So far, little fraud evident in rental assistance programs

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After falling victim to massive unemployment fraud, housing officials in California and other states are reporting some fraudulent applications to their rental assistance programs.

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Sacramento, Calif. — After seeing scammers 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 used it to pay them said. from unpaid rents of people.

But in the eight months since California’s rental assistance program began, fraud has been virtually non-existent. The Department of Housing and Community Development has identified 1,800 fraudulent rental assistance applications out of approximately 500,000 statewide – 0.0036% – and none were paid.

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The agency’s deputy director, Geoff Ross, said it was “careful” about California’s unemployment benefits debacle that has become the costliest government fraud case in state history.

“All of them were detected very easily and quickly,” Ross said of fraudulent rental assistance applications. “We’ve learned a lot from past programs.”

Congress approved trillions of dollars in aid during the pandemic – including more generous unemployment benefits and rental assistance – often leaving it to state and local governments to get them out the door.

For unemployment benefits, several states rushed last year to approve checks for millions of people who suddenly lost their jobs because of government shutdown orders. The frenzied sanctions made it easier for criminals to file and collect fraud claims in states large and small, even collecting benefits in the names of thousands of state prison inmates.

Earlier this year, Congress approved $46.5 billion in rental aid, and most states are distributing the first tranche of $25 billion. More than $10 billion has been passed out as of September 30, according to the US Treasury Department, and officials are credited with helping to stem a wave of evictions.

It has been difficult to determine whether scammers are targeting federal rental aid funds nationwide with the same enthusiasm that they were going after expanded unemployment benefits. Several states, including Missouri, Texas, Louisiana and Rhode Island, would not say whether they had been fraudulent, claiming that 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 yet to report anything.

But in the states that have disclosed the information, there has been very 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. The computer program they use to verify people’s identities has blocked more than 9,900 people from filing potentially fraudulent applications. This is the same program that many states have adopted to prevent fraud in their unemployment claims.

In New York, state officials say potentially fraudulent applications “less than 1% of the total number of applications submitted,” according to Anthony Farmer, director of public information for the Office of Temporary and Disability Assistance in New York. account for.

“While multiple instances of potential fraud have been referred to law enforcement for further investigation and action, and many other potential instances are subject to review by OTDA and its vendor, no final determination of alleged fraud has been made at this time.” It is,” said the farmer. an email.

In Utah, only 1% of applications are fraudulent, “and a small amount of them have been paid,” according to Christina Davis, communications 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 out more than $178 billion in benefits. By comparison, California has received just over 507,000 rental assistance applications and paid out over $1.1 billion.

Unemployment benefits also have strict eligibility rules, which require people to document their employment status every two weeks and confirm that they are still looking for work – requirements that have been temporarily postponed due to the pandemic. was suspended early in the year but has since been reinstated.

Most rental assistance programs, while requiring proof of a certain income to be eligible, only require people to check a box to certify that they have been affected by the pandemic – something that the federal government encouraged the states to do so.

The rollout of the federal program was plagued by a lack of clear guidelines and subsequent cumbersome regulations that some housing advocates argued placed too much emphasis on preventing fraud. The Treasury changed the guidance and encouraged states to allow tenants to report their income and risk of homelessness, among other things, instead of requiring them to provide piles of documents.

State housing officials also benefited as they had more time to prepare. While the agencies handling unemployment benefits were suddenly overwhelmed with millions of claims at the start of the pandemic, state housing officials had months to prepare before the money came in and people could apply for it.

At first, the states were slow to withdraw the money—so slow that California’s auditors warned that the state was in danger of forfeiting some of the money because they didn’t accept it fast enough. But California easily met its first funding deadline and is now paying an average of $100 million per week, Ross said.

To root out fraud, California officials cross-check applicants against death certificates and lists of prison inmates. The most common types of irregularities are multiple applications coming from the same address or people trying to pass themselves off as both landlord and tenant.

“I think we have really good control over this,” Ross said.

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Casey reported from Boston.

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