California is demanding that thousands of tenants and landlords who were approved for emergency rental assistance during the pandemic return the money — often months after it has been spent — sometimes for vague or unspecified reasons.
The California Department of Housing and Community Development has sent “recapture” emails to about 5,400 tenants and landlords who received COVID-19 rent relief funds, the agency told The Sacramento Bee.
HCD gives aid recipients 30 to 90 days to send the money back, said Nur Kausar, HCD communications manager. The agency claims overpayment, tenants withholding funds from landlords and fraudulent activity are among the reasons they ask landlords and tenants to return their aid, Kausar said.
But lawyers suing HCD on behalf of needy tenants call the repayment requests “retroactive denials” and say asking for the money back is “outrageous and unfair.”
“These are tenants who went through the complicated and lengthy application process, submitted all their documents, and were approved to get help,” said Madeline Howard, a senior attorney for the Western Center on Law and Poverty.
“Then HCD turns around with no warning and tells the tenant they are denied, without explaining why, and demands the tenant pay back money they do not have anymore because they have paid it over to their landlord. This is both unlawful and profoundly unfair.”
Renters ‘devastated’ by repayment requests
In a court declaration, the leader of a Northern California nonprofit said tenants who have received notices to repay their relief funds are “devastated by this experience.”
“All of our clients are low-income and lack the means to repay the rental assistance they previously received and paid to their landlord,” said Amber Twitchell, associate director of Napa County nonprofit On the Move.
One of the tenants who received a repayment notice is a single mother who lost her husband to COVID-19 and had to find a new rental she could afford without his income, Twitchell said. She received $8,100 and “does not know how she will be able to come up with the money to repay the state.”
“Many of our clients are immigrants, including some who are undocumented,” Twitchell said. “This experience has damaged their trust in the community and in the government. This experience also has affected their trust in my organization and in my staff.”
Tenants sue state over rent relief program
California’s emergency rental assistance program has sent more than $4 billion to about 344,000 households since March 2021, according to HCD data.
Households received payments averaging $12,000 to help with months of back rent.
To get aid, tenants and landlords had to submit lengthy applications to HCD. Some waited months to receive their payments because of a processing backlog.
The program closed to new applications on March 31, although some cities and counties continue to run their own relief programs. California lawmakers continued eviction protections for tenants who applied, but the last extension ended June 30.
In June, tenant advocacy groups Alliance of Californians for Community Empowerment and Strategic Actions for a Just Economy joined with research institute PolicyLink to sue HCD in Alameda County Superior Court.
The groups claim the agency has denied eligible tenants’ aid applications with confusing explanations and provided few appeal opportunities.
On July 7, a judge granted their request to stop HCD from denying rental assistance to additional tenants until the court could determine whether the application process meets constitutional standards.
Tenants, landlords asked to return rent relief
The lawsuit also claims HCD is wrongfully issuing retroactive denials in asking poor tenants to return aid funds they’ve already used to pay their landlords.
The judge’s ruling also requires the agency to stop sending out those denials, as well, Howard said.
In her court declaration, Twitchell said her organization is helping 26 tenants and two landlords who received HCD repayment requests after the state distributed a total of $175,000 in aid funds.
Twitchell said tenants and landlords received HCD repayment notices via email weeks or months after their applications were approved and they had used the money to pay off their back rent.
Some of On the Move’s clients created email addresses only to apply for rent relief. After they received their money, they stopped checking the account and didn’t know HCD wanted repayment until nonprofit staff told them, Twitchell said.
Other tenants have never received an email and would only know they owe the state money if they check HCD’s online portal, she said.
Why is the state asking for its money back?
Twitchell and her staff were initially confused when they heard tenants were receiving the notices. They allow 30 days to appeal but “(provide) no information about the specific reason for the denial,” she said.
“Nearly all of the denial notices I have seen say only that ‘inconsistent or unverifiable information has been provided by the applicant and cannot be substantiated by the program,’” Twitchell said in the declaration. “Sometimes, the denial notice says that the ‘inconsistent or unverifiable information’ is in a certain section of the application, but there is no further information about what part of that section caused the denial.”
In her declaration, Twitchell said she and her staff think a third-party contractor, Horne, LLC, conducted a “secondary review” of applications after the state distributed money.
When she and her staff could not get more information about the repayment requests, they had to “comb line-by-line over every application that is approved and then denied to try to identify the reason for the subsequent denial.”
Twitchell and her staff found that blurry signatures and rentals in buildings that contain both residential and commercial units were common reasons for denial.
“I believe that Horne is doing a digital scan as part of its review, and if an applicant’s address is not clearly permitted for residential use, the application gets flagged,” Twitchell said.
Rent relief fraud?
HCD would not describe the system it uses to identify tenants and landlords for repayment requests, citing “concern it would compromise the work we do to prevent fraud.”
Kausar said the agency works with the State Controller’s Office to “review potential pay files as an addition to our existing fraud protection measures.”
“Those measures are put in place to protect our qualified applicants who truly need the relief while also ensuring the program is acting as good stewards of public funds,” Kausar said.
HCD did not respond to Bee questions about why the additional reviews are necessary and why the state would conduct them after already distributing funds.
The agency wants to “minimize fraud attempts while keeping barriers to program participation low,” she said.
Kausar also did not say whether tenants or landlords who are unable to repay the money are sent to collections.
“Our recapture policy allows for repayments of overages to be repaid over a period of 90 days,” Kausar said. “In instances of fraud, the recapture policy requires 30 days.”
