As Minnesota, other states struggle to distribute rental assistance money, feds offer new guidelines (and a scolding)

When the hundreds of millions of federal dollars in rental assistance began flowing to Minnesota, the state saw a deadline to use the money as both a challenge and an opportunity.

Officials knew that getting 65 percent of rental assistance into the hands of landlords by the end of September would be difficult, based on a smaller state program that used 2020 CARES Act cash. But they also knew that states and local governments that meet the feds’ demand to get money out quickly would be rewarded with additional funds from states that failed the test.

“If we do keep our money and demonstrate that we are getting it out the door, there’s a possibility that we could run the program for 90 days after December 31st,” Minnesota Housing Finance Agency Commissioner Jennifer Ho told a Senate committee January 12. 

But Ho also added a caveat: The deadlines “are just really hard.”

“It makes me wonder who in Congress has ever stood up a really large program and run it before,” Ho said then.

Eight months later, Minnesota is closer to losing those federal funds than gaining more — something it has in common with most other states. According to a dashboard maintained by National Equity Atlas, just two states — Texas and Virginia — are even at or near having spent 50 percent of their money, with most states having far more money in the bank than in the hands of landlords.

Minnesota has currently distributed just 13 percent of the $375 million state and local governments got in pandemic relief money in December for rental assistance, according to the atlas. The state’s own dashboard shows that, as of Wednesday, 40,000 applications have been submitted for $226 million in assistance for back rent and other housing costs, with $47 million in payments made so far.

The money in question is referred to as ERA1, though additional rental assistance money, ERA2, is also flowing from the American Rescue Plan passed in April, and is subject to different rules and guidelines. Taken together, Minnesota and its largest local governments have been allocated $670 million. Applications can be made at renthelpmn.org or by calling 211.

But the slowness of distribution has led to finger pointing between the federal government and the states over the tepid pace. That became more intense after the U.S. Supreme Court ruled Aug. 26 that the Centers for Disease Control and Prevention did not have the authority to order an extension of the pandemic eviction ban. 

Minnesota’s own eviction ban was removed by legislation that was adopted and signed during the June special session. Unless tenants owing rent are in the queue to get federal rental assistance — or are not eligible for help — they can be evicted starting Oct. 12. But tenants who are eligible and have submitted an application cannot be evicted until next June.

September is also a critical month because it marks the end of the $300 per week jobless insurance top off that was another benefit of the American Rescue Plan.

Last week, the U.S. Treasury issued new guidelines that both scolded the states for poor performance and gave them ways to speed up the processing of applications.

While the issuance of payments to landlords has increased, Treasury wrote, “many grantees need to do more to urgently accelerate efforts to prevent harmful evictions of vulnerable families. … After September, programs that are unwilling or unable to deliver assistance quickly will be at risk of having their rental assistance funding reallocated to effective programs in other high-need areas.”

If all states are struggling to reach the goals by Sept. 30, it’s not clear where money could be shifted. The Treasury guidance singled out Texas and North Carolina, even though states that did well in getting money to landlords are now seeing a leveling off in payments, partly because they reduced backlogs of requests for help.

Even if Minnesota were among the states receiving extra funds, it might not have had use for them. Most estimates of the unpaid rent by those eligible for assistance is much less than the amount of federal help already pledged to Minnesota, even with a program that allows payment of up to three months in future rent and up to 12 months of back rent.

Ho said Thursday that she is not worried that the state will lose money if it doesn’t meet the Sept. 30 deadline. She said Minnesota is 23rd among the states for payments delivered and has millions of dollars of rent help requests in process of being paid out.

“We have demonstrated our ability to reach households in need,” she said. “The need is great. It’s just a question of being able to work through these applications. It certainly would not make sense for either the Treasury or Congress to suddenly be putting the breaks on all of our programs just as they’re gaining speed.”

New rules aimed at speeding up the process

The primary change announced last week will let states take renters’ word that they meet income eligibility requirements rather than submit documents. Dubbed “self-attestation,” the new guidelines permit the practice when documents are not readily available.

Minnesota has already been using the process on some applications, Ho said Thursday, but the new guidance clarifies what is allowed. “If you don’t have any income, there is nobody writing you to say you don’t have any income. And if someone isn’t eligible for unemployment insurance, there’s no document to produce there,” she said.

Another key change: The U.S. Treasury will allow payments to landlords even if the tenant no longer lives in the apartment or house but left owing back rent. The previous rules said landlords could only get payments if the tenant remained in the housing unit. While it was meant to discourage evictions, it also put a burden on tenants who had to leave units for personal or financial reasons.

 “There are some very limited circumstances where we can work with both a renter who has moved out and that property in order to make both folks whole,” Ho said.

The new rules also allow states to use federal dollars to make extra payments to landlords who rent to hard-to-house tenants — such as those who have past evictions on their records or who have been homeless in the past year.

The speed by which the state has spent the money has been criticized by landlord groups and by many Republicans in the state Senate. Ho’s confirmation was one of those GOP leadership held out for possible review and potential removal from office. But the national coverage of the spending of rental assistance provided a sort of defense for the Housing Finance Agency, in that while Minnesota’s payments may be slow, many states are slower still.

Minnesota is in a different legal position from many states because it has a bipartisan agreement to phase out its own eviction moratorium that’s tied to the rental assistance program. No matter what happens on the federal level, Minnesota tenants who qualify for the program cannot be evicted for nine months.

The Minnesota Multi Housing Association, which represents the owners and managers of apartments, said it applauded the new guidance from the federal government, calling it “much-needed modification” of the requirement. But Cecil Smith, the executive director of the association, also said the state housing agency “needs to implement these measures on an expedited basis.

“Unfortunately, after more than 19 weeks and only 13% of funds distributed, we remain gravely concerned about RentHelpMN’s ability to serve the urgent needs of renters and housing providers awaiting this assistance,” Smith said.