimme for any legislators who want to make the lives of both their constituents and their local bureaucrats easier. We must also remember that this is not simply an administrative issue—these funds have been appropriated to keep real families in their homes during a deadly pandemic. Ultimately, this is about public health, housing stability, and most importantly of all, ours and our neighbors’ dignity.

Disclaimer: The author worked directly on the COVID-19 Housing Assistance Grant program as an employee of the City of Chicago, but recently left this position to attend a graduate program in New York.