Stimulus Update: Data Shows Rental Assistance Funds Were Not Distributed Equitably

Talk about upsetting news.

When the COVID-19 outbreak erupted in early 2020, it led to an almost immediate uptick in unemployment numbers. Because so many people lost their jobs and didn't have money in savings to fall back on, lawmakers worried that delinquent rent payments would lead to an eviction crisis. As such, they put a ban on evictions that didn't expire until 2021.

At that point, a lot of people's financial situations had improved tremendously. But that wasn't the case across the board.

Thankfully, those unable to catch up on past-due rent or keep up with future rent were able to apply for aid under the federal emergency rental assistance program. Funds under that program were allocated at the state level, and each state was tasked with rolling out an application process.

Since mid-2021, many Americans have received aid thanks to that rent relief program -- and as such, have managed to stay in their homes and avoid eviction. But new data reveals that rent relief funds were not distributed in an equitable fashion, which calls the program's effectiveness into question.

A different approach should have been taken

Think tank New America did a study of the federal emergency rental assistance program, and it found a number of flaws with it. One major issue is that different states had different processes for applications, and some were clunkier and more burdensome than others. And so people in states where the system didn't run as smoothly may have been less likely to receive aid.

Worse yet, New America found that the states in need of more funding were shorted on rent relief dollars, while states in need of less money were overfunded. Case in point: The federal emergency rental assistance program allocated $131 per person in California and $610 per person in Wyoming. But California has a larger share of residents who rent.

Lesson learned

The big takeaway from the aforementioned research is that had the emergency rental assistance program actually been run at the federal level, things may have gone more smoothly. Furthermore, Congress should've taken a needs-based approach to rent relief rather than a population-based approach.

Of course, it's too late to go back in time and run the program differently. But it does beg the question of whether lawmakers should look at putting new relief programs in place in light of soaring rent costs -- especially with a fourth stimulus check being off the table.

Over the past year, rents have spiked in many major metro areas. And so at this point, some tenants who received rent relief funds may still be at risk of losing their homes due to not being able to afford them.

Early on in the pandemic, many landlords slashed rent prices in an effort to fill vacancies as demand took a nosedive in light of rampant unemployment. These days, rental demand is high because the economy is stronger and more people are gainfully employed, but that's put landlords in a position where they can command a lot more money.

Unfortunately, many people can't afford higher rents at a time when inflation is causing most expenses to soar. And so another big drawback of the federal emergency rental assistance program is that it failed to account for tenants' ongoing struggles once they got caught up on past-due rent.