More states return tens of millions in rental assistance, as battle heats up

In her office at a nonprofit in central Nebraska, Karen Rathke routinely encounters residents still stung by the pandemic and hoping to get help with their rent.

Rathke, president of the Heartland United Way, was hoping to tap into an additional $120 million in federal Emergency Rental Assistance to help them. But that money, part of what's known as ERA2, is at risk after Republican Gov. Pete Ricketts said he doesn't want it.

Many other states have in recent months returned tens of millions of dollars in unused rental assistance because they have so few renters — but only Nebraska has flat out refused the aid.

"I'm very concerned about not having anything," Rathke said of the federal money, which can be allocated over the next three years for everything from rent to services preventing eviction to affordable housing activities.

"All these nonprofits, when people come to them asking for help, the bucket will be empty," she said. "It is hard to tell people no, to tell people that we don't have the funds to help them."

The debate is playing out across the country as the Treasury Department begins reallocating some of the $46.5 billion in rental assistance from places slow to spend to others that are running out of funds.

When the Emergency Rental Assistance money was included as part of the COVID relief measures passed by Congress in late 2020 and early 2021, the U.S. had no national infrastructure to help people behind on rent keep from being evicted. Federal, state and local officials across the country had to scramble to get programs in place.

It "has helped keep eviction rates well below historic averages throughout the pandemic," said Deputy Treasury Secretary Wally Adeyemo.

Rents have exploded across the country, causing many to dig deep into their savings, downsize to subpar units or fall behind on payments and risk eviction now that a federal moratorium has ended.

States and localities have until September to spend their share of the first $25 billion allocated, known as ERA1, and the second $21.55 billion, known as ERA2, by 2025. So far, Treasury says $30 billion has been spent or allocated through February.

Treasury announced earlier that over $1 billion of ERA1 funds would be moved, for a total of $2.3 billion reallocated this year. Larger states like California, New York, New Jersey and Texas are getting hundreds of millions of dollars in additional money. Native American tribes, including the Oglala Sioux Lakota in South Dakota and Chippewa Cree in Montana, are also receiving tens of millions of dollars in additional help.

Those losing money are almost all smaller Republican states with large rural populations and fewer renters. Many were slow to spend their share as required by program rules, so they either voluntarily returned money or had it taken. Some, like South Dakota, Wyoming and New Hampshire, unsuccessfully pitched to use the money for other things like affordable housing.

Still plenty of money left, say Republicans

Treasury officials, housing advocates and many Republican governors argue there is still plenty of money to help renters in these states and that the reallocation gets the money to where it's most needed. Montana, for example, returned $54.6 million but still has $224.5 million. West Virginia returned more than $42.4 million but still has $224.7 million, according to Treasury.

"We are trying to reallocate the best we can," said Gene Sperling, who is charged with overseeing implementation of President Joe Biden's $1.9 trillion coronavirus rescue package. "This is a balancing act, but one that is rooted in commitment to getting the most funds to the most people in need as possible."

North Dakota returned $150 million of its $352 million, saying it couldn't effectively spend all the money by the deadline. The state believes the remaining funds are sufficient to meet the needs of those who are eligible.

Some Democratic lawmakers disagree.

"Outrageous and unacceptable: turning back rental assistance funds when applications are piling up and people are being evicted," tweeted Democratic Rep. Karla Rose Hanson, of Fargo.

South Dakota was forced to return more than $81 million — though more than $9 million went to Native American tribes in the state. Gov. Kristi Noem suggested the money was not necessary, adding: "Our renters enjoy something even better than government hand-outs: a job."

But Democratic Sen. Reynold Nesiba said there was a lack of awareness about the rental assistance and criticized the state for not doing more to promote it. He pointed to a $5 million tourism advertising campaign that was paid for with coronavirus relief funds and questioned why that level of promotion didn't happen for pandemic relief programs.

Meanwhile, organizations that are helping administer the rental assistance still available expect a continued need. The state has long faced a run on affordable housing, which has only been exacerbated during the pandemic.

"Housing costs are just too high," said Sandy Miller, who coordinates the rental assistance program for an organization called Community Action in the western half of South Dakota. "It's harder for them to get in a home, it's harder for them to stay in their home."

In New York, an eviction fight is ramping up now that the moratorium is over. Many tenants still struggling during the pandemic are afraid they'll lose their homes, and they're demanding action from Gov. Kathy Hochul.

Funding based on population, not number of renters

Several states argued the reallocation addresses a flaw in the program, which created a funding formula based on population, not the number of renters in a state.

"Congress ... did not take into consideration Wyoming's small population, income levels, actual renters' needs, and that the majority of Wyoming households — 70% — are owner occupied," said Rachel Girt, the state's rental assistance communication coordinator, after the state returned $164 million out of $352 million. Another $2.8 million was shifted to the Northern Arapaho Tribal Housing Program and Eastern Shoshone Housing Authority.

Josh Hanford, commissioner of the Vermont Department of Housing and Community Development, noted that the $352 million it received far surpassed the $25 million given to Memphis, which has a similar population.

"As long as we're able to serve all our eligible households, hopefully folks will see that there is greater need in other parts of the country that have received a lot less assistance per household," Hanford said when asked about the state returning $31 million.

In Nebraska, the loss of funds is projected to hit rural areas hardest.

The state program already reallocated $85 million of its $158 million in ERA1 to its biggest cities of Omaha and Lincoln and their respective counties. It still has nearly $30 million. Without the additional $120 million in ERA2 money, an analysis by the University of Nebraska-Lincoln's Center on Children, Families and the Law found that tenants in Omaha and Lincoln will still have help after September, but those in other counties will not.

Ricketts, the Nebraska governor, defended the decision not to take the additional money.

The state "has received and distributed an unprecedented amount of federal funding to help Nebraskans weather the storm over these past two years," he wrote in an opinion column. "But at a certain point, we must acknowledge that the storm has passed and get back to the Nebraska Way. We must guard against becoming a welfare state where people are incentivized not to work and encouraged to rely on government handouts well after an emergency is over."

But housing advocates say his decision will leave many vulnerable tenants without a lifeline. Tenants in rural areas often have access to fewer resources, including affordable housing, internet access and reliable transport.

Lawmakers passed a bill last month requiring the state to apply for the money. But Ricketts vetoed the bill, saying the state "must guard against big government socialism." If lawmakers don't override his veto, the money is likely to be reallocated by Treasury to other states.

"We know from communities across Nebraska that the need is not only there, but is fairly severe," said Erin Feichtinger, director of policy and advocacy for the social service agency Together.

"There is really no good reason to pass up these funds. It's money that is allocated to Nebraskans," she said. "Nothing bad will happen if we accept this funding, but lots of bad things can if we don't."