In the nine months since Minnesota’s latest rental assistance program began, criticism of the small state agency charged with running the program has evolved — from complaints that it wasn’t up and running fast enough to concerns that it didn’t last long enough.
Facing back-to-back legislative hearings this week, Minnesota Housing Commissioner Jennifer Leimaile Ho was left to defend the agency. After being able to get money to landlords at a faster pace, that outflow — and a recent increase in applications — hastened the exhaustion of the federal money used to fund the program.
So with just two-days notice last month, the agency cut off applications for the program, RentHelpMN. While it will take time to process the applications already submitted, Ho said she thinks there is enough money in the fund to cover up to a year of unpaid rent for approved applicants but that no additional assistance will be available.
“We always knew we’d have to close. We just didn’t know when,” Ho told the House Housing Committee Tuesday. “It was temporary. It was done by Congress as an emergency act. And it was huge: nearly a half billion dollars.”
As of this week, the agency has spent $375 million in actual assistance to 48,000 households. It expects that when the program ends, a little less than $450 million will be spent on assistance, with the rest of the state’s $537 million allotment going to administer the program.
Separate programs, such as the Zero Balance Project, were set up by some of the larger cities and counties that received direct money from the federal government and have also been closed to new applications.
But the abrupt cutoff of RentHelpMN surprised some in the affordable housing community and angered legislators who were caught off guard.
Ho responded to those criticisms Tuesday, saying the agency had no experience with running a program in the winter months and saw applications in December and January that exceeded previous months.
Applications doubled from August to December, from 5,400 to 10,900, and then doubled again in January, to 22,600. Ho cited the end to temporary holiday employment, the omicron COVID surge and the end of the federal child tax credit as factors in increasing rent debt.
The agency wanted to avoid taking applications for February rent if it would mean having to reject otherwise eligible applicants because the fund was dry. “It seems like the hardest option but the best option was to be upfront with people and say we weren’t going to have enough money to pay February rent,” Ho said.
Twice the state requested additional money from the federal government as part of a reallocation of unused money initially sent to other states. Twice the Minnesota requests were rejected.
Too slow, and then too fast
RentHelpMN was the second COVID-era rental assistance program in Minnesota. The state set up its own rental assistance program in the second half of 2020, using $100 million of federal CARES Act allocations. Congress then directly funded rental assistance with the December 2020 COVID relief act and again with the American Rescue Plan in the spring of 2021.
Between the two latter rounds of funds, Minnesota and some of its cities and counties received $673 million, with $537 million going to the RentHelpMN program created by the state’s Housing Finance Agency.
In addition, Gov. Tim Walz set aside another $20 million from his allocation of ARPA funds to give extra payments to tenants who had used all their benefits and $7 million for administrative costs not covered by the federal funds.
As in most states, creating a program from scratch that had to accept applications, check financial eligibility of requesters and issue tens of thousands of payments was challenging, with delays and glitches common. Landlords who hadn’t received rent for months but were prohibited by both state executive orders and federal rules from evicting tenants for non-payments ended up waiting to get their money.
Federal officials scolded states for slow rollouts in September, threatening to take back money if it wasn’t spent. At the same time, the federal government said it might send additional funds to states that were getting checks out the door and had additional need.
Then, when the systems were running more smoothly in the fall, money was paid out at a pace that was faster than originally anticipated, and the state closed applications on Jan. 28, offering just two-days notice.
During an appearance before the Senate Housing Committee the same day, Ho faced questioning about the ending of the program and the amount of money used to administer the project.
Committee Chair Rich Draheim, R-Madison Lake, said he had sent a letter to Ho in December asking about the pace of expenditures and estimates for when the program would end. A month later he said he received a response that didn’t mention the pending closure of applications.
Congress allowed states to use between 10 percent and 15 percent of funds for administration, depending on which act of congress appropriated the money. In addition, the American Rescue Plan encouraged states to spend 10 percent of funds for housing stabilization services, including eviction prevention and diversion services and housing navigation services. A $9 million request for proposals has been issued but not yet granted, Ho said.
Could she use that money for rental assistance instead? asked Sen. Zach Duckworth, R-Lakeville.
Ho said it could, though it would only cover about three days based on the current flow of checks.
The $7.75 billion elephant?
DFLers on the two committees proposed extending the program, at least until June 1, when eviction protections for tenants with pending rental assistance applications will end.
Rep. Mike Howard, DFL-Richfield, referred to Minnesota’s $7.75 billion budget surplus as “the elephant in the room.”
“We are still in a pandemic,” Howard said. “The need facing Minnesotans is increasing, not decreasing, right as we’re sort of pulling the rug out from under them.”
Extending the program would cost about $300 million, Ho said, adding that if the Legislature decided to include rental assistance in any supplemental budget that Gov. Tim Walz would sign it, even though such a use was not in his budget request.
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