California rent relief contractor’s deal gets more lucrative
Despite a slow initial rollout of rent relief money, the state of California is extending and more than doubling its contract with the outside contractor it hired to deliver the money to tenants and landlords.
The contract with Horne LLP, a Mississippi-based accounting firm specializing in disaster relief, has grown from $ 51.7 million when the program launched in March to at least $ 146.8 million in the amended agreement signed Sept. 16, according to documents obtained by CalMatters. through a public registration request.
Under the new contract, which runs until March 2022, Horne will be responsible for administering $ 2.6 billion in rent relief, up from $ 1.15 billion when the program launched in March.
According to Geoffrey Ross, deputy director of the California Department of Housing and Community Development.
Ross said cities that previously administered their own programs have joined the state due to increased efficiency; for example, the state can easily redistribute funds if a city or county has excess money. He also said local officials have seen the state’s success with its contractor.
Horne, who has made emergency rent relief a line of business, is not responsible for handing out all the money California has. The remainder of the $ 5.2 billion available for rent relief is administered by local jurisdictions that still disburse the first round of funds, including Los Angeles, and those that run their own programs for the second round, including Sacramento, Stockton, San Diego, Oakland and Alameda.
The amount managed by the state and by Horne could increase if local jurisdictions also choose to transfer their program to the state, or if California receives remaining federal funds from other states.
But state auditor Elaine Howle warned last week that California could lose up to $ 337 million in federal rent relief because of the way it reports its spending to the federal government. The Housing and Community Development Department disputes what will happen.
While the state has increased Horne’s administrative costs in the renewed contract, this is about 5% percent of the total rent assistance allowance – and still falls below the federal government’s 15% cap for costs. administrative.
“Although this is a considerable amount of money, we are now able to deploy additional resources,” Ross told CalMatters. “We have some pretty significant cost savings when you had to compare what it would cost the 49 jurisdictions to run this center. ”
Most of what Horne receives will go to staffing, which Ross said the company has already quadrupled, to around 1,200 employees, since the program began.
As of September, the contract provides for at least 1,190 people to manage individual cases, 340 people to staff the call center and 19 people to manage funds. The workforce is expected to drop in November, to 650 case managers and 190 call center agents, and even more by March.
If the state decides additional staff are needed, the contract says Horne would provide 200 additional staff within three weeks at an additional cost of $ 4 million per month to the state.
The money budgeted to pay Horne could technically be redirected to landlords and tenants if they use fewer staff than expected, Ross said.
Lots of big contracts
This is just one of many contracts worth tens of millions of dollars the state has signed with outside vendors in response to emergency needs related to the COVID-19 pandemic. They include several to address unemployment benefit issues for unemployed Californians. Some other agreements have had problems.
Ross said the state had received several offers for the contract and determined that Horne was the most qualified because of his expertise in disaster relief, including rent relief in Texas. Although this rollout also started slowly, it has improved, according to media reports.
The state of California was not prepared to create the software or hire employees to withdraw the money in time before it began to be clawed back by the federal government, Ross said.
“It’s really hard to fully understand what the right amount is for this stuff, especially, to be honest, of a program of unprecedented scale and speed,” said Vincent Reina of the University of Pennsylvania, whose research group studied the distribution of rent relief in California and Los Angeles.
To gauge the effectiveness of the program, Reina said to look at three things: the total dollars distributed, the rate at which the distribution has increased, and whether the dollars have reached those who need them most. “And this is where the data gets really complicated,” he said.
This week, the state announced that it had paid $ 584.8 million to nearly 50,000 households, or about a quarter of the $ 2.6 billion available. This is an increase of nearly 700% since June 28, when the state launched the latest round of tenant protections, according to Russ Heimerich, spokesperson for the Business Agency, Consumer Services. and state housing.
Ross attributed the faster rollout to the relaxation of federal documentation requirements, which led to simpler claims and an increase in the amount that landlords and tenants are eligible to receive.
Although eviction protections enacted in June expire on September 30, rental assistance will continue to be available. To be covered by eviction protections until next March, eligible tenants must apply for rent relief.
“When an eviction case goes to court, the court is supposed to ask the landlord, ‘Did you participate in the rent relief and did your tenant participate in the rent relief?’ If the answer is yes, then the courts cannot deal with the issue of deportation until this case is decided, ”Heimerich said.
Horne and the Housing Department work on a separate phone line that courts could call to corroborate if a plaintiff in an eviction case had applied for rent assistance, Heimerich said.
Landlord finally gets relief
A landlord, Bill Phelps, told CalMatters he ultimately received nearly $ 35,000 in missed rent for the 4-bedroom, 3-bathroom home he was renting for $ 3,500 a month from Concord. But he had asked for the money six months earlier, on March 15, the day the state opened its gate.
“It was a long, long, long wait, but I’m happy to have the money,” said Phelps, 72.
But he said his tenants, an unemployed couple with two children who lost their jobs at the start of the pandemic, still plan to move in with their families at the end of the month because they are $ 7,500 behind on rent.
“I spoke to the tenants and said, ‘The moratorium ends at the end of the month. You’re going to have to go. I don’t want to start an eviction, ”Phelps told CalMatters. “That’s where I made the offer: I’ll forgive you for the $ 7,500 you owe if you’re away by the end of the month. I even gave $ 200 if they needed it.
Ross said the money was still available and encouraged landlords and tenants to ask for rent until December to avoid having to leave. But they have to wait 15 days between the day they receive rental assistance and their next application.
Phelps said he didn’t know this was an option and would consider it. But he has little faith.
“If I got my check right away, oh yeah, they can stay,” he said. “But as it is, I wouldn’t get that money until maybe July or August next. I’m going to kind of take my losses, go ahead and sell the house.