California at risk of losing out on hundreds of millions in federal rental assistance, auditor warns

The California state auditor is warning that residents could potentially lose hundreds of millions of dollars in federal rental assistance granted amid the coronavirus pandemic due to state officials’ delayed allocation of the money. 

Auditor Elaine Howle wrote in a Thursday letter to California Gov. Gavin Newsom (D) and state legislative leaders that the state’s Department of Housing and Community Development (HCD) “must commit additional benefits to eligible households in order to reduce the State’s risk of losing millions of dollars in federal funds for this program at the end of September 2021.” 

Howle noted in her audit report that there have been delays in HCD’s distribution of the first $1.8 billion for California households as part of the federal Emergency Rental Assistance program, potentially risking renters in the state missing out on additional funding meant to help them avoid eviction during the pandemic. 

“HCD remains at risk of losing federal funds, and it must employ every effort possible to increase its amount of funds obligated before the federal deadline of September 30, 2021,” Howle wrote. 

While the state auditor acknowledged that “substantial progress” had been made since HCD’s first report on allocations of funds in June, she added that it “continues to be important that HCD obligate as much of the $1.8 billion as possible so that the State is in the best position to potentially receive additional federal funds for rental assistance.” 

According to the auditor, California could “lose up to $337 million of its remaining unobligated funds,” or money that the state has not yet agreed to pay to households. 

The rental assistance program is among the wave of coronavirus relief efforts passed by Congress to address some of the economic impacts of shutdowns and restrictions implemented during the pandemic.  

In December, Congress allocated up to $25 billion for federal rental assistance, with an additional $21.5 billion allocated in March, according to the Treasury Department. 

HCD Director Gustavo F. Velasquez pushed back on Howle’s conclusions, arguing in a statement shared with The Hill that “California is not in serious risk of losing federal funding for rent relief.”

He pointed out that under federal rules, HCD only needs to have obligated at least 65 percent of the money initially allocated before it can be eligible for surplus funds from other states. 

“The state’s strong performance has us positioned to be eligible to receive additional federal funding that has been recaptured from other state and local jurisdictions that do not have the same demand as California,” he added. 

Velasquez noted that $526 million has already been distributed by the department, which he “fully expects to meet the benchmarks for federal funding for rent relief.”