New Federal Funding Opens Opportunities for Housing

Historic federal funding is coming to Minnesota and, with it, an opportunity to stabilize households in need and help our housing system recover from the shocks created by the COVID-19 pandemic. Congress passed the American Rescue Plan in March, providing $1.9 trillion of COVID relief and recovery funds. Several allocations have been made to Minnesota state and local governments in recent weeks. Unlike previous federal COVID-relief bills, the American Rescue Plan provides multi-year funds and capacity building resources to address both immediate and long-term housing challenges. While earlier COVID relief resources took an interim approach and restricted funds for crisis response in a single year, American Rescue Plan funds work with the understanding that the recovery process will take several years and that communities require ongoing support. With this historic funding – and the lessons we will learn from it – our region has a generational opportunity to re-weave the social safety net and stabilize housing for millions of families.

Several components of the federal legislation impact housing. Of the many new funding opportunities in the American Rescue Plan, Family Housing Fund looked at three specific programs that are particularly important for our work to improve housing stability in the Twin Cities region: emergency rental assistance, homeownership assistance, and emergency housing vouchers. The influx of resources in these areas open new opportunities for our program activities and give us hope for the upcoming years.

Emergency Rental Assistance

A historic amount of assistance is now available to renters who have experienced financial hardship during the pandemic. $375 million of emergency rental assistance (ERA 1) was allocated in payments to the state and local governments via the December appropriations bill. The Minnesota Housing Finance Agency (MHFA) is currently distributing those funds via RentHelpMN, and local governments also recently launched rent assistance programs. The American Rescue Plan allocated an additional $228.9 million to the state and $67.8 million to Twin Cities local governments for emergency rental assistance (ERA 2). With ERA 1 and ERA 2 combined, a massive $672 million of emergency rental assistance is available to stabilize housing for Minnesota renters. This amount of money and the federal rules for it are historic in many ways, including:

• Prospective rent: Tenants may apply for prospective rent in addition to past rent owed. This is an unprecedented opportunity to proactively help struggling renters rather than waiting for them to fall behind and face eviction.
• Extended timeline to apply for assistance: ERA 2 funds will be available until September 30, 2027, and renters may receive assistance for up to 15 months of rent payments. This is a long-term resource for renters who may have ongoing financial struggles because of the pandemic.
• Direct payments to renters: Program administrators are required to offer assistance directly to the renter if the landlord chooses not to participate.

Emergency rental assistance is critical for FHFund’s work to prevent evictions and displacement. From our experience working with Housing Courts, county emergency assistance programs, and the distribution of CARES Act dollars last fall, we know that timely and effective access to financial assistance can make the difference between remaining stably housed or bearing the long-term costs and stress of displacement. As we support local jurisdictions with the administration of the Zero Balance Project, we are excited to see federal rules that align with the best practices that we have identified for stabilizing families.

Assistance for Homeowners

Thousands of homeowners have struggled to make housing payments during the pandemic. The American Rescue Plan will provide support to Twin Cities homeowners via two new complementary programs: direct financial assistance for homeowners and grant funds for housing counseling services.

Minnesota will receive $128 million from the new national Homeowner Assistance Fund (HAF) to launch a homeowner assistance program to help homeowners avoid foreclosures. This is a remarkable opportunity to help homeowners stay in their homes, protecting their housing stability and preserving their ability to build wealth through homeownership. In addition to mortgage assistance, homeowners may apply for HAF funds to cover a range of housing-related costs, including utilities, internet, insurance, and association fees. MHFA will receive the full allocation of HAF dollars from Treasury no earlier than July. This will also be a long-term resource for homeowners; funds will be available until September 30, 2025.

Separately, a new Housing Stability Counseling Program will provide funding to organizations in support of housing counseling services for families who are at risk of housing instability. These funds will be distributed as grants by NeighborWorks America in a competitive process. While many housing counseling organizations traditionally focus on homeownership, these funds may be used to help renters facing eviction in addition to homeowners facing foreclosure. These services are critical for helping households navigate assistance programs and understand the options available to them.

While cash assistance will help stabilize homeowners in response to the pandemic, housing counseling funds will help build the capacity of Minnesota’s network of homeownership advisors to meet the increased need now and in the future. FHFund is a longstanding partner to housing counseling organizations – focused on both homeowner preparation and rental stability– and we are encouraged by this opportunity to strengthen the capacity housing counseling system. These resources will also be important for our work to support prospective homebuyers and new owners of 2-4 unit buildings.

Emergency Housing Vouchers

Many households have experienced homelessness or are at greater risk of becoming homeless due to the pandemic, and they require greater support to obtain or stabilize their housing. In response, the American Rescue Plan dedicated $5 billion to create a new emergency housing voucher program which will be administered by local public housing authorities (PHAs). These vouchers are separate from the Housing Choice Voucher (Section 8) program and are designed to serve households who are experiencing homelessness, at risk of homelessness, or fleeing domestic violence. Minnesota PHAs will receive 921 emergency housing vouchers total, 671 of which are allocated to PHAs in the Twin Cities metro region. While this allocation does not meet the demand (there are many more families in the Twin Cities who need this support), the creation of any new vouchers is rare and important. Notable elements of the new program include:

• Long-term support: Families will be able to use the vouchers through September 2030, though vouchers cannot be reissued to new households after September 30, 2023. The nine-year timeline reinforces the legislation’s overall approach to provide lasting resources to struggling renters, acknowledging that we will be dealing with the impacts of the pandemic for several years.
• Expanded services: In addition to the vouchers themselves, each PHA will receive federal funding to create a new menu of support services for voucher holders. Services could include help with security deposits, rental application fees, landlord incentives, or housing search assistance. Each PHA will decide which services to offer. These funds will be critical for ensuring households in crisis receive the support they need, and they offer an opportunity to pilot different housing interventions and learn what is most effective.
• Pre-existing restrictions waived: HUD has waived several pre-existing rules in order to expand program eligibility and reduce application requirements, improving access to the program for the most vulnerable households. PHAs may request more waivers from HUD if necessary; this is an important window of opportunity to continue informing and influencing federal rules.   

The emergency housing voucher program creates a new avenue for FHFund’s longstanding work to help PHAs increase voucher acceptance among owners across the Twin Cities region. Owner participation in the program is critical for ensuring that families with vouchers have broad choices and flexibility in their housing. Our strategy for engaging more owners will be important for ensuring the success of households in the new voucher program.

These three elements of the American Rescue Plan directly align with FHFund’s strategies and present opportunities for our work to expand to meet the needs of Twin Cities communities. There are several other components of the American Rescue Plan that impact housing, and as more decisions are made regarding these funds, we are hopeful for more opportunities to strengthen the housing system. Additionally, the infrastructure plan proposed by the Biden administration (American Jobs Plan) has the potential to bring more federal funding for housing to the Twin Cities region. This is a unique moment for innovation; by working together, we can harness it to ensure that Minnesota emerges from the pandemic with a stronger housing system.