State issues

Texas COVID relief and eviction diversion programs could fall short if these major issues aren’t fixed

Texas’s first statewide COVID-19 rental assistance program will kick off this January after months of government planning and public calls for action. Gov. Greg Abbott first announced in September 2020 that the Texas Department of Housing and Community Affairs (TDHCA) would administer $171 million in CARES Act funds to support income-based rental assistance, eviction diversion through the Justice of the Peace courts, and programming for homelessness prevention and rapid rehousing. With a new federal coronavirus package on its way, including $25 billion earmarked for rent relief, Texas renters will look to the TDHCA program for assistance.

Although tens of thousands of Texans need rental relief, housing experts and advocates have qualms about aspects of the program. The program’s limited scope ($40 million in rental assistance in early 2021 spread across 40-50 cities and counties) is unlikely to prevent many evictions. The Eviction Diversion Program, which launched in pilot counties in October, has experienced administrative challenges. Perhaps most worrying of all is the coverage and the timeline. Even in the most optimistic scenario, relief will roll out to select communities in mid-January, but will not reach smaller communities, including most of rural Texas, until late spring.

Rental assistance remains in high demand. Census data released on December 16, 2020, indicated that one-third of Texas renters had low confidence about paying next month’s rent and almost one in five missed the previous month’s payment. The CDC’s moratorium on evictions will end on January 31, 2021, after a last-minute extension by Congress. Months of unpaid rent continue to weigh down renters, which is why effective statewide rental assistance would represent a significant step toward broad recovery.

Programs and Funding

According to recent discussions with TDHCA, the planned 2021 programs will be financed by $106M in CDBG-CV funds and $65M in ESG-CV funds. These designations refer to annual HUD grants expanded by CARES Act provisions.

In the first wave of funding, TDHCA will grant $40M to contracted entitlement communities. This program falls under the umbrella of the Texas Emergency Rental Assistance Program (TERAP). TDHCA has contracted with some HUD “entitlement” communities in Texas, the cities and counties eligible to receive annual CDBG funding, for anticipated transfers of CDBG-CV to local COVID-19 rental assistance programs. 

The majority of these funds will flow into existing local COVID-19 rental assistance programs. However, at least 10% of funds will be set aside for the Texas Eviction Diversion Program (TEDP). This program enables Justices of the Peace to divert tenants and landlords involved in an eviction dispute to a rental assistance and mediation program. In October, TEDP launched in 19 pilot counties, not all of which will participate in the 2021 program.

Eviction Diversion Program description

TDHCA Board Book (Pg. 356)

As for the other $65.9M in CDBG-CV, TDHCA plans to administer it through a competitive Notice of Funding Announcement, or NOFA. TDHCA will seek “cities, counties, public housing authorities, private non-profits and Council of Governments,” to provide COVID-19 rental assistance to tenants in areas not covered by the entitlement programs. For small local governments that do not have existing rental assistance programs, TDHCA will institute program design guidelines and facilitate program administration. If the NOFA does not draw quality competitors, TDHCA has expressed interest in covering those areas itself as a statewide provider.

In addition to the CDBG-CV disbursements, TDHCA has stated that it intends to use $65M in Emergency Solutions Grants to support providers of housing solutions for very low-income renters and the homeless. TDHCA will take recommendations from Continuum of Care Programs (CoCs) and entities in CoC regions, and award contracts to approved subrecipients. These subrecipient agencies will provide emergency shelter, homelessness prevention, rapid rehousing, and related services.

Proposed Uses of CDBG-CV and ESG-CV

TDHCA Board Book (Pg. 311)

CDBG, or Community Development Block Grants, are annual grants earmarked for projects benefiting people with  low or moderate incomes. ESG, or Emergency Solutions Grants, target extremely low-income households.

Timeline

The first wave of rental assistance funding, amounting to $40 million in CDBG-CV funds, is expected to arrive in mid-January. A recent document indicated that 54 entitlement communities were still participating in contract negotiations with TDHCA. However, TDHCA has reported that some jurisdictions have declined to take part in the program and expects that several more may drop out during negotiations. TDHCA plans to send finalized contracts to participating entities on January 15, 2021.

Soon thereafter, according to the agency’s leadership, money will flow into local COVID-19 rental assistance programs, with 10% set aside for the Eviction Diversion Program. Whether transfers will be quite so immediate remains to be seen. Putting aside that contracts may not be signed as soon as they are received, even if local rental assistance programs stand ready to accept influxes of state funding, the eviction diversion aspect of the program presents a complex managerial task, as it involves the buy-in and training of Justices of the Peace. This could mean that implementation, scheduled for January 15, may actually start in late January or in February.

Later this year, TDHCA will put out a Notice of Funding Announcement (NOFA) for $61M in rental assistance for parts of the state not covered by the first wave of funding. Texas contains approximately 1,000 rural and small cities and counties that would be eligible for funding. TDHCA will also explore the possibility of non-governmental regional providers, multi-government partnerships, and a statewide program. TDHCA has indicated that the NOFA would occur in spring 2021, though the schedule remains uncertain.

Our Concerns

  1. Lack of statewide coverage

To call this program “statewide” may be overstating its reach. If all goes well, select entitlement communities will receive assistance in January. However, some entitlements declined to participate (TDHCA mentioned that certain program requirements, in addition to general administrative capacity constraints, may have deterred them), and non-entitlements will have to wait longer still. As a result, most of Texas will not see the benefits of these resources. In rural areas, especially, this lack of support will hurt, as these areas are also less likely to have up-and-running rental assistance programs compared to major metro areas like Austin, Houston, and San Antonio.

  1. Slow rollout

The recent Congressional extension of the CDC eviction moratorium only moderately diminishes these concerns. Given that the planning and program design stage has stretched for months, with many entitlements dropping out, the January 15 date may prove optimistic. Once contracts are sent out, how long until they are signed and money starts to flow? Moreover, after resources reach the entitlements, they must then reach the residents themselves. A spate of news stories indicated that COVID-19 rental assistance programs have faced significant challenges distributing funds.

  1. Eviction Diversion issues

The Texas Eviction Diversion Program, a joint initiative by the Texas Supreme Court, the Office of Court Administration (OCA), and TDHCA, launched in pilot counties in mid-October and immediately encountered issues. TEDP required buy-in from Justices of the Peace, who hear eviction cases in Texas, as it shifted work to them and their staff. JPs, who would have to explain the program to tenants and landlords and engage in a quasi-mediation process, often did not understand the program themselves. Legal services providers, advocates, and community-based groups often had to fill in the gap of educating tenants, landlords, and JPs.

The TEDP pilots also created confusing incentives for both landlords and tenants, who were only eligible for help if they were participating in an active eviction suit. Landlords, who might have preferred to access aid without filing in court, were stymied by the program’s design, and tenants faced a perplexing situation in which not getting filed against could keep them from receiving any help. In 2021, under the statewide program, TDHCA will support local pre-eviction rental assistance programs (while supplies last), but TEDP will still require landlords to agree to participate in the program. Landlords can, and often do, refuse to participate, preferring instead to go ahead with an eviction. In these instances, tenants will not be able to seek relief.

  1. Insufficient funding

The first wave of resources, $40 million, will spread thinly over 40-50 entitlement communities. TDHCA has indicated that Waco, a city of almost 49,000 households, will receive about $312,000. Putting aside $31,200 for administrative costs and taking into account average fair market rent, that allocation will help 47 households for up to six months. In Temple, a city of 27,618 households, with a 16% poverty rate, up to 25 households can get help.

Texas can still significantly improve the program and even use these half-measures as a jumping-off point for a lasting, post-COVID response to systemic housing scarcity. But the current scope of funding, wholly inadequate to meet the need, presents a symbolic rather than a meaningful commitment to preventing evictions.

Solutions

The National Low Income Housing Coalition has estimated that Texas will receive $1.93 billion in federal COVID aid earmarked for rental assistance. Cities and counties with populations over 200,000 will be eligible to apply directly to the U.S. Treasury for their share of the funds (roughly proportional to their population size multiplied by 45%). After local governments claim their due, the state may be left with over $1.4 billion.

Although the Governor may choose to transfer more funds to local cities and counties, the remainder, held at the state level, could bolster the drastically underfunded Texas Emergency Rental Assistance Program. However, program design concerns that emerged during the planning and pilot stages indicate that TDHCA may require augmented administrative capacity to handle an expanded program.

The passage of the new COVID stimulus package therefore represents an opportunity to improve and fully fund TDHCA’s eviction diversion efforts. If TDHCA is able to accelerate the timeline, cover more territory, and offer more households relief, then Texas renters may be able to avoid experiencing evictions during what many hope will be the final chapter of the coronavirus pandemic.

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