As Emergency Rental Assistance Programs Ramp Up, Abt Study Finds the Allocation Formula Is a Main Driver of Underspending
Rockville, Md. – With eviction moratoriums expiring and the cost of housing soaring, the failure to spend federal Emergency Rental Assistance (ERA) funds was understandably a major concern of policymakers and the media in the summer and fall of 2021. Research released by Abt Global and the National Council of State Housing Agencies (NCSHA) documents two main reasons for this underspending. The first was the complicated process of creating and implementing a new federal program. The second was a congressionally mandated allocation formula that provided a disproportionate share of funding to states with smaller populations. As states and localities have completed the process of implementing and scaling their programs, the allocation formula remains a key driver of underspending.
Abt’s studies, commissioned by NCSHA, look at the causes of early delays and apparent underspending, as well as the effectiveness of the formula used to distribute funding to grantees.
Findings
In July 2021, Abt held individual discussions with program staff managing emergency rental assistance programs in eight states: California, Illinois, Kansas, Maine, Oklahoma, South Dakota, Tennessee, and Virginia. These states were selected by NCSHA to reflect programs that differed in several ways, including geographic and population diversity, the sizes of the first round of ERA funding (ERA1) allocations they received, and ERA1 spending rate as of May 2021, among other characteristics.
- The allocation formula for ERA1 was mismatched to need. Representatives from less populous states noted that their allocation was likely too large given the need for rental assistance in their states, and that the allocation mismatch and thus funds on hand contribute to the perception that they are not efficiently assisting households in need.
- Aligning state and local approaches took time. The Congressional ERA1 allocation formula gave some cities and counties the option to receive a direct allocation from Treasury and establish a rental assistance program independent of the state program. Having multiple ERA programs in a state creates opportunities to add capacity or flexibility to the programs but can also create challenges. State administrative staff said they spent a significant amount of time in the early stages of program design negotiating with localities about whether they should join the state program or how state and local programs could align their approaches.
- The complexity of starting a new program led to initial delays in spending. Several states attributed initial spending delays to challenges in designing and implementing ERA programs that met statutory requirements. These ranged from creating intake processes that could support all applicants in more populous states, to the need to quickly hire and train new staff in smaller states. Some also cited delayed or changing guidance from Treasury.
- Outreach to landlords increases interest in participating. Program administrators reported that, in general, landlords are aware of the availability of ERA funds, but some were not interested in participating in the program, affecting initial state spending levels. When states have conducted direct outreach to explain the benefits, landlords often have expressed a willingness to participate.
To better understand the need for emergency rental assistance in different states, Abt reviewed 10 estimates of rental debt published at different times during the pandemic and compared the estimates to Congress’ appropriations and allocations for the first and second rounds of ERA funding.
Abt’s review determined that the model published by the Federal Reserve Bank of Philadelphia offered the most comprehensive and realistic analysis of the overall need for rental assistance during the pandemic. The model uses state-level unemployment levels to estimate the number of renters financially impacted by the pandemic, and then estimates their total rental debt based on income (including COVID-specific benefits like enhanced unemployment insurance and stimulus payments) and housing costs. Application of the Federal Reserve Bank of Philadelphia’s model to the state level confirms that many states with smaller populations received a disproportionately high share of funding.
“Our research underscores that creating a new program like ERA entails a range of implementation challenges that take time to address,” said Abt Project Director Stephen Whitlow. “As we’ve seen in recent months, ERA spending has accelerated as states and localities have completed their start-up and scaling phases and ramped up to meet the need.”
“It’s clear that the ERA1 allocation formula did not equitably reflect states’ emergency rental assistance challenges,” added Abt’s Director of Housing and Community Initiatives, Jeffrey Lubell, who was also involved in the research. “In the future, it may be advisable to consider alternative allocation models. For example, emergency rental assistance could be allocated based on the number of extremely low-income households in each state or locality and adjusted to reflect variation in rent levels.”
“NCSHA engaged Abt Associates to conduct this important research to shed light on the practical realities of estimating emergency rental assistance need and implementing effective programs to meet it,” said NCSHA Executive Director Stockton Williams. “The research provides context for efforts to date and an analytic foundation for future policy development at all levels of government.”
About Abt Global
Abt Global is a global consulting and research firm that combines data and bold thinking to improve the quality of people's lives. We partner with clients and communities to advance equity and innovation—from creating scalable digital solutions and combatting infectious disease, to mitigating climate change and evaluating programs for measurable social impact. https://www.abtglobal.com
Contact:
Eric Tischler
eric_tischler@abtassoc.com
(301) 347-5492
