Scenario: An agency wants to pursue Emergency Solutions (ESG) Grant Rapid-Re-Housing (RRH) funding to provide Short-/Medium-Term Rental Assistance. The agency also owns permanent housing units that might be a good fit for some of the ESG RRH clients. Assuming the units meet all of the ESG requirements (Fair Market Rent, Habitability, Rent Reasonableness, etc.). AND assuming the agency/subrecipient does not steer the ESG RRH client(s) to these units, can the agency lease them to ESG RRH clients with the rental assistance payments going to the ESG agency/subrecipient?
When a recipient or subrecipient owns the housing, it does invoke the conflict of interest provisions of the ESG Interim Rule (24 CFR § 576.404), which read as follows:
(a) Organizational conflicts of interest. The provision of any type or amount of ESG assistance may not be conditioned on an individual's or family's acceptance or occupancy of emergency shelter or housing owned by the recipient, the subrecipient, or a parent or subsidiary of the subrecipient. No subrecipient may, with respect to individuals or families occupying housing owned by the subrecipient, or any parent or subsidiary of the subrecipient, carry out the initial evaluation required under § 576.401 or administer homelessness prevention assistance under § 576.103.
This means that the specific conflict of interest requirements for a recipient or subrecipient (including any parent or subsidiary) with an ownership interest differ based on the type of assistance being provided, but in all cases the evaluation would include not only the client's eligibility for ESG assistance, but also the rental assistance amounts necessary to house and maintain a participant.
- Rapid Re-Housing Tenant Based Assistance - Documentation that the program participant had a choice of other units: Under the Rapid Re-Housing component, a recipient or subrecipient may provide tenant-based rental assistance to a program participant that chooses a unit in which the recipient or subrecipient has an ownership interest. However, the recipient or subrecipient cannot exclusively direct a program participant to a unit it owns, nor can it carry out the initial evaluation to determine eligibility for the assistance and the amount and types of assistance the individual or family needs to regain stability in permanent housing. The recipient or subrecipient would need to provide documentation that the program participant had a choice of other units.
- Rapid Re-Housing Project-Based Assistance - COI Waiver required: Under the Rapid Re-Housing component, a recipient or subrecipient is prohibited from providing project-based rental assistance in a unit in which it has an ownership interest. This is because project-based rental assistance is inherently conditioned upon acceptance of a unit in a particular project, so the program participant would not be offered a choice of other units not owned by the recipient or subrecipient. A recipient may request a waiver of the conflict of interest requirement once per grant in order to provide project-based rental assistance.
- Homelessness Prevention – COI Waiver required: With regard to Homelessness Prevention assistance, the regulation explicitly prohibits a recipient or subrecipient from administering this type of assistance in a unit it owns. Therefore, a recipient would need to request a waiver of the conflict of interest requirements once per grant to provide any type of homelessness prevention assistance to a household residing in a unit owned by the recipient or subrecipient.
PLEASE BE AWARE OF TWO ADDITIONAL REQUIREMENTS:
Intake Assessment: First, even with a waiver of the conflict of interest requirements, if ESG assistance is provided to program participants in housing owned by the recipient or subrecipient, the recipient or subrecipient **may NOT conduct the intake assessment** to determine the household's eligibility for ESG and the amount and types of assistance the housheld needs to regain stability in permanent housing. Even a separate division of the same organization (or a parent or subsidiary) would not suffice. Such a recipient or subrecipient would need to find another independent organization that is also an ESG recipient or subrecipient to do the intake assessment and ensure that all program participants are eligible.
Waiver of the rental assistance agreement: Second, in order for the recipient or subrecipient to administer rental assistance to assist a program participant in a unit it owns, the recipient must request a waiver of the rental assistance agreement requirement. This waiver is needed because the rental assistance agreement must be between the recipient or subrecipient and the owner, and it is not possible for a recipient or subrecipient to create such an agreement with itself. However, a different recipient or subrecipient may provide rental assistance to a program participant that chooses to live in a unit owned by the recipient or subrecipient.