Broad Latitude in the Use of Recovery Funds Towards Housing
The recovery funds program offers states, territories and the District of Columbia wide spending discretion to tackle an extensive variety of issues. The U.S. Department of Treasury’s final rule on the fiscal recovery funds provides guidance on eligible uses and recognizes the program as a means to combat housing insecurity.
Accepted uses towards housing include assistance to households, the provision of government services, and responses to health and economic impacts. This can come in the form of rent and utility assistance, housing development policies, homeless services, and more. The final rule also prioritizes investments in those disproportionately affected by the pandemic and communities characterized by preexisting disparities.
More Federal Funds in the Pipeline
The Emergency Rental Assistance Program established under the Consolidated Appropriations Act and the American Rescue Plan Act was created to help mitigate the personal and public effects of housing insecurity exacerbated by the COVID-19 pandemic. The first round of funding, ERA1 provided up to $25 billion to assist families with unpaid rent and utilities. Funds must be spent prior to Sept. 30, 2022. The second distribution, ERA2, appropriated $21.55 billion to provide financial assistance to eligible households through existing or newly created rental assistance programs. Funds must be spent prior to Sept. 30, 2025. As of February 2022, $16.4 billion of ERA1 funds and $6.5 billion of ERA2 funds has been spent toward rental assistance.
Priorities in Housing
Eviction Prevention and Rental Assistance
Evictions for nonpayment of rent can lead to homelessness, legal issues and negative credit reports. At the height of the pandemic, the Centers for Disease Control enacted a national eviction moratorium, allowing additional time for rent relief. Once the moratorium expired, millions of people were expected to pay outstanding rent or face eviction. In response, some states enacted legislation to provide direct rental assistance and eviction prevention services to families at risk of becoming homeless, such as:
- Nevada: $5 million for direct payment of rental assistance to landlords.
- New Jersey: $500 million to create the Eviction Prevention Program and allocate funding for rental assistance.
- North Carolina: $15 million for rapid rehousing services, including deposit and rental assistance, for families at risk of homelessness due to the COVID-19 pandemic.
- Washington: $403 million to boost the state’s emergency rental and utility assistance.
Families unable to pay their utility bills often face consequences such as lower credit scores, debt accrual and potential eviction. The National Energy Assistance Directors’ Association estimates the national utility debt increased by $2.1 billion from December 2020 to December 2021. Some policies financed by the fiscal recovery funds to provide financial assistance and prevent utility shut offs include:
- Alaska: $7 million for grants to electric utility companies to address delinquent payments due to COVID-19.
- Maryland: $103 million for utility assistance. $83 million of these funds is dedicated to low-income households, while $20 million is dedicated to families of modest means.
- Virginia: $120 million for direct assistance to residential utility customers with accounts over 60 days in arrears.
Housing Development and Funding
Housing shortages are often the result of a mismatch between the housing supply and demand. Nearly 7 million additional affordable homes are needed nationwide for the approximately 11 million people living in extremely low-income households. States have used fiscal recovery funds to increase the supply of affordable housing. For example:
- Connecticut: $20 million over two years to finance the housing trust fund, housing development grant fund and create a taskforce to better use federal funding for housing needs.
- Iowa: $100 million for a variety of affordable housing initiatives, including increased workforce housing tax credits, funding for the downtown housing grant program and the creation of a minority homebuyer down payment assistance pilot program.
- Pennsylvania: $50 million to accelerate Low-Income Housing Tax Credit construction projects which had been delayed due to rapidly rising construction, material and labor costs.
Shelter Services and Property Renovation
According to the U.S. Department of Housing and Urban Development, the number of chronically homeless individuals increased by 15% between 2019 and 2020. Crowded shelters increase the likelihood of contracting COVID for people experiencing homelessness, who are already at a higher risk due to social factors and preexisting health concerns. States are using ARPA recovery funds to expand shelter services and renovate lodging establishments to address homelessness issues and lessen the impact of COVID-19, including:
- Colorado: $45 million for grants and loans to local governments and nonprofit organizations for the rental, acquisition or renovation of underutilized hotels and motels to provide non-congregate sheltering or affordable housing for people experiencing homelessness.
- Maine: $11.5 million, including $10 million to support homeless shelters and $1.5 million for housing navigators.
- Vermont: $94 million to provide housing and increase shelter capacity, prioritizing people without housing or people enrolled in hotel and motel voucher programs.
- Wisconsin: $6 million to provide resources to homeless shelters, domestic abuse shelters, and youth homelessness and runaway centers during the winter months.
This brief touches on only some of the ways states have used fiscal recovery funds to alleviate pandemic-induced concerns related to housing. Additional examples and program details can be found in NCSL’s allocation database.
States, territories and the District of Columbia must obligate federal recovery funds by December 2024 and spend them by December 2026. Until then, NCSL will continue tracking how these funds are prioritized and allocated. NCSL also has a database tracking housing and homeless legislation for states, D.C., and territories.