Feds won’t reimburse California $300 million for homeless housing amid COVID. Congress wants answers

California cities and counties might be on the hook for more than $300 million they spent placing thousands of homeless residents in hotels in the midst of the COVID-19 pandemic.

At the time, local officials made the unprecedented move under the impression that the federal government would reimburse much of their cost for offering shelter, without time limits, to unhoused people at elevated risk of severe symptoms. But the Federal Emergency Management Agency says that they were mistaken and that the agency had only agreed to pay for hotel stays of up to 20 days.

Now, concerned members of the California delegation want answers. A Monday letter by Rep. Robert Garcia (D-Long Beach), signed by 34 other Democratic members and one Republican — Rep. David Valadao (R-Hanford), asks FEMA Administrator Deanne Criswell to reconsider and reimburse cities that are already strapped for cash.

“We’re talking about the single largest loss of life event that we’ve had to go through in over a generation,” Garcia said. “This idea that we’re not going to, in this massive emergency, fully reimburse cities and counties for housing folks ... is crazy. FEMA has a responsibility to fix this problem.”

Los Angeles stands to lose out on $60 million spent from its general fund, nearly a third of the $194 million submitted to FEMA for reimbursement. The city already faces hiring limits due to a budget shortfall.

“Every dollar would help us fill some of those vacancies,” said assistant city administrative officer Ben Ceja.

The issue stems from a letter sent Oct. 16 from FEMA Regional Administrator Robert Fenton to Nancy Ward, the director of California’s Office of Emergency Services.

Gov. Gavin Newsom terminated California’s statewide pandemic stay-at-home order June 11, 2021, at which point more than 70% of adults had received at least one vaccine dose.

Fenton told California officials that FEMA would limit reimbursements during the two years after the order was lifted to hotel stays of up to 20 days. That’s “in accordance with the [Centers for Disease Control’s] recommended isolation and quarantine period,” he wrote.

Emergency hotel placements were offered to people who had been exposed to or tested positive for COVID-19 and had nowhere to isolate, and those who were considered high risk, such as people over 65 or with underlying health conditions. Unhoused people in encampments and congregate shelters broadly were at higher risk of exposure to the virus.

Fenton wrote that the rules for reimbursement were laid out in letters to California as early as March 27, 2020. Those requirements did not change, he said, though the prior letters don’t explicitly lay out the 20-day cap.

The COVID-19 pandemic was the largest disaster response in FEMA’s history. The agency said it has provided California more than $9.4 billion in COVID-19-related assistance, and that all states and local governments are subject to the same policy and reimbursement process for sheltering homeless people.

“FEMA under its Public Assistance Program works closely with state, tribal, territorial and local governments to provide all eligible and available funding for reimbursement, and will continue to do so for those impacted during the pandemic,” said acting FEMA press secretary Daniel Llargués.

California officials tell a different story.

After declaring a state of emergency over COVID-19, Newsom launched Project Roomkey in April 2020 to help unhoused people safely isolate themselves in hotels and motels to prevent the virus from spreading.

Some 62,000 people were sheltered through the program.

Local counties and cities fronted the cost of hotel leases and food and service providers with the expectation that they’d be reimbursed. FEMA’s commitment was critical to California’s ability to protect its residents, Garcia’s letter states.

Initially, FEMA agreed to cover 75% of eligible expenses, but in January 2021 the agency agreed to reimburse all costs.

Fenton’s letter in the fall came as a shock.

“This October 2023 policy decision comes long after local governments across our state had already expended significant local resources under Project Roomkey with the full expectation for reimbursement,” the members of Congress wrote. “We note that no previous cap had ever been noticed by FEMA.”

California officials argue that the indefinite length of stay was important for public health and to allow residents to transition to different housing. The program wasn’t perfect — in Los Angeles, it never got close to the goal of securing rooms for all estimated 15,000 eligible homeless people, though it maintained a long wait list and many of those housed left without explanation.

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The reimbursement losses range from hundreds of thousands to hundreds of millions: $114 million for San Francisco city and county, $22 million for Ventura County and $200,000 for Madera County. Some jurisdictions that already received compensation could be forced to pay the money back.

Garcia said he’s intimately familiar with Project Roomkey from his days as Long Beach mayor. Long Beach stands to lose $6.2 million it spent housing homeless residents.

The situation erodes trust between California localities and FEMA, he said.

“I remember being at the table when cities like mine were being told they’d be fully reimbursed for this,” Garcia said. “So it’s quite disturbing and quite frankly not acceptable that counties and cities across the state essentially could lose more than $300 million for previous expenditures that we had all the reason to believe would be reimbursed.”

In January, the Governor’s Office of Emergency Services sent FEMA a letter urging it to reconsider the cap.

“California is committed to maximizing federal aid to communities and has been aggressively pushing for FEMA to rescind the decision to deny promised assistance to local governments,” said Emergency Services spokesman Brian Ferguson.

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Had there been clearer guidance, Los Angeles would have recommended the program be limited to stays of 20 days or less, said City Administrative Officer Matt Szabo.

Wendy Huff Ellard, a disaster recovery attorney who represents four California counties seeking FEMA reimbursement, as well as others in Texas and New York, said some localities will face significant difficulty recovering from the loss of the funds they spent.

“The cities and counties in this case have relied on FEMA providing funding for the program,” she said. “It’s impossible to go back and change what they’ve done.”

Ellard said California is at the forefront of what she thinks will be denials across the country. When reimbursement requests started rolling in, she said, “I think FEMA realized how big the programs were and that it perhaps should have issued more specific parameters.”

Llargués, the FEMA spokesman, said that’s not true.

“FEMA did not revise eligibility for non-congregate sheltering or any other COVID-19 related activities in order to reduce costs,” he said.

Once FEMA issues application decisions, California governments that receive denials can begin an appeal and arbitration process. That could take close to a year, Ellard said.