Report shows delays, inaccuracies in Minnesota rent help program

Minnesota's rush to launch a pandemic-era rental assistance program led to issues with customer service, technology and program policies, a legislative auditor's report found.

The state received $586 million through the federal Emergency Rental Assistance program, according to the state agency Minnesota Housing. As COVID-19 swept the nation and many Minnesotans' incomes plummeted, the agency created RentHelpMN to keep people housed and help landlords receive rent.

"While RentHelpMN provided critical assistance to many Minnesotans during the COVID-19 pandemic, prolonged application processing times caused frustration for many program participants," states an evaluation report released Thursday by the nonpartisan Office of the Legislative Auditor. "In addition, program staff made processing errors in a sample of applications we reviewed."

Minnesota Housing said this week that it has distributed $428 million to 58,600 households through the program that launched in spring 2021. The cash went to landlords and utility companies to help cover past-due bills and future payments.

The program quickly came under fire from some landlords and legislators. They raised concerns about its slow start, the length of time to process applications and get the money out, the accuracy of payments and eventually the program's abrupt end. The state's Legislative Audit Commission, composed of a bipartisan group of six lawmakers, told auditors to investigate the program last year.

The Legislative Auditor's Office examined a sample of 41 applications and checked whether people processing the documents accurately approved or declined the requests. They found 40 of 41 eligibility determinations were correct. Of those applications, 31 of them were approved for aid.

However, when auditors dug into the amounts people received, they found that in five of the 31 cases the state did not give the correct amount of rental assistance.

Reasons for the inaccuracies varied. In one case, a landlord increased the applicant's rental request for one month by $127 but did not provide updated documentation. In other cases, a utility payment was incorrectly included, late fees were inaccurately paid and an applicant received more assistance than the person was eligible to get.

RentHelpMN program staff identified 630 overpayments, totaling $3.5 million, as of September and were still recouping money in February, the auditor's report states. About two-thirds of that was under review for suspected fraud. When the evaluation report was written, staff with the rent assistance program were still trying to determine whether some payments were improper.

Minnesota Housing refined its fraud prevention processes over time, the report states, noting that as of August 2022 RentHelpMN staff had identified and declined more than 4,350 applications that were suspected of fraud.

In the early months of the program, state housing officials noted that the individualized, often complicated applications made it difficult to get the dollars out quickly.

The program's slow distribution of dollars in the first four months led to frustrations. The evaluation found that renters waited 87 days on average for the state to process their applications. The process sped up as the program continued.

Auditors offered half a dozen recommendations to improve future programs. The state agency needs to set standards for application processing times, have comprehensive procedures to recoup overpayments, collect sufficient documentation and conduct regular audits, auditors said. They also emphasized the needs for program participants to have access to knowledgeable staff, more extensive technology testing and clear program policies and procedures.

Many of the recommendations from the Legislative Auditor's Office are appropriate for a mature program or one with sufficient time and resources ahead of its launch, Minnesota Housing Commissioner Jennifer Ho said in a letter responding to the report. But she said they are not reasonable for the unprecedented circumstances the state faced as it created a large new emergency program in four months.

"Minnesota Housing adhered to all of the U.S. Department of Treasury's program requirements, ensured fiscal integrity, and met all of Treasury's benchmarks for expenditure of funds," Ho wrote. "By the end of 2021, RentHelpMN put Minnesota among the top eight states in the country in distributing assistance."

She emphasized a line in the auditor's report that laid out the challenging set of circumstances the state housing agency faced.

"Minnesota Housing was charged with implementing a large and complex new program while correctly applying federal eligibility requirements and distributing accurate payments. But, it was also charged with implementing the program in a very short amount of time with changing federal guidance and limitations on administrative spending," the report states.

The state started giving out payments in May 2021. It contracted with an outside company to create the application portal and partnered with about 30 nonprofits and community groups that helped renters get money. The program came to a rushed end in January 2022 after the state was flooded with more applications than anticipated.

The state has yet to spend $85 million of the money it received from the U.S. Treasury for emergency rent help, a Minnesota Housing spokeswoman said Wednesday.

In February, Minnesota Housing's board approved spending about half of the remaining money on rental assistance and the other half on developing and preserving affordable rental housing. The agency is working on designing and implementing a new program to give out the money, spokeswoman Jill Mazullo said. She said earlier this year that the RentHelpMN portal could not be used because the infrastructure backing it up is no longer in place.

The $586 million the state government received was only a portion of the federal pandemic rent aid channeled to Minnesota. Some metro cities, counties and tribal governments also received funds. Minnesota's state and local governments received a total of $741 million, which does not include funds to tribes, according to Minnesota Housing.

Many of the initial dollar figures grew as money was reallocated nationally. The U.S. Treasury has reallocated tens of millions of dollars to the state, which Ho called a "vote of confidence" in Minnesota Housing's work.

Staff writer Erin Adler contributed to this report.