Mayors push for housing money in budget bill; Treasury threatens rental aid clawback

As Congress debates the size of a major budget bill, mayors Wednesday urged lawmakers to preserve the billions set aside for affordable housing, which they said is key to cities’ fiscal health.

The budget reconciliation package, one of several high-stake bills Congress is debating this week, currently totals $3.5 trillion but is widely expected to be trimmed to win key moderate Democrat support. It includes $327 billion in housing-related support ranging from public housing upgrades to block grants and vouchers.

The funding, if passed, would be a “gamechanger here in Columbia and everywhere,” Columbia, South Carolina Mayor Steve Benjamin said Wednesday during a U.S. Conference of Mayors press conference. “Mayors think a lot about housing,” Benjamin said. “It’s fundamental to our economy.”

The various housing measures in the bill ring in at $327 billion, according to Rep. Maxine Waters, D-Calif., chair of the House Financial Services Committee.

“I have insisted that housing is infrastructure and I know what you mayors are facing in these cities in trying to provide housing for the unhoused,” Waters said. “I’m so pleased we’ve gotten this far and we’re working hard to bring this bill home.”

The $327 billion includes $90 billion in housing vouchers, $80 billion to address needed repairs in public housing, $24 billion for people experiencing homelessness, and $15 billion for new affordable units.

Los Angeles has the second largest housing deficit in the country, said Mayor Eric Garcetti, who called housing “the most important piece of infrastructure for most Americans.”

“As the negotiations ensue, every cut made to what’s baked into the reconciliation package cuts hope, cuts our future and cuts the American dream,” said Garcetti, who President Joe Biden has tapped to become the ambassador to India.

In related news, a Biden senior advisor warned Tuesday that the Treasury Department may begin to claw back unspent Emergency Rental Assistance funds sent to states and local governments in previous stimulus bills.

Emergency Rental Assistance 1, enacted as part of a larger stimulus bill in December 2020, provides up to $25 billion to states and local governments.

The Treasury Department is authorized to recover unspent funds after Sept. 30 for those governments that have spent less than 65% of their allocation, said Gene Sperling, American rescue plan coordinator and senior advisor to President Biden, during a conference call on Sept. 28 hosted by the National Low Income Housing Coalition.

“We’re going to make clear to people who are not performing that they are at risk of reallocation,” Sperling said. “This is now a very strong tool we have to encourage better performance that we haven’t had up until this moment,” he said. “We’ve been in a persuasion, cajoling and guidance game until now. Now we have the ability to say, ‘If you’re a slow performer, there are consequences.’”

The final determination and reallocations are expected to occur in spring 2022, said Treasury deputy secretary Adewale Adeyemo in a Sept. 24 letter to ERA recipients.

“We anticipate implementing the reallocation process over a period of time, with escalating consequences if a state or locality fails to demonstrate progress in using its ERA 1 funds or implementing the flexibilities Treasury has made available,” the letter said.

A second round of funding, Emergency Rental Assistance 2, was enacted in March 2021 and provides up to $21.55 billion for states and local governments.

The funds are sent directly to the states, US territories, local governments and Indian tribes, according to Treasury. The governments are expected to use the funds to support eligible households through existing or new rental assistance programs.

Through September 27, just over 37% of the $25 billion of ERA1 funds have been spent, according to the National Low Income Housing Coalition.

As of August 31, states in aggregate have spent 26% of their allocation and local governments have spent 42% of their allocation.

Arkansas, Nebraska, Arizona and the Dakotas have spent less than 5% as of the end of August, the coalition said. Florida has spent less than 10%. Eight states, including New Jersey, Virginia and Texas, have spent more than 40%.