CARES Act Provides More Than $160 Billion to State, Local Governments; Advocates Push for More including $100 Billion for Emergency Rental Assistance and $48 Billion for HOME
As described in a previous post on the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the phase 3 COVID-19 response legislation, among its many proposals were supplemental appropriations for housing and community development activities. Of this supplemental funding $12.4 billion went to HUD, designed to meet increased demand for funding because of the COVID-19 public health emergency, both in terms of increased operating costs and decreased tenant incomes:
- $5 billion Community Development Block Grants (CDBG).
- $4 billion Emergency Solutions Grants (ESG).
- $1.25 billion Tenant-Based Rental Assistance (TBRA)/Housing Choice Vouchers (HCV).
- $400 million for Housing Assistance Payment (HAP) adjustments
- $850 million for increased Section 8 administrative funding
- $1 billion Project-Based Rental Assistance (PBRA).
- $685 million Public Housing Operating Fund.
- $300 million Native American Programs.
- $200 million Native American Housing Block Grants, and
- $100 million for Indian Community Development Block Grants.
- $65 million Housing Opportunities for Persons With AIDS (HOPWA).
- $50 million Section 202 Supportive Housing for the Elderly Program.
- $15 million Section 811 Supportive Housing for Persons with Disabilities.
HUD Formula-driven Resources
Of these CARES Act HUD supplemental funding amounts, three are largely formula-driven programs with allocations to state and local governments: $5 billion for CDBG, $4 billion for ESG, and $65 million for HOPWA. Congress authorized $2 billion each of the CDBG and ESG funding, and nearly $55 million of the HOPWA funding to be distributed to state and local jurisdictions based on HUD’s fiscal year (FY) 2020 formula for each program. Congress also directed $1 billion of the CDBG funding to be allocated only to states according to a new formula created by HUD to reflect the extent and emergency needs of the COVID-19 pandemic in each state. Furthermore, Congress authorized another $2 billion each for CDBG and ESG to be distributed to state and local jurisdictions according the new HUD formula, and $10 million in HOPWA funding awarded competitively.
Community Development Block Grants
Congress has often provided emergency supplemental funding for disaster recovery through the CDBG program. It is a very flexible source of funding, which can be used for a wide variety of affordable housing and community development activities primarily for low- and moderate-income households. However, it also is distributed to more than 1,200 jurisdictions, which means that each jurisdiction may end up not receiving much in funding.
HUD allocated April 1 the $2 billion in CDBG funding distributed as per the FY 2020 CDBG formula.
Emergency Solution Grants
The ESG program is a formula-driven program authorized by the Homeless Emergency Assistance and Rapid Transition to Housing Act of 2009 (HEARTH Act) to assist people to quickly regain stability in permanent housing after experiencing a housing crisis and/or homelessness. The ESG was used in response to the 2008-2009 great recession in the American Reinvestment and Recovery Act of 2009 (ARRA) to assist households impacted by the crisis, and Congress turned to it again to assist with the emergency housing response to COVID-19.
Like CDBG, HUD allocated April 1 $1 billion of the $2 billion in ESG funding distributed as per the FY 2020 ESG formula. The second $1 billion allocation through the FY 2020 ESG formula is expected to allocated later.
Some affordable housing advocates are calling for at least $100 billion in emergency rental assistance distributed largely through the ESG program for future COVID-19 response legislation, given the needs that LIHTC and other multifamily properties will face in the coming weeks and months due to the eviction and forbearance provisions of the CARES Act, as well as the increased demand for affordable rental housing and loss of income for many low- and moderate-income households.
Housing for Persons With AIDS
HOPWA is the only federal program dedicated to addressing the housing needs of low-income people living with HIV/AIDS and their families. Most of the funding is allocated by formula, but some funding is awarded competitively. Grantees partner with nonprofit organizations and housing agencies to provide housing and support to these beneficiaries. Given the health vulnerabilities of people with AIDS, Congress authorized supplemental funding for HOPWA in the CARES Act.
Like CDBG and ESG, HUD allocated April 1 nearly $55 million in funding distributed as per the FY 2020 HOPWA formula and another $10 million in competitive HOPWA awards
Treasury Formula-Driven Resources: $150 Billion for the Coronavirus Relief Fund (CRF)
A lower profile source of funding in the CARES Act among affordable housing advocates, despite being more than 10 times the funding provided to HUD is the Treasury-administered Coronavirus Relief Fund (CRF). Through the CRF, Congress provides $150 billion to states, territories and tribal governments to use for expenditures incurred due to the public health emergency with respect to COVID-19 in the face of revenue declines. This funding is allocated by population proportions, with a minimum of $1.25 billion for states with relatively small populations, $3 billion total to Washington, D.C. and territories, and $8 billion to tribal governments. Of the amount going to states, local governments of at least 500,000 in population are allowed to apply for a direct allocation of no more than 45 percent of their particular state’s allocation, based on their relative population share of the state.
While state and local governments have a wide variety of unanticipated expenditures relating to the COVID-19 public health emergency, those state and local governments could choose to use a portion of the funding to finance affordable housing and community development activities much like CDBG. Given that overall amount of funding is 30 times larger and goes to only 171 jurisdictions instead of more than 1,200, CRF funding may be easier to access for affordable housing stakeholders than CDBG.
State, local and tribal governments are to receive payments and must submit required information through Treasury’s web portal by April 17, 2020. Eligible expenses include:
- necessary costs for their response to the COVID-19 outbreak, which
- were not accounted for in the budget most recently approved as of March 27, 2020, and
- incurred between March 1 and Dec. 30, 2020
Along with replenished funding for the CARES Act Small Business Administration programs, Congressional Democrats are pushing for another $250 billion for hospitals, state and local governments. The additional state and local government funding could be allocated through the CRF.
Below is an estimate of how Treasury and HUD will likely allocate these formula-driven resources:
Phase 4 COVID-19 affordable housing advocacy
Congress is likely not finished with COVID-19 response legislation. Advocacy focused on possible future legislation is well underway. The ACTION Campaign has advocated for the following tax-related affordable housing proposals in Congress:
- For emergency relief: Enact a minimum 4 percent LIHTC rate for buildings placed in service after January 20, 2020 (as per the FEMA COVID-19 “incident period” for states).
- Additional immediate relief: Allow developments to access 4 percent LIHTC by lowering the “50 percent test” to 25 percent for buildings placed in service after Jan. 20, 2020.
- For economic recovery:
- Increase the annual 9 percent LIHTC allocation by 50 percent, phased in over two years at 25 percent per year, and adjusted for inflation, beginning in 2021.
- Provide additional basis boosts to allow developments to access additional equity if needed for financial feasibility.
- For regulatory relief (if IRS does not act): Extend key LIHTC deadlines to continue progress on affordable housing development, including: 10 percent test deadlines, placed in service deadlines and rehabilitation expenditure deadlines.
$48 Billion Proposal for HOME
In addition to the $100 billion in emergency rental assistance mentioned above, one of the latest proposals is a centered on an emergency supplemental appropriations request of $48 billion for the HOME Investment Partnerships Program (HOME). HOME is flexible in that it can be used for both operating support for rental properties as well as tenant-based rental assistance.
The CARES Act did not include any new funding for HOME, which many affordable housing professionals consider a crucial oversight. In response, a coalition has recent formed to request a $48 billion appropriation for the program in the next round of legislation.
If enacted, below is an estimate of how it would be distributed if it was allocated as per the FY 2020 HOME formula.