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Industry Needs Multi-Faceted Approach to Rental Assistance

On May 15, the U.S. House of Representatives passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which establishes a $100 billion emergency rental assistance program. Per the bill, funds would be disbursed to state and local government grantees and delivered in consultation with continuum of care providers, through the U.S.Department of Housing and Urban Development’s (HUD) Emergency Solutions Grants (ESG) program. While we appreciate the House’s tireless work to provide relief to the millions of renters and housing providers affected by COVID-19, we continue to have reservations about the current proposal as it makes its way to the Senate for consideration. ESG should not be the primary delivery mechanism for a rental assistance program of this magnitude.

Irrespective of the proposal in the HEROES Act, the National Apartment Association (NAA) has emphasized in ongoing discussions with lawmakers that Congress must create an emergency rental assistance program in its next COVID-19 relief package. We have urged them to utilize multiple federal programs through HUD and take advantage of the implementation infrastructure of these existing rental assistance platforms to get funding out quickly and efficiently to those most in need. We also suggested that Congress look to lessons learned from past disaster relief efforts, where housing agencies worked with residents and owners to ensure rent payments go directly to the property.

As background, the HEROES Act proposal restricts eligibility for renters based on their income at the time of application. The bill also provides the HUD Secretary with discretion to waive current requirements as needed due to the ongoing COVID-19 emergency. Funding would be provided to cover current and past due rental amounts, including utility payments, late fees and deposits, and made available for a maximum of three years.

While there are many positives to the rental assistance proposal in the HEROES Act, our concerns center around the limitations of the program’s delivery system. The mission of grant recipients under ESG is geared towards homeless shelters and assisting homeless populations. There is no question that additional funding is needed to support the programs and at-risk populations normally supported by ESG, however, the program lacks the capacity to disburse $100 billion in funding quickly and efficiently to the myriad renter households that may need assistance due to the crisis. Using ESG’s formula approach with its multi-layered process would be overwhelmed and likely result in delays. Also, the bill’s requirement that grantees consult with continuum of care providers adds another layer of process that would interfere with timely allocation of the funding amidst the crisis.

Additionally, the HEROES Act establishes an income limitation for renter populations served by the emergency rental assistance proposal. At most, the bill provides for assistance to households up to 120 percent of area median income (AMI), if the grant recipient states that it will serve such population in its plan. This could be a challenge for renters across the income spectrum who are experiencing job loss, furlough or a reduction of income due to COVID-19 and live in a variety of asset classes. They may require temporary, short-term rental assistance to make ends meet.

Establishing an emergency rental assistance program is a top priority for NAA. The apartment industry expects a significant number of residents will be financially affected by COVID-19, inhibiting their ability to pay their rent even with the assistance provided in the CARES Act. Housing providers rely on rental income to pay employee wages, mortgage payments, taxes, insurance and, importantly, to maintain continuity of essential services for apartment communities as many renters must shelter in place.

In fact, according to NAA’s Breakdown of $1 of Rent, all but 9 cents of each rent dollar passes through rental housing owners to pay property-level financial obligations, including 14 cents to property taxes, which in turn support the community through financing for schools, teachers, emergency services and other important local needs. As the crisis continues and renters’ savings are depleted, the ongoing challenges that interfere with renters’ ability to pay their rent could have cascading effects not only on the rental housing system, but state and local governments and the broader economy.

As the Senate takes up the issue of rental assistance in the next phase of federal relief, we recommend the following:

Utilize existing housing programs through HUD to maximize the capacity to provide relief during the emergency.

  • The ESG program to ensure that homeless persons receive rental assistance and related services and provide emergency housing as well as help families or individuals that are facing homelessness ($20 billion).
  • The Section 8 Housing Choice Voucher program, which can utilize the 2,200 state and local agencies that currently administer and distribute funding for 2 million families to establish and fund short term emergency vouchers ($20 billion).
  • The HOME program to address emergency housing needs including a streamlined funding formula to states with at risk properties developed under the HOME and/or the Low-Income Housing Tax Credit programs ($27.5 billion).
     

Employ existing programs through the U.S. Department of Agriculture to ensure rural communities receive equal consideration for funding.

  • The Rental Assistance program under the Section 521 program to provide sufficient project based rental assistance to prevent displacement. Funding for supplemental rental assistance for the Rural Rental Assistance was not included in the CARES Act ($2 billion).
  • The Rural Housing voucher program, which would provide short-term vouchers for rural families through the existing distribution platform ($500 million).
     

Renters and housing providers would be better served by an emergency rental assistance program allocated through existing platforms under the HUD Secretary and the Secretary of Agriculture. This multi-faceted approach allows for sufficient capacity and flexibility to ensure that rental assistance reaches urban, suburban and rural areas quickly and efficiently. Similar to provisions in the CARES and HEROES Acts, existing programs could be modified to waive many of the current statutory and regulatory requirements and adjust for the temporary nature of the assistance, urgency and the realities of working in a shelter in place environment.

NAA continues to work with members of both chambers to ensure policymakers understand the severe affects that the HEROES Act proposal would have on the apartment industry and its residents and what is needed to maintain stability in the rental housing system. Rental housing operators urgently need relief in the next federal package. The viability of the rental housing industry is at stake.

To learn more about NAA’s policy asks, please visit the Phase 4 Resources for Industry Advocates page. If you have any questions, or would like to learn more about rental assistance, please contact Jodie Applewhite, Manager, Public Policy.