by Kenneth G. Lore and Robert J. Baker, Katten Muchin Rosenman LLP
Introduction
On April 16, 2021, New York Gov. Andrew Cuomo signed into law the COVID-19 Emergency Rental Assistance Program of 2021 (the “2021 Act”). The 2021 Act allocates $2.45 billion in rental relief for New York households, including $2.35 billion in federal funds and $100 million in state funds. Each state or other jurisdiction receiving federal funds is charged with administering those funds through new or existing rental assistance programs in that state or jurisdiction. This advisory provides a general background on the current need for rental assistance and New York’s previous attempt at rent relief, describes the relevant details of the 2021 Act, and highlights what is next with respect to rental assistance.
The 2021 Act includes both strict eligibility requirements for tenants seeking aid and a carrot and stick approach to ensuring landlord cooperation, as described in further detail below. Generally speaking, eligible tenants must (i) have income of no more than 80% of the area median income (“AMI”), (ii) have experienced financial hardship due to the COVID-19 pandemic, and (iii) be at risk for housing instability. Landlords will likely welcome the ability to recover up to 15 months’ rent and the opportunity to apply for aid on behalf of tenants. Landlords will react less warmly to the strings attached to the aid, including prospective eviction limitations and rent freezes. Furthermore, if a landlord elects not to accept assistance for which a tenant has qualified, that landlord will be effectively prohibited from evicting the tenant on the basis of non-payment of the qualifying past-due rent, assuming the courts enforce that portion of the statute.
Since the vast majority of the rental assistance funds are provided by the federal government, New York state must comply with federal requirements in distributing the funds, including tenant eligibility rules, applicant prioritization and the look-back period for eligible rent arrears.[1] The United States Department of the Treasury (the “Treasury”) has published FAQs with respect to the federal requirements of the program.[2] States do, however, have some latitude in other matters, including the restrictions they can place on landlords who receive assistance payments.
Background on Rental Assistance
The Need for Assistance
The COVID-19 pandemic has led to an unprecedented amount of households falling behind on rent. In New York State alone, one 2020 analysis estimated that between 800,000 and 1.23 million households would be unable to pay rent and be at risk of eviction by January 2021 with an aggregate rent debt of between $2.5 billion and $3.4 billion.[3] The landlords of those households face operating expenses, property tax payments and, in most cases, debt payments of their own but have been largely unable to evict tenants for non-payment of rent due to local, state and federal eviction moratoria. The moratoria are anticipated to continue for some time – the Centers for Disease Control and Prevention has extended its nationwide moratorium until June 30, 2021[4] and New York’s moratorium effectively lasts until May 1, 2021, if not further extended.[5] Any government response to this vast dislocation would need to be commensurately immense to bring widespread relief to homeowners and landlords.
Emergency Rent Relief Act of 2020
New York’s first pandemic-era rent relief legislation, the Emergency Rent Relief Act of 2020 (the “2020 Act”), was widely seen as flawed.[6] The 2020 Act was funded with approximately $100 million allocated to New York through the Federal Coronavirus, Aid, Relief and Economic Security (CARES) Act of 2020.[7] While the relatively modest $100 million in assistance could only provide a small reduction in the billions of dollars of aggregate rent debt state-wide, by March 2021, less than half of the $100 million had been paid out even after eligibility for the program was expanded in December 2020 by Governor Cuomo.[8] Critics of the program point to strict eligibility requirements that limited the pool of available applicants – for example, an applicant was required to show that they were rent burdened (i.e., paying 30% or more of their gross income in rent) before March 1, 2020, regardless of whether the applicant was rent burdened as of the time of the application.[9] The pool of applicants was further winnowed by documentation requirements that were difficult for some to meet. Providing documentation is the most common point at which applicants tend to drop out of rent relief programs according to a case study of 15 emergency rent relief programs throughout the country by the Housing Crisis Research Collaborative.[10] As described further below, the 2021 Act seeks to avoid many of the pitfalls associated with the 2020 Act.
Landlord Participation
The success of the 2021 Act will depend, in significant part, on the extent to which landlords elect to participate in the program. However, New York must balance landlord participation against other, often contradictory goals such as ensuring that tenants are not evicted without cause after landlords receive payment and maximizing the reach of limited funds. The National Low Income Housing Coalition (“NLIHC”) examined state and local emergency rental assistance programs to determine best practices for designing rental assistance regimes.[11] The report notes that approximately 25% of the programs tracked by NLIHC require some form of concessions from the landlord in order for the landlord to receive aid. The concessions include accepting a fraction of rent as payment-in-full, waiving late fees, and an agreement not to evict the tenant for a period of time. As those concessions become more onerous, landlords are less likely to accept the aid. In Los Angeles, for example, nearly 50% of landlords declined to participate in that city’s 2020 rental assistance program.[12] Other mechanisms can encourage landlord participation, such as facilitating the landlord’s ability to apply for aid on behalf of tenants.
The 2021 Act’s Balancing Act
The 2021 Act seeks to reach a much greater proportion of households in need of relief. The 2021 Act should be more successful than the 2020 Act solely on the basis of scale – the 2021 Act provides for over 23 times more funding for rent relief than the 2020 Act. Households will be able to apply for aid for up to 12 months past-due rent and, in certain circumstances, three months of prospective rent. The 2021 Act also broadens the pool of eligible applicants by eliminating the requirement that the tenant be rent burdened pre-pandemic and covering tenants who received unemployment or cash benefits in the past, among other changes. Documenting eligibility will be streamlined by the ability of tenants to self-attest to certain program requirements when other documentation is not available. Landlords will be able to apply for aid on a tenant’s behalf (with the tenant’s consent) and the law does not provide for less than full payments of rent due to landlords.
The 2021 Act does, however, impose certain restrictions on landlords. If a landlord accepts aid through the program, the landlord may not increase the monthly rent or evict for reason of expired lease or holdover tenancy for one year after assistance is received, among other restrictions.[13] Even if a landlord does not accept rental assistance payments, the landlord will be deemed to have waived the amount of rent that would have been covered by the assistance.[14]
The prospect of success of the 2021 Act is strengthened by the decision of many New York cities and counties to participate in the state-run program rather than establishing their own separate programs. The federal statutes allowed jurisdictions of over 200,000 people to directly receive and administer the federal assistance funds and certain jurisdictions, such as San Francisco, have elected to receive their own funds and run their own assistance programs.[15] The 2021 Act, however, allows jurisdictions that elected to receive federal funds to contribute those funds to the state for distribution by the state to households in the jurisdiction which contributed the funds.[16] Most notably, New York City has elected to contribute its approximately $240 million allocation to the state. The City determined that it would be best to use a single application system for households so as to eliminate any potential confusion about duplicative programs. The City’s Department of Social Services is, as of this writing, seeking a contractor to facilitate community outreach about the rental assistance program and assist households in submitting applications.
The 2021 Act in Detail
Eligible Households
In order to be eligible for relief, households must meet all the following requirements:
- The household must pay rent for their primary residence in New York State.[17]
- The household must include an individual who, directly or indirectly due to the COVID-19 outbreak, (i) qualified for unemployment, (ii) experienced a reduction in household income, (iii) incurred significant costs, or (iv) experienced other financial hardship. [18]
- The household must demonstrate a risk of homelessness or housing instability.[19] Housing instability may be demonstrated through (i) a past due utility or rent notice or eviction notice, (ii) unsafe or unhealthy living conditions, or (iii) any other evidence of risk, as determined by the state of New York.[20]
- The household’s income must be no more than 80% of AMI.[21] The income used for this determination is either (a) the household’s total income for calendar year 2020 or (b) the household’s monthly income at the time of application for assistance.[22]
The 2021 Act mandates that immigration status not be taken into account when determining eligibility.[23] Occupants of federal or state subsidized public housing that limits household’s share of the rent to a set percentage of income will only be eligible to the extent funds are remaining after serving all other eligible populations.[24]
Eligible Payments
Each eligible household will qualify for rental assistance equal to up to 12 months of rental and utility arrears.[25] Three months of prospective rental assistance may also be paid to households that are rent burdened (i.e., households for which the monthly rental obligation is 30% or more of the household’s gross monthly income).[26]
Application Process
The Commissioner of the State Office of Temporary and Disability Assistance (the “Commissioner”) must make an application for assistance available on its website as soon as practicable.[27] Once available, the application may be completed by the tenant or, if the tenant consents, the landlord or another party designated by the tenant.[28]
The specific documentation necessary to prove eligibility will be determined by the Commissioner.[29] Self-attestation is specifically deemed to be acceptable to the extent permissible by federal law and relevant guidance.[30] The Treasury is generally permissive of using self-attestation to establish income and rent amounts in its FAQ publication.[31]
Application Prioritization
Applications will be prioritized for certain groups for 30 days beginning on the first day applications are accepted for rental assistance. The following are the four priority groups in descending order of priority:
- Households which have income at or below 50% of AMI and which have a member of the household in one or more of the Additional Priority Categories.[32]
- Households which have income at or below 50% of AMI and which do not have a member of the household in any of the Additional Priority Categories.
- Households which have income at or below 80% of AMI and which have a member of the household in one or more of the Additional Priority Categories.
- Households which have income at or below 80% of AMI and which do not have a member of the household in any of the Additional Priority Categories.[33]
After the 30-day priority period, applications will be processed on a rolling basis.[34]
Considerations for Landlords
Rental assistance payments are intended to be paid directly to the applicable landlord and the Commissioner is charged with undertaking reasonable efforts to obtain the cooperation of landlords.[35]
If a landlord accepts rental assistance payments, the landlord will be subject to the following conditions and restrictions:
- the rental arrears covered by the payment are deemed satisfied and may not be used as the basis for a non-payment eviction;
- all late fees due on the rental arrears are deemed waived;
- for a period of 12 months after the first rental assistance payment is received, the landlord may not raise rent higher than the amount in place at the time of application to the program;
- for a period of 12 months after the first rental assistance payment is received, the landlord may not evict the tenant for reason of expired lease or holdover tenancy; and
- the landlord must notify the tenant of the foregoing tenant protections.[36]
If a landlord does not accept rental assistance payments on behalf of a tenant approved for such payments:
- from the date the provisional determination is made that the tenant is eligible for rental assistance, the tenant may use such determination as an affirmative defense against proceedings seeking monetary judgment or eviction for non-payment of rent during the applicable period; and
- if the landlord does not accept payment within 12 months of such determination, the landlord will be deemed to have waived the amount of rent covered by the assistance payment and will be prevented from initiating actions premised on the non-payment of rent covered by the provisional payment.[37]
What’s Next?
At the state level, the next major step will be the release of the application for assistance from the Commissioner. Senator Kavanagh has stated that the application will be through an online portal system and that it will be available within weeks and the office of the Commissioner has said that the application will be available in May.[38] The application and other guidance will also clarify the eligibility requirements for the $100 million in state funding intended to expand eligibility beyond the federal rent relief.[39]
At the federal level, the Treasury will continue to update its FAQs and may provide other guidance.
Further legislation or government action in this space is also likely. New York state may extend its eviction moratorium beyond the current expiration of most protections on May 1.
[1] Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, Div. N, § 501 (2020); American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 3201 (2021).
[2] Emergency Rental Assistance Frequently Asked Questions, U.S. Department of the Treasury (March 26, 2021), https://home.treasury.gov/system/files/136/ERA-Frequently-Asked-Questions_Pub-3-16-21.pdf.
[3] Stout Risius Ross, LLC, Analysis of Current and Expected Rental Shortfall and Potential Evictions in the U.S. (September 25, 2020), https://www.ncsha.org/wp-content/uploads/Analysis-of-Current-and-Expected-Rental-Shortfall-and-Potential-Evictions-in-the-US_Stout_FINAL.pdf.
[4] Centers for Disease Control and Prevention, Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 (April 1, 2021), https://www.cdc.gov/coronavirus/2019-ncov/more/pdf/CDC-Eviction-Moratorium-03292021.pdf.
[5] Memorandum, Residential Eviction Proceedings Under the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020, State of New York Unified Court System Chief Administrative Judge Lawrence K. Marks (December 20, 2020), Section 5, http://nycourts.gov/whatsnew/pdf/Memo-Evictions-December2020B.pdf.
[6] See, e.g., Sadef Ali Kully, The Waiting Game for Pandemic Rent Relief in New York, City Limits (March 3, 2021), https://citylimits.org/2021/03/03/the-waiting-game-for-pandemic-rent-relief-in-new-york/; Cara Long Corra, New York State’s Tenants Need Immediate Relief, Fiscal Policy Institute (December 18, 2020) https://fiscalpolicy.org/new-york-states-tenants-need-immediate-relief; and Susan Arbetter, Cuomo Announces Executive Order to Help Needy Renters, Spectrum News (December 3, 2020) https://spectrumlocalnews.com/nys/central-ny/capital-tonight/2020/12/03/cuomo-announces-executive-order-to-help-needy-renters.
[7] 2020 Sess. Law News of N.Y. Ch. 125 §2.3 (S. 8419) (McKinney).
[8] Katherine Fung, NY’s Second Round Of Rent Relief Only Distributes $7 Million Of $60 Million Available, Gothamist (March 23, 2021), https://gothamist.com/news/nys-second-round-rent-relief-only-distributes-7-million-60-million-available.
[9] 2020 Sess. Law News of N.Y. Ch. 125 §2.1.b (S. 8419) (McKinney).
[10] Claudia Aiken et al., Learning from Emergency Rental Assistance Programs: Lessons from Fifteen Case Studies (March 9, 2021), Section 1, p. 10.
[11] Kim Johnson and Rebecca Yae, Best Practices For State And Local Emergency Rental Assistance Programs, National Low Income Housing Coalition (January 11, 2021), p.8.
[12] Will Parker, Why Some Landlords Don’t Want Any of the $50 Billion in Rent Assistance, The Wall Street Journal (March 19, 2021), https://www.wsj.com/articles/why-some-landlords-dont-want-any-of-the-50-billion-in-rent-assistance-11616155203.
[13] 2021 Act, Subpart A § 9.2(d).
[14] 2021 Act, Subpart A § 9.2(c).
[15] Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, Div. N, §501(b)(1)(B)(ii); San Francisco Mayor’s Office of Housing and Community Development, Update on the U.S. Treasury Emergency Rental Assistance Programs (April 7, 2021), https://sf.gov/information/update-us-treasury-emergency-rental-assistance-programs.
[16] 2021 Act, Subpart A § 2.99-mm.
[17] 2021 Act, Subpart A § 5.1(a)(i).
[18] 2021 Act, Subpart A § 5.1(a)(ii).
[19] 2021 Act, Subpart A § 5.1(a)(iii).
[20] Treasury FAQs, supra note 2, Question 3.
[21] 2021 Act, Subpart A § 5.1(a)(iv). A press release from the Chair of the Senate Committee on Housing, Construction and Community Development, Senator Brian Kavanagh, and other news reports indicate that the $100 million in state funding allocated to this rental assistance program would be used to expand eligibility to cover households between 80%-120% AMI and other groups not eligible for federal relief, however, as of the date of this publication, there is no statute governing this expanded eligibility. We inquired to the office of Senator Kavanagh about what eligibility rules would apply, and his office indicated that the Office of Temporary and Disability Assistance will promulgate the eligibility rules associated with rollout of the funds. See, Press Release, Senator Brian Kavanagh, State Budget Provides for Huge Investments in Housing (April 7, 2021), https://www.nysenate.gov/newsroom/press-releases/brian-kavanagh/state-budget-provides-huge-investments-housing.
[22] 2021 Act, Subpart A § 5.2.
[23] 2021 Act, Subpart A § 5.1(a).
[24] 2021 Act, Subpart A § 5.1(a)(i).
[25] 2021 Act, Subpart A § 3.1. Note that utility arrears are paid directly to the utility. 2021 Act, Subpart A § 9.2(a).
[26] 2021 Act, Subpart A § 3.1.
[27] 2021 Act, Subpart A § 6.1.
[28] 2021 Act, Subpart A § 6.1.
[29] 2021 Act, Subpart A § 7.
[30] 2021 Act, Subpart A § 6.6.
[31] See Treasury FAQs, supra note 2, Questions 4 and 5.
[32] “Additional Priority Categories” means (i) mobile home tenants who have accrued rent due on the land on which their home sits, (ii) individuals from a vulnerable population, including, but not limited to, victims of domestic violence, survivors of human trafficking, and veterans, (iii) households who have an eviction case pending, (iv) households who are residing in communities that were disproportionately impacted by the COVID-19 pandemic in a methodology to be determined by the Commissioner, and (v) tenants in a building of 20 or fewer units. 2021 Act, Subpart A §5.4.
[33] 2021 Act, Subpart A §§ 5.4 and 5.5.
[34] 2021 Act, Subpart A § 5.6.
[35] 2021 Act, Subpart A § § 9.2(a) and 9.2(b).
[36] 2021 Act, Subpart A § 9.2(d).
[37] 2021 Act, Subpart A § 9.2(c).
[38] Sadef Ali Kully, NYS Budget on Housing: Rent Relief Victory, Disappointment on NYCHA and Homelessness, City Limits (April 14, 2021), https://citylimits.org/2021/04/14/nys-budget-on-housing-rent-relief-victory-disappointment-on-nycha-and-homelessness/; Eddie Small, State’s $2.4B rent-relief program will allow landlords to apply directly for aid, Crain’s New York Business (April 8, 2021), https://www.crainsnewyork.com/residential-real-estate/states-24b-rent-relief-program-will-allow-landlords-apply-directly-aid.
[39] See note 21.
