On March 30, the U.S. Department of Treasury (Treasury) released guidance on how it will reallocate unused funds from the second tranche of funding of the Emergency Rental Assistance (ERA) program, or ERA2, that was authorized by the American Rescue Plan Act of 2021 (ARPA). Congress passed $25 billion in emergency rental aid in December 2020 and a second round of $21.5 billion in March of 2021 to assist families struggling to make rental and utility payments.

Treasury also announced that through February 2022, state and local grantees have made over 4.7 million payments to households and spent, or obligated, approximately $30 billion of the program’s total $46 billion. Treasury expects most of the remaining funds to be deployed to households or paid to grantees by the summer of 2022.

State and local grantees with expenditure ratios below 20 percent as of March 31, 2022, based on the program data they submit to Treasury, will be determined to have “excess funds” subject to potential reallocation. Grantees can avoid reallocation if they can surpass this expenditure ratio by April 30, 2022, or if they have made voluntary reallocations of at least 25 percent of their ERA1 allocation.

Treasury’s approach to reallocating ERA2 funds is designed to ensure as many low-income renters as possible have access to this assistance during the pandemic. These guidelines include incentives to encourage state and local governments to commit additional funding – including a portion of their State and Local Fiscal Recovery Funds (Recovery Funds) – to assist more renters and make continued investments in housing stability and make long-term investments in eviction prevention.

Many state and local governments are already using a portion of their Recovery Funds, which can be used to pursue a range of eviction prevention strategies, among other housing support services. According to Treasury’s latest Recovery Fund reporting data, state, local and tribal governments budgeted over $3.75 billion for rent, mortgage and utility assistance as well as eviction prevention services, through the end of 2021.

ERA2 reallocation will take place in multiple rounds, the same as the ERA1 reallocation process, and will ensure that funds will be used in the most efficient manner to address tenants that need the most assistance.

Additional details on the ERA2 reallocation process can be found from Treasury’s published guidance here.