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Latest Reallocation Guidance Includes New Incentives to Urge State and Local Governments to Fund Additional Eviction Diversion Efforts

WASHINGTON — The U.S. Department of the Treasury announced today that through February 2022, state and local Emergency Rental Assistance (ERA) grantees have made over 4.7 million payments to households and spent or obligated approximately $30 billion in assistance of the program’s total $46 billion. Treasury expects the vast majority of the remaining funds to be deployed to households or paid to grantees by the middle of 2022. As these emergency funds run out, Treasury is sharing its reallocation process for ERA2, the program’s expansion under the American Rescue Plan. Treasury’s approach to reallocating ERA2 funds is designed to ensure as many low-income renters as possible have access to this assistance during the pandemic.

Because relatively few funds are expected to be available for reallocation, these guidelines include incentives to encourage state and local governments to commit additional funding – including a portion of their State and Local Fiscal Recovery Funds – to assist more renters and make continued investments in housing stability.

“In just one year, the Emergency Rental Assistance program built a national infrastructure for eviction prevention that never existed before and has helped keep eviction rates well below historic averages throughout the pandemic,” said Deputy Secretary Adeyemo. “As these emergency funds run out, now is the time for state and local governments to leverage this infrastructure to provide services like right-to-counsel programs and housing counselors that will help families avoid economic scarring long after COVID-19 is in the rear-view mirror.”

The nationwide infrastructure that ERA has helped to create has led not only to millions of renters receiving direct assistance, but also the creation of hundreds of new state and local programs and partnerships with nonprofits and courts administering eviction diversion, access to counsel, and other housing stability services. Establishing these services at a national scale is paying off. New analysis by Princeton University’s Eviction Lab published earlier this month found that millions of renters avoided the threat of eviction in 2021 due to the federal government’s serious and unprecedented interventions, in significant part through the American Rescue Plan. It also found that low-income and majority-Black neighborhoods that typically see a disproportionate share of eviction cases experienced the largest absolute reduction in filings.

As recent demographic data released by Treasury shows, over 80% of assistance is reaching the lowest income households – with approximately 40% of all primary applicants receiving assistance self-identifying as Black and approximately 20% self-identifying as Latino.

Today, Treasury announced guidance for the reallocation of ERA2 funds. In this guidance, Treasury has worked to balance reallocating funds to grantees that are quickly running out of funds even as the need for assistance remains significant with ensuring that renters in states where funds have moved more slowly have an opportunity to receive assistance. For this reason, Treasury will continue to prioritize reallocating funds within the same state when possible, and where excess funds remain, it will provide them to areas with significant demonstrated need and ability to provide assistance promptly. To date, Treasury has reallocated more than $2 billion of ERA1 funds, the majority of which were transferred voluntarily between grantees within the same state, with reallocated funds generally going to higher-need areas and more diverse communities.

Treasury’s guidance also includes new incentives for state and local governments to supplement their rental assistance programs and make long-term investments in eviction prevention. Many state and local governments are already using a portion of their State and Local Fiscal Recovery Funds (SLFRF), which provide $350 billion that can be used to pursue a range of eviction prevention strategies, to make these types of investments. According to Treasury’s latest SLFRF reporting data, state, local, and Tribal governments budgeted over $3.75 billion for rent, mortgage, and utility assistance as well as eviction prevention services, through the end of 2021. In reallocating ERA2 funds, Treasury will prioritize grantees that have used other sources of funding, including SLFRF, to deliver more rental and utility assistance. Treasury has also structured its ERA2 reallocation process to preserve grantees’ ability to obligate up to 10% of their ERA2 funds in the coming months for housing stability services, including housing counselors, eviction diversion programs, right-to-counsel programs, and other vital infrastructure that can be leveraged to prevent evictions in the long term.

Other key elements of Treasury’s reallocation approach include:

• Reallocation of Remaining ERA1 Funds: Given the limited amount of ERA1 funds remaining for reallocation, Treasury anticipates only one more round of ERA1 reallocation from state, local, and territorial grantees’ initial allocations, which will occur later this spring and be based on expenditure and obligation data through March 31, 2022. Treasury intends to recapture a portion of unobligated funds from grantees, leaving grantees with the amount of ERA1 funds they have spent in their strongest quarter to date. This reallocation is intended to ensure that ERA1 funds will be spent through by the statutory deadline of September 2022 while continuing to direct excess funds to grantees with the greatest need.
• Key Principles of ERA2 Reallocation: As with ERA1 reallocation, ERA2 reallocation will take place over multiple rounds, provide mitigation opportunities, and prioritize keeping funds within the same state consistent with local needs. ERA2 funds available for reallocation will be distributed to grantees with significant demonstrated need and ability to get funds to low-income renters. Under the ERA2 statute, Treasury may not reallocate funds that have already been paid out to grantees. As a result, under the guidelines announced today, grantees that keep up pace with the expenditure ratio thresholds and obligate just over half of their ERA2 funding in 2022 will receive their full allocation and avoid reallocation entirely.
• Additional details on the ERA2 reallocation process can be found on Treasury’s Fact Sheet and Treasury’s guidance.

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