Summary and Analysis of the Interim ESG Rule December 2011
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1 Summary and Analysis of the Interim ESG Rule December 2011 On November 15, 2011, the U.S. Department of Housing and Urban Development (HUD) released an interim rule for the new Emergency Solutions Grant (ESG) program, which was officially published in the Federal Register on December 5. The interim rule implements changes made by the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act of HUD also published a final rule on Defining Homeless on December 5 and a draft regulation on the Homeless Management Information System (HMIS) on December 9. Regulations governing the Rural Housing Stability Program and the consolidated Continuum of Care programs are expected in the coming months. Overview and Rationale for Interim Rule Congress passed the HEARTH Act in May Among other changes, the Act expanded the Emergency Shelter Grant by adding rapid re-housing, more robust homelessness prevention, and HMIS as eligible activities. The HEARTH Act also renamed the program as the Emergency Solutions Grant. It emphasized the importance of helping people to quickly connect with or remain in permanent housing after they experience a housing crisis or homelessness. HUD aims to help communities improve integration with mainstream services, strengthen system-level coordination, and build on lessons learned from years of practice and research to invest in proven solutions like rapid re-housing. Normally, HUD publishes a proposed rule, accepts public comments, and uses that feedback to release a final regulation that will go into effect. However, HUD has decided that it would be in the public s best interest to begin implementation of the new ESG program as quickly as possible. This requires the use of an interim rule that will go into effect almost immediately, though HUD will still take public comments into consideration before publishing a final rule. While many federal program funding levels were reduced in fiscal year (FY) 2011, Congress specifically provided additional funding for the new ESG program. HUD interprets this to mean that Congress recognizes the need for homeless assistance and that the new ESG program can have an immediate impact on helping people experiencing and at risk of homelessness. Timing The regulation will go into effect on January 4, 30 days after it was officially published in the Federal Register. Individuals and organizations are encouraged to submit comments to HUD to provide feedback on HUD s interpretation of the HEARTH Act as it relates to the ESG program. Public comments are due February 3. HUD will subsequently publish a final regulation on the new ESG program. Definitions The interim ESG rule identifies three categories of people who are at risk of homelessness and are therefore eligible for homelessness prevention assistance. At-risk households include: 1. Individuals and families who have all three of the following characteristics: o Have incomes below 30 percent of area median income; AND
2 o Have insufficient resources (i.e. family, friends, faith-based or social networks) immediately available to attain housing stability and avoid entrance into an emergency shelter or literal homelessness; AND o Exhibit one or more qualifying risk factors (see below for details). 2. Children and youth who qualify as homeless under other federal statutes, including the Runaway and Homeless Youth Act, Head Start Act, Violence Against Women Act, Public Health Service Act, Food and Nutrition Act, or Child Nutrition Act; AND 3. Children and youth (and their parents/guardians who live with them) who qualify as homeless under the Department of Education definition (Education for Homeless Children and Youth section of the McKinney-Vento statute). Qualifying risk factors under the first category of at-risk households include people who: Have moved frequently (2 or more times during the 60 days immediately prior to application for assistance) because of economic reasons; Are living in the home of another because of economic hardship; Have been notified that their right to occupy their current housing or living situation will be terminated; Live in a hotel or motel; Live in severely overcrowded housing; Are exiting an institution; or Otherwise live in housing that has characteristics associated with instability and an increased risk of homelessness. In addition, this interim rule clarifies the definition of chronic homelessness. Being chronically homeless has involved having a disability and living in a safe haven, an emergency shelter, or a place not meant for human habitation for a year or more continuously, or on at least four separate occasions over three years. In this interim rule, HUD determines that a person must be homeless at least 15 days for it to count as a distinct episode of homelessness. Eligible Activities The ESG rule allows ESG funds to be used for several components street outreach, emergency shelter, homelessness prevention, rapid re-housing, and HMIS and the necessary administrative costs for each. Street Outreach and Emergency Shelter. The interim ESG rule adds to the list of eligible shelter activities the costs of supplies and motel/hotel stays in certain cases, and it removes the limit on staff costs. To the extent possible, essential services for emergency shelter and street outreach under this rule are the same as eligible costs for supportive services under the Continuum of Care program. HUD has done this in order to facilitate coordination and improve understanding of requirements. Homelessness Prevention and Rapid Re-Housing Assistance. ESG funds can be used for: Short-term (up to 3 months) and medium-term (up to 24 months) rental assistance; and Housing relocation and stabilization services.
3 Both prevention and rapid re-housing assistance can be provided for a short-term period of up to 3 months, or for a medium-term period of between 3 and 24 months. Rental assistance can include a one-time payment of up to 6 months of rent arrears. Other than rental arrears, assistance cannot be provided to households simultaneously receiving rental assistance from other public sources. Homelessness prevention assistance is only eligible to the extent that it is necessary to help program participants regain stability in their current housing or move into other permanent housing and achieve stability there. Recipients have broad discretion to decide the type, length, and depth of rental assistance provided, as long as it does not exceed 24 months during any 3 year period. Program participants must sign a lease with the housing owner, and the provider must sign a rental assistance agreement with the housing owner. Under the interim ESG rule, program participants eligibility, as well as the types and amounts of assistance they receive, must be re-evaluated at least once every three months for prevention assistance and at least once per year for rapid re-housing assistance. As required under the HEARTH Act, the interim rule also allows rental assistance to be either project-based or tenant-based. In order to ease the transition into permanent housing and avoid forcing households to move when their project-based assistance ends, the interim rule states that project-based assistance may be suspended, terminated, or transferred to another unit upon a client exiting the program. Under project-based assistance, the provider may sign a contract and pay up to the entire first month s rent, provided that a program participant signs a lease and moves into the unit prior to the end of the first paid month. The lease must not condition occupancy to the provision of rental assistance payments. The rental assistance agreement between the provider and the housing owner must have an initial period of at least one year. HUD specifically requests comments on how to best structure project-based short- and medium-term rental assistance so as to avoid forcing program participants to move at the end of their assistance. Eligible housing relocation and stabilization services include: Financial assistance costs, including rental application fees, security deposits, last month s rent, utility deposits, up to 24 months of utility payments, and moving costs (including temporary storage costs of up to 3 months); and Stabilization assistance costs, including housing search and placement, housing stability case management, mediation, legal services, and credit repair. HMIS. Under the HEARTH Act, all projects receiving funding under the ESG program must participate in a Homeless Management Information System (HMIS). HUD published a proposed rule on December 9 to establish the regulations to govern HMIS. Administrative Costs Under the HEARTH Act, the portion of ESG grants that can cover administrative costs is increased from 5 percent to 7.5 percent of a jurisdiction s entire grant.
4 In FY 2011, HUD has divided the ESG grant into two allocations. The first allocation was released in Summer 2011 under the old Emergency Shelter Grant. The second allocation was announced in November 2011 in conjunction with the interim Emergency Solutions Grant rule. Under the first FY 2011 allocation, the old rules still applied, and communities could only use 5 percent of their ESG funds to cover administrative costs. As a result, some communities may be able to spend more than 7.5 percent of their second allocation of FY 2011 ESG funds for administrative costs. The total percent of the combined first and second allocations put toward administrative costs cannot exceed 7.5 percent. For more information and an example, click here to view slides 37 through 40 from HUD s introductory webinar. The rule clarifies that employee compensation and other overhead costs directly related to carrying out the ESG program components are eligible costs of those activities and are not subject to the spending limit for administrative costs. Centralized or Coordinated Assessment In its interim ESG rule, HUD explains that it expects to include in an upcoming proposed rule for the Continuum of Care (CoC) program a requirement for communities to develop and implement a centralized or coordinated assessment system. This interim rule proposes that ESG recipients will be required to participate in this system to initially assess the needs of each household seeking prevention or homeless assistance. Regardless of which year s funding is being used, ESG recipients will be required to implement this provision, though not until a final CoC program rule has been published and the CoC has implemented such an assessment system. CoCs would design these systems based on local needs. It will be important for communities to develop a common assessment tool for use throughout the community, though tools will vary from community to community. Centralized or coordinated intake can take a number of forms, including: A central location(s) where individuals must present for homeless services; A or other hotline that screens callers using the common assessment tool and connects them to appropriate local providers; A no wrong door approach in which a household can present at any homeless service provider in the area and be assessed and referred using the same tool; A specialized team of case workers that provide assessment services to providers within the CoC; or A regional approach in which hubs are created within smaller geographic areas. HUD requests comments from ESG-funded victim service providers on how to ensure that a coordinated intake system does not increase risk for people fleeing domestic violence, dating violence, sexual assault, or stalking. Each community will be required to develop a specific policy on how to address the needs of households fleeing domestic violence. HUD has included this proposed requirement for coordinated or centralized assessment based on lessons from HPRP and the Rapid Re-Housing for Families Demonstration. Coordinated assessment helps communities to match households with the most appropriate available resources to meet their needs, improving system efficiency.
5 Case Management The ESG interim rule specifies that program participants must meet at least monthly with a case manager, who must develop an individualized permanent housing plan. Case managers must help connect households with appropriate services and financial assistance through other public and private homeless assistance and mainstream programs. Housing stability case management can last no more than 30 days while the program participant seeks permanent housing and no more than 24 months once in permanent housing. Eligible case management activities include: Using the centralized or coordinated assessment system; Conducting an initial evaluation; Counseling; Developing, securing, and coordinating services and public benefits; Monitoring and evaluating program participant progress; Providing information and referrals to other providers; Developing an individualized housing and service plan; and Conducting re-evaluations. Immediate Implementation of Prevention and Rapid Re-Housing Activities HUD s proposed rule will go into effect January 4, Communities have already received one allocation of FY 2011 Emergency Shelter Grant resources, but they are receiving a second FY 2011 ESG allocation. All funds under the second allocation must go toward newly-eligible activities, including prevention, rapid re-housing, HMIS, and administration. No resources from the second FY 2011 allocation may be put toward street outreach or emergency shelter. Communities can spend on traditional shelter and outreach activities the greater of either: 60 percent of their total ESG grant; OR The amount of ESG dollars utilized for these activities in FY In total, HUD is providing $250 million for ESG programs in FY 2011, including $160 million that was released in Spring 2011 for traditional shelter and outreach activities. Because $160 million is slightly more than 60 percent of the total national grant, the second of the above options is applicable to communities in FY Therefore, in most cases, communities can spend on traditional shelter and outreach activities in FY 2011 only as much as they spent in FY 2010; all additional resources (the entire amount of the second FY 2011 allocation) must be put toward the newly-expanded homelessness prevention and rapid re-housing activities, including HMIS and administration. Communities that wish to do so can reprogram a portion of their initial FY 2011 ESG installment from shelter and outreach activities toward prevention and rapid re-housing. To do so, communities must amend their Consolidated Plan in accordance with the ESG rule. In future fiscal years, the entire ESG amount will be allocated at one time. However, communities still must spend on traditional shelter and outreach activities no more than either 60 percent of the total grant, or the amount spent on these activities in FY 2010, whichever is greater.
6 Changes to the Consolidated Plan The HEARTH Act and Federal Strategic Plan to Prevent and End Homelessness both envision increased collaboration between ESG programs, CoC programs, and other mainstream housing and services programs. In this interim rule, CoCs must participate in the local Consolidated Plan process and evaluate outcomes for ESG projects. In turn, ESG recipients must consult with CoCs about the allocation of ESG funds and participation in HMIS. The regulation requires a greater focus in Consolidated Plans on homeless people, especially chronically homeless people, families with children, veterans and their families, and unaccompanied youth, as outlined in the Federal Strategic Plan. The interim rule also specifies that local jurisdictions must consult with publicly-funded institutions and systems of care that may discharge people into homelessness and must make other changes to the Consolidated Plan to ensure increased consistency between the Consolidated Plan and the CoC Plan. These changes are intended to foster closer coordination between ESG and CoC programs, as well as other mainstream housing and services programs. Coordination with Other Systems and HUD Resources The HEARTH Act requires that ESG recipients consult with CoCs in allocating funds for eligible activities, developing performance standards, evaluating outcomes, and administering and operating HMIS. ESG recipients are required, as much as possible, to coordinated ESG activities with other programs targeted toward homeless people, as well as mainstream housing, health, social services, employment, education, and youth programs for which homeless and at-risk families and individuals may be eligible. Recipients should coordinate with, among many others, CoC, HUD-VASH, Education for Homeless Children and Youth, Health Care for the Homeless, Runaway and Homeless Youth, Homeless Veterans Reintegration, Section 8, Public Housing, HOME Investment Partnership, Workforce Investment Act, and TANF programs. Both the Federal Strategic Plan and recent reports from Congress encourage HUD and communities to maximize coordination among these targeted and mainstream programs. HUD has tried to align these regulations with other mainstream programs, coordinating where possible the ESG rule with Community Development Block Grant (CDBG), HOME, and Section 8 regulations. Where possible, HUD also aims to align the ESG program with the CoC and Rural Housing Stability programs, to improve efficiency and coordination among the programs.
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