After watching scammers make off with more than $20 billion in fraudulent California unemployment benefits during the pandemic, state housing officials were wary of a repeat when the federal government poured money into the state and told them to use it to pay off people's unpaid rent.
But in the eight months since California's rental assistance program began, fraud has been virtually nonexistent. The Department of Housing and Community Development has identified 1,800 fraudulent rental assistance applications out of nearly 500,000 statewide — 0.0036% — and none was paid.
Geoff Ross, the agency's deputy director, said it was “mindful” of California's unemployment benefits debacle that has become the most expensive government fraud case in state history.
“All of those were detected pretty easily and early,” Ross said of the fraudulent rental assistance applications. “We learned a lot from previous programs.”
Congress approved trillions of dollars in aid during the pandemic — including more generous unemployment benefits and rental assistance — often leaving it up to state and local governments to get the money out the door.
For unemployment benefits, many states last year rushed to approve checks for millions of people who suddenly lost their jobs because of government shutdown orders. The frenzied approvals made it easy for criminals to file and collect on fraudulent claims in states large and small, even collecting benefits in the names of tens of thousands of state prison inmates.
Earlier this year, Congress approved $46.5 billion in rental assistance, and most states are distributing the first tranche of $25 billion. According to the U.S. Treasury Department, more than $10 billion has gone out through Sept. 30, and officials credit that with helping avert a wave of evictions.
It's been difficult to determine if scammers are targeting federal rental assistance money nationwide with the same gusto they had while going after expanded unemployment benefits. Many states, including Missouri, Texas, Louisiana and Rhode Island won't say if they have had any fraud, claiming doing so would compromise their security.
The Treasury Department, which oversees compliance with federal spending programs, says it is monitoring various state programs for fraud but has nothing to report yet.
But among states that have disclosed information, there has been little fraud.
In Arizona where a staggering 30% of unemployment benefits paid during the pandemic went to scammers, state officials have received nearly 8,300 rental assistance applications so far. A computer program they use to verify people's identities has stopped more than 9,900 people from filing potentially fraudulent applications. It's the same program many states adopted to stop fraud in their unemployment claims.
In New York state officials say potentially fraudulent applications account for “less than a fraction of 1% of the total number of applications submitted,” according to Anthony Farmer, director of public information for the New York Office of Temporary and Disability Assistance.
“While several instances of potential fraud have been referred to law enforcement for further investigation and action, and several other potential instances remain under review by OTDA and its vendor, there have been no final determinations of fraud made at this time,” Farmer said in an email.
In Utah only about 1% of applications have been fraudulent, “and an even smaller amount of those have been paid out,” according to Christina Davis, communication director for the Utah Department of Workforce services.
Unemployment benefit systems are much larger and more complex than rental assistance programs. In California, state officials have processed more than 25 million unemployment claims and paid more than $178 billion in benefits. By comparison, California has received just over 507,000 rental assistance applications and paid out more than $1.1 billion.
Unemployment benefits also have strict eligibility rules that require people to document their employment status every two weeks and confirm they are still looking for work — requirements that were temporarily suspended early in the pandemic but have since been reinstated.
Most rental assistance programs, while requiring proof of a certain income to be eligible, only require people to check a box certifying they have been impacted by the pandemic — something the federal government has encouraged states to do.
The rollout of the federal program was plagued early on by a lack of clear guidelines and later by burdensome rules that some housing advocates argued put too much emphasis on preventing fraud. Treasury tweaked the guidance and encouraged states to allow tenants to self-report their income and risk of becoming homeless, among other things, rather than requiring them to provide piles of documents.
State housing officials also benefited because they had more time to prepare. While agencies that handle unemployment benefits were suddenly overwhelmed by millions of claims at the start of the pandemic, state housing officials had months to get ready before the money came to them and people could apply for it.
At first, states were slow to get the money out — so slow that California’s auditor warned the state was in jeopardy of forfeiting some money because they didn’t approve it fast enough. But California easily met its first funding deadline and is now averaging about $100 million payments per week, Ross said.
To root out fraud, California officials cross-checked applicants against death certificates and lists of prison inmates. The most common types of improprieties found have been multiple applications coming from the same address or people trying to pass themselves as both a landlord and a tenant.
“I feel like we have a really good handle on it,” Ross said.
Casey reported from Boston.
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