Updated FAQs Provide Guidance for Emergency Rental Assistance Program

Published by Stephanie Naquin on Wednesday, April 7, 2021
Journal Cover Thumb April 2021

The U.S. Department of the Treasury released updated frequently asked questions (FAQs) Feb. 22 regarding the Emergency Rental Assistance (ERA) program, providing guidance for a range of issues.

In order for a household to be eligible for ERA funds, at least one individual in the household must meet the following criteria:

  1. Qualifies for unemployment or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship due to COVID-19;
  2. Demonstrates a risk of experiencing homelessness or housing instability; and,
  3. Has a household income at or below 80% of the area median income (AMI).

The first and second criteria

The original FAQs published Jan. 19, defined “annual income” as either of the following:

  • The definition used by HUD for Section 8 in 24 CFR 5.609, which is referred to as “Part 5” for which the HUD 4350.3 is the associated handbook. This is the same definition of income used for many affordable housing programs, including the Low-Income Housing Tax Credit (LIHTC) incentive.
  • Using adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual federal annual income tax purposes. Using this definition would require a copy of the Form 1040 as filed with the IRS, commonly referred to as “the long form,” for the household. While this definition seems less burdensome than Part 5, it is a less commonly used definition of income with its own challenges.

While the statute provides income eligibility by reference to either (i) household total income for calendar year 2020 or (ii) sufficient confirmation of the household’s monthly income at the time of application, as determined by the Treasury Secretary (Secretary), it did not prescribe how it should be documented and verified. The only guidance provided was:

For determining annual income, grantees should obtain at the time of application source documents evidencing annual income (e.g., wage statement, interest statement, unemployment compensation statement), or a copy of Form 1040 as filed with the IRS for the household.

For determining monthly income, grantees must obtain income source documentation, as listed above, for at least the two months prior to the submission of the application for assistance. If an applicant qualifies based on monthly income, the grantee must redetermine the household income eligibility every three months for the duration of assistance.

The update to the FAQs brought clarity, flexibility and the opportunity for alignment of eligibility in existing government assistance programs. While the definition of income and methods for income determination remain unchanged, how income can be documented and verified changed.

AMI, Categorical Availability, Monthly Income

An important clarification noted in the updated FAQs is definition of AMI. Given that HUD publishes several income data sets for different programs that vary, understanding the applicable limit for comparison has a direct impact on program success.

For example, in FY 2020, for Bristol Bay Borough County, Alaska, the following are the 80% income limits for the Section 8 program versus the LIHTC incentive that uses the Multifamily Tax Subsidy Income Limits (MTSP):

Program1 Person2 Person3 Person4 Person
Section 8$54,950$62,800$70,650$78,500
MTSP$57,440$65,600$73,840$82,000

If a grantee inappropriately adopts or an owner accidently applies the MTSP definition of 80%, the success of the program would be at risk.

Another positive outcome of the updated FAQs is the introduction of categorical eligibility. If the household has been verified to be at or below 80% of the AMI in connection with another local, state or federal government assistance program, the determination letter from the government agency that verified the household’s income can be accepted as documentation of that household’s income. In such cases, the determination must have been made on or after Jan. 1, 2020. While this provides an opportunity to reduce the burden of documenting income, it is important to note that the household must still income qualify at the applicable limit for the ERA program.

The updated FAQs also lessened the burden specific to determination of confirmation of the household’s monthly income at the time of application under the second option of methods for income determination. The requirement for at least the two months prior to the submission of the application for assistance was removed and, instead, the expectation is that monthly income information provided at the time of application and extrapolate over a 12-month period was added. Note, if monthly income is used to establish household income eligibility, the requirement to redetermine the household income eligibility every three months for the duration of assistance remains in effect.

Source Documentation Options

Lastly, the FAQs provided insight into how to document eligibility when source documentation of an income or asset is not possible/available.

To the extent that a household’s income, or a portion thereof, is not verifiable due to the impact of COVID-19 (for example, because a place of employment has closed) or has been received in cash, or if the household has no qualifying income, grantees may accept a written attestation from the applicant regarding household income. If such a written attestation without further documentation is relied on, the grantee must reassess household income for such household every three months.

Simply put, if the applicant is unable to provide the documentation required to satisfy either the Part 5 or 1040 definition of income or is not categorically eligible in connection with another local, state or federal government assistance program, as a last resort, a written statement regarding their income can be accepted. In such cases, the household’s income is required to be reassessed every three months for the duration of the assistance. This provision is considered a “last resort” and contingent on all parties making all reasonable due diligence efforts to otherwise document income eligibility.

Other important updates to the FAQs of note are:

The initial statute allowed for ERA funds to be used for “other expenses related to housing” and the updated FAQs note that these expenses can include relocation expenses and rental fees (if a household has been temporarily or permanently displaced due to the COVID-19 outbreak); reasonable accrued late fees (if not included in rental or utility arrears and if incurred due to COVID-19); and Internet service provided to the rental unit.

To ensure that the funds are used for the intended purpose, the program encourages landlord/utility provider participation with direct payments to the entities. If the assistance instead is paid to the tenant, there is no assurance that the tenant will then use the funds in an appropriate manner. However, if a landlord and/or utility provider refuses to participate and will not accept direct payments, instead of the prior requirement to either send a certified letter or making attempts by phone or email over a 21-day period, reasonable outreach efforts are met if:

(i) a request for participation is sent in writing, by mail, to the landlord or utility provider, and the addressee does not respond to the request within 14 calendar days after mailing; (ii) the grantee has made at least three attempts by phone, text or e-mail over a 10 calendar-day period to request the landlord or utility provider’s participation; or (iii) a landlord confirms in writing that the landlord does not wish to participate.

Ensure Compliance

In conclusion, while these updated FAQs provide relief in the administrative component of the program for grantees, landlords, utility providers and tenants, it is important to remember that this is a federal rental assistance program that carries significant liability for all parties if mishandled. Grantees are encouraged to robustly understand the nuances of this program and create policies and procedures that reduce barriers to access the funds. As grantees launch their program, landlords and utility providers should identify the grantee and their specific documentation requirements to be in the best position to access these funds.