Hochul Pledges to Speed Up Rent Relief, as $115 Million Contractor Struggles to Hit Benchmarks

The contract granted to outside firm Guidehouse to administer the beleaguered program has begun to attract scrutiny from lawmakers and good government groups, who have also questioned the hiring of a top Cuomo advisor for a high-level position at the company.

New York’s new Gov. Kathy Hochul pledged to speed up rental assistance payments Tuesday—exactly three months after the state and a firm tapped to run the relief fund postponed the program’s launch date, and have since struggled to curb dysfunction amid widespread criticism of its rollout. 

The Office of Temporary and Disability Assistance (OTDA) and the consulting firm Guidehouse Inc. finalized a $115 million agreement on May 3, a deal that charged Guidehouse with setting up a web portal, processing applications and issuing payments through the federally-funded initiative. 

The Emergency Rental Assistance Program (ERAP) was supposed to begin fielding applications on May 24 and authorizing payments to landlords 30 days later, according to the terms of a contract obtained by City Limits. Both benchmarks were pushed back and the slow rollout has frustrated applicants statewide, but Guidehouse has not faced any penalties, OTDA said.

Nearly four months after the state and Guidehouse agreed to the deal, ERAP has issued about 9 percent of the state’s roughly $2.2 billion allotment, to the dismay of waiting tenants and landlords across New York. The state received 158,000 unique applications for the fund as of mid-August.

The Guidehouse contract skirted review by the state comptroller under an executive order issued by Gov. Andrew Cuomo in the early days of the pandemic, but has begun to attract scrutiny from lawmakers and good government groups, who have also questioned a move by a top Cuomo advisor to Guidehouse shortly after the deal was finalized.

“For any contract done during COVID, there should be a lookback,” said Rachael Fauss, a senior analyst at Reinvent Albany. “The comptroller and the legislature should take a greater interest in these issues.”

Behind from the beginning 

The 170-page contract, obtained through a Freedom of Information Law request, outlines several benchmarks that Guidehouse and OTDA failed to meet on time, beginning with the very first one: ERAP was supposed to start accepting applications from tenants and landlords on May 24.

OTDA said the agency decided to delay the portal launch until June 1, after the Memorial Day holiday had passed. Since then, the process has been plagued by inefficiencies, missing language translations, and, until earlier this month, an inability for applicants to save and resume cumbersome online-only submissions.

In a response for this story, Guidehouse said they have met their contract requirements and confirmed that they have not faced any of the penalties outlined in the terms of the agreement (the contract states that Guidehouse could forfeit a percentage of its monthly payments for failing to reach its narrow performance standards: retaining a certain number of employees and ensuring the ERAP portal does not crash.)

The firm blamed the delayed start on the state.

“The date delay was imposed by the State and had no relation to Guidehouse,” a Guidehouse spokesperson said in an email.

OTDA officials have described the challenge of starting a new, large-scale assistance program from scratch and said lawmakers failed to act earlier to establish the program. Nevertheless, the agency’s contract with Guidehouse outlines an ambitious timeline.

The rent relief fund was supposed to begin “transmitting payment authorizations” to landlords within 30 days of accepting applications, the contract states. ERAP did not begin cutting checks until late July—a few weeks after the 30-day benchmark.

Hochul gets involved

The ERAP money has started to flow in recent weeks, with OTDA issuing about $200 million to property owners on behalf of more than 12,000 households. The agency says it has earmarked, or “obligated,” another $480 million on behalf of 46,000 tenants, but has not yet issued payments to their landlords. 

The rental assistance delays are not specific to New York. Nationwide, just 11 percent of federal rent relief funds have been distributed, the New York Times reported Wednesday. New York may have fared better than most of the country in recent weeks, placing second among states in terms of money paid out or committed to landlords, according to the National Low Income Housing Coalition. The actual percentage of money distributed in New York continues to trail most states, however.

OTDA Commissioner Michael Hein said he expects New York’s upward trajectory to continue as the agency and its contractors resolve inefficiencies.

But the agency seemed to have encountered a lack of urgency at the highest level of state government: Hein told lawmakers at an Aug. 11 Assembly hearing that he had never spoken to Cuomo about the rental relief fund. 

On her first day in office, Hochul began to take a more active role. She told reporters Tuesday that she will immediately seek to speed up ERAP payments by “deploying more people to the crisis, realizing that there’s many people who have not been made aware that we have these resources to help them and connecting them to landlords.”

Later in the day, Hochul ordered a review of the program’s processes and said 100 contracted employees would be reassigned to help landlords resolve discrepancies on their applications. She told reporters she would assemble a team to make further recommendations. 

Hundreds of state and private employees are already working to process the applications and fielding calls from tenants and landlords with questions on the status of their submissions.

Those workers are in addition to staffers already provided by Guidehouse, which was required in a contract clause to assign at least 1,400 workers to ERAP by late June. Failure to meet the staffing goal would result in a 5 percent contract penalty in the July invoice, the deal states.

Both Guidehouse and OTDA said the contractor met those staffing benchmarks and has not had to pay any penalties. “As verifiable by OTDA, we have met or exceeded all staffing requirements set forth in the contract,” a Guidehouse spokesperson said. 

But by July 1, ERAP had received more than 100,000 applications, straining the capacity of OTDA, Guidehouse and a network of 11 subcontractors.

Cuomo announced July 26 that 350 additional state employees would begin handling ERAP applications to supplement the “over 1,000” contracted staff working on the program.

Close ties to Cuomo

Nearly three months into the program, some aspects of the agreement and relationship with Guidehouse have spurred additional scrutiny.

The contract lists 11 subcontractors, but the names of all but one—California-based consulting firm Nan McKay—are redacted in the documents obtained by City Limits. Hein has mentioned Nan McKay during legislative hearings in recent weeks, and has also discussed a second contract issued to the corporation Deloitte to operate a call center.

OTDA and Guidehouse declined to share the names of the 10 other firms. State officials pointed to a piece of open records law that shields companies’ supposed “trade secrets.”

Good government groups and state lawmakers have also questioned the hiring of a top Cuomo advisor for a high-level position at Guidehouse.

Shortly after Guidehouse received the contract, the firm hired Joseph Spinelli as its director of consulting. Spinelli, a longtime Cuomo family ally, served as a senior advisor and deputy secretary to the governor from March 2020 to May 2021. He previously worked at the company Navigant, which was purchased by private equity firm Veritas Capital and folded into Guidehouse in 2019. He has also served as inspector general under Gov. Mario Cuomo, a board director at the New York Racing Association and state-contracted monitor for the Administration for Children’s Services. 

OTDA said the hiring had nothing to do with the decision to award the contract to Guidehouse, which would have violated ethics rules. When contacted for this story, Spinelli referred to Guidehouse and a statement OTDA gave to the Associated Press denying any involvement in the negotiations.

“We pride our firm on strictly adhering to all ethical guidelines regarding all RFP, Contract Awards and the Confidentiality of same,” said a Guidehouse spokesperson. “At no time did Joseph Spinelli have any involvement in the NYS Emergency Rental Assistance Program (ERAP) for either Guidehouse or any of our subcontractors nor was the state aware of his application for employment with Guidehouse or subsequent offer. He has had no role in the ERAP engagement prior to or since joining the firm, and no involvement in the procurement of this contract.”

There is no evidence that Spinelli’s role with Guidehouse influenced the contract, but Fauss, from Reinvent Albany, said such hirings illustrate the tight-knit world of state politics and private consulting, relationships that  deserve attention. 

“How do we address the revolving door of people who do business with the state?” Fauss said. “People who come from the highest levels of state government have immense knowledge of how the state works and have immense power over people.”

Reinvent Albany and other reform groups have begun to call for a retroactive review of the ERAP contract and other agreements that skirted comptroller oversight under Cuomo’s procurement order. “Allowing large contracts to go unchecked risks the abuse of billions of taxpayer dollars,” said Reinvent Albany, Common Cause, Citizens Union and other groups in a joint statement June 2.

Earlier this month, Comptroller Tom DiNapoli’s office did issue a report on ERAP based on publicly available information, stating that the delayed payments suggest that OTDA “has struggled to process applications.” Despite ostensibly overseeing state finances and procurement, DiNapoli’s office said it did not have access to the Guidehouse contract.

In response to DiNapoli’s findings, OTDA spokesperson Justin Mason said the agency seeks to improve the program, but was “dismayed that this report does not accurately reflect the stabilizing impact the program is having for renters and landlords alike.”

Under ERAP rules, tenants can show proof of their application as a defense against eviction proceedings. Landlords who receive payment through ERAP cannot evict their tenant for at least a year.

“Likewise, this report doesn’t touch upon the fact that the ERAP program was tethered to the state budget process, which achieved critical tenant protections, but significantly delayed its launch,” Mason added.

Hudson Valley Sen. Elijah Reichlin-Melnick has sponsored legislation to restore comptroller oversight of most state contracts over $50,000 and told City Limits he plans to update the measure to include retroactive review of contracts awarded during the pandemic. 

“It is imperative that taxpayer money spent by the government has oversight from an independent authority,” Reichlin-Melnick said. “Moving forward and seeing the links between the Cuomo administration and the ERAP contract with Guidehouse … I will work to ensure there is retroactive oversight of existing procurement contracts added to my bill, and fight to get it passed as soon as possible when the legislature returns to session in January.”

An unfulfilled goal 

The contract also sheds some light on an issue raised by various community-based organizations since ERAP first began accepting applications. Though they have assisted thousands of tenants, the nonprofit providers lack the ability to follow up on specific submissions, identify patterns or determine where to target their outreach. 

“We still can’t access any data about the clients we’re seeing, and now what’s happening is the tenants we were able to help are calling back, requesting an update on the application,” said Lakisha Morris, chief operating officer at Catholic Charities Community Services. Her organization received a city contract to assist with ERAP applications in Manhattan.

“At this point we’re just in limbo like the clients,” Morris said.

The Guidehouse agreement states that “OTDA will work with the Contractor to make reasonable efforts to enable CBO staff to view any applications that were submitted on behalf of the CBO.” That hasn’t yet happened, despite consistent urging from the nonprofit groups.

Despite the various issues, Hein, the OTDA commissioner, told assemblymembers earlier this month that Guidehouse has fulfilled the contract’s primary performance standard: keeping the application portal up and running. The contract states that Guidehouse must ensure that the portal remains operational “99.9% during each full calendar month.”

“The ERAP System and ERAP Application are expected to be highly available, meaning 24x7X365,” the document states.

Still, Hein acknowledged that Guidehouse had failed to adequately process rental assistance applications during the early surge. 

“I think there was the hope and expectation that working with our vendor that they would be able to move through the backlog themselves,” he told assemblymembers at the time. “When we saw that wasn’t taking place we wanted to be able to take action and take action aggressively because we know that New Yorkers are frustrated and need money and the landlords need dollars and want to be able to move through this process.”

ERAP covers up to 12 months of arrears, plus three additional months of rent for low- and middle-income tenants who could not make those payments as a result of the pandemic. The state issues the funds directly to landlords, many of whom have struggled to pay their mortgage or property taxes without the monthly revenue. 

An estimated 831,000 New Yorkers owe back rent, according to analysts from the research group National Atlas Equity. The vast majority have not yet applied for ERAP funds.

According to the contract, the fund is intended to process 240,000 rental assistance applications “within four to five months from Program ‘Go-live’ date,” thus establishing a Nov. 1 deadline for the lofty goal. 

That target is within reach, as long as more tenants and landlords learn about the program and complete their applications. Hochul said Tuesday that the state would direct an additional $1 million to outreach.

So far, too few New Yorkers have applied to exhaust all of the federal funding included in ERAP, Hein previously told lawmakers. 

“Assuming we approve applications at the rate we are doing, you are in a scenario where the numbers won’t work out,” he said. “You need more applications.”