The Consolidated Appropriations Act of 2021, which established and provided $25 billion for the first round of the federal Emergency Rental Assistance program (ERA1), directed the U.S. Treasury Department (Treasury) to recapture and reallocate “excess” ERA1 funds beginning on September 30, 2021. On September 24, Treasury sent a letter to state and local ERA grantees outlining how Treasury plans to recoup and redistribute these funds, stating that it intends to direct resources to grantees that have been successful in administering the program and also to those areas with the highest need. The reallocation of ERA1 funds will impact counties that, despite initial regulatory uncertainty, staffing and infrastructure challenges, have begun to effectively administer rental assistance to their residents most in need.

Treasury plans to take the following approach to reallocating ERA1 funds:

• Identify “excess” funds for reallocation: Treasury will use state and local grantees’ expenditure ratios to identify excess funds for reallocation. Treasury will establish a minimum expenditure ratio, based on expenditures made through September 30. The amount available for recoupment will be the difference between a grantee’s actual expenditures and the minimum expenditure ratio.
  
  The first determination of expenditure ratios will happen after October 15, when grantees submit their September expenditure data. The minimum expenditure ratio will increase over time, with the final determination and reallocation expected in the Spring of 2022.


• Give grantees advance notice of recoupment: Treasury will provide grantees that have been identified as having excess funds and subject to reallocation an opportunity to provide evidence of why these funds should not be recouped and lessen the amount recaptured. Treasury will not recapture ERA1 funds that have already been obligated by the grantee.


• Keep reallocated funds within the same state: Treasury will work to keep reallocated ERA1 funds within the same state, with funds flowing between localities or between the state and localities. Further, Treasury will work with grantees interested in voluntarily having their ERA1 funds reallocated.


• Provide additional funds to high-performing grantees: Treasury will reallocate recouped ERA1 funds to state and local grantees that have obligated at least 65 percent of their ERA1 allocation and have demonstrated a need for additional funds. Additionally, Treasury will reallocate these recouped funds in tranches as they become available.

Treasury announced that it will release more detailed guidance on ERA1 reallocation in the coming days. Information on reallocation also comes as recently released expenditure data showed that ERA grantees provided over $2.3 billion in assistance to more than 420,000 households during the month of August, an increase over the 340,000 households served in July. This new data confirms counties’ commitment to administering the ERA program at the local level and keeping residents safely and stably housed.

NACo will continue to monitor and advocate for county priorities as ERA reallocation guidance is developed and implemented.