Some TX landlords got a piece of $2 billion in rent relief money and evicted their tenants anyway

TEXAS (KTRK) -- When Cherice Scott received a notice last September that she, her husband and their four children would soon be kicked out of their Katy apartment, she said employees at the complex told her not to worry about it.

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Scott and her husband had fallen behind on rent in June after Scott stopped working to take care of her youngest daughter, who has Down syndrome, and the medical bills piled up.

The next month, their landlord started the eviction process, even though Scott, 37, had taken the rental office staff's advice and requested help from Texas' $2 billion, federally backed rental assistance fund. Scott said she spoke to the office staff and walked away believing she didn't need to worry about eviction as they waited for the relief money - or to bother showing up to court.

When the state sent the rent relief check to the wrong address, Scott said the staff assured her they were working to get the money re-sent.

"I trusted them," Scott said. "I shouldn't have."

Scott had landed a new job as a dietician at a local hospital when she returned from work one afternoon in early October to find most of her belongings spread out on the lawn and the locks changed. Thieves had walked off with their electronics.

Jeff Williams, a Harris County justice of the peace, had approved the eviction without Scott present in court - a typical outcome in eviction cases when tenants don't show up to their hearings.

Scott wanted to know: What happened to the rent relief money?

After weeks of phone calls, a Texas Rent Relief program staffer told Scott that her former landlord had indeed received the rent relief money in mid-November - more than $11,000, enough to cover the six months' back rent they owed.

"They were very well informed that that money was there and it was coming to them," said Scott, who's now living in a short-term rental in Missouri City with her four kids. "Yet they still pushed us out."

Scott's former landlord - Blazer Real Estate Services, a Houston property management company - did not respond to calls and emails requesting comment. An employee at Blazer's office who answered the phone declined to answer questions.

The federal government and the state of Texas both had people like Scott and her family in mind when they hurriedly created a safety net for struggling renters amid the COVID-19 pandemic.

Texas received more than $2 billion out of the American Rescue Plan Act, the $1.9 trillion federal stimulus package President Joe Biden signed into law last year, to set up the Texas Rent Relief program, designed to help such families stay in their homes as the pandemic triggered a tsunami of business closures and hundreds of thousands of layoffs.

But The Texas Tribune interviewed tenants from across the state who were approved for federal rental assistance and were evicted anyway.

Two landlords, like Scott's, evicted their tenants in the period between the initial rent relief application and when the government money arrived and then kept it - an apparent violation of the program's requirements for landlords. In those cases, the check was initially sent to the wrong property - and only arrived after the tenant was kicked out.

One landlord received federal money through the Texas Rent Relief program and later chose not to renew their tenant's lease - which was legal in that case.

In order to receive federal rent relief funds through the state, landlords had to sign an agreement that forbids them from evicting tenants for nonpayment during the time period covered by the assistance.

But housing advocates and lawyers who represent tenants facing eviction say they routinely see cases of Texas landlords accepting thousands of dollars from the government and evicting the tenants the money was intended to help.

The Tribune contacted government agencies involved in the program and found that none of them - including the Texas Department of Housing and Community Affairs, which runs the state rent relief program - track how often this happens.

And it's not just happening in Texas.

According to the National Housing Law Project, 86% of the 119 lawyers across the country who responded to a survey gauging how the end of a federal moratorium on evictions was affecting tenants said they had seen cases where landlords either declined to apply for assistance from rent relief programs or took the money and proceeded to kick out their tenants.

"The industry standard here is fraud," said Stuart Campbell, managing attorney at Dallas Eviction Advocacy Center, speaking generally about instances in which landlords receive rent relief funds and evict tenants. "These landlords are the prime beneficiary of these rental assistance programs and just en masse have been violating the provisions of the programs and on top of that consistently misleading judges and securing judgments and evictions, even when they're receiving funds."

Many landlords have tried to work with their tenants to try to avoid evictions for back rent during the pandemic, said David Mintz, vice president of government affairs for Texas Apartment Association, a trade group of rental property owners.

But receiving rent relief dollars wasn't guaranteed, so some landlords filed for eviction in case the money didn't come through and as a last resort after months of going without rent, Mintz said. Under the program rules, landlords are allowed to evict only in specific situations, such as lease violations related to criminal activity, property damage or "physical harm" to others, Mintz pointed out.

If tenants feel they have been unjustly evicted, they can appeal the eviction, Mintz said. Any allegations that "either a renter or a rental property owner isn't following the program rules" should be reported to the program to be investigated, he said.

"We believe owners have done their best to try to understand the intricacies of the program and comply with its requirements," Mintz said.

When Congress set aside more than $46 billion for emergency rental assistance, they intended for that money to keep people in their homes, said U.S. Rep. Sylvia Garcia, a Democrat from Houston. The idea of landlords taking rent relief dollars and still evicting tenants is "outrageous," she said, and could warrant investigation.

"I think any landlord that accepted money or got money directly for rent absolutely should not have evicted anyone," Garcia said. "And if they did, it should be audited and reviewed by (government investigators) so that we can recoup our funds for the misuse of the dollars."

A group of Austin-area lawmakers - state Reps. Celia Israel, Sheryl Cole, Vikki Goodwin, Gina Hinojosa, Donna Howard and Eddie Rodriguez - alerted TDHCA this week that they have seen "alarming calls from constituents" whose rent relief money went to the wrong address, and called on the agency to fix the problem. Those constituents were told "they were unable to receive their eligible assistance" while the agency recouped the funds, the lawmakers wrote Thursday to TDHCA board Chair Leo Vasquez.

"Our constituents experienced significant unreliability during an already challenging set of circumstances, all the while, both renters and landlords alike had unclear direction from TDHCA for weeks - or months - if and when the approved funds would finally arrive," the lawmakers wrote.

Texas closed the rent relief program to new applicants in November, citing overwhelming demand for rental assistance dollars. The state received another $47 million in March, which TDHCA said would go toward helping tenants who applied before the November cutoff. As of Wednesday, the program has assisted more than 300,000 households.

The money was considered crucial to prevent a wave of tenants losing their homes as eviction bans expired; in recent months, three Texas metro areas - Houston, Dallas and Fort Worth - have seen some of the highest eviction case filings in the country among the 31 cities tracked by Eviction Lab, a research center based at Princeton University that tracks eviction filings.

To qualify for rental assistance from the Texas program, tenants had to fall below a certain income level, prove they experienced some kind of financial hardship during the pandemic and make the case that they would be at risk of losing their home if they didn't receive rent relief.

A collection of state and federal agencies - including the TDHCA - are tasked with looking into allegations of fraud, waste and abuse in rent relief programs. But none of the agencies contacted by the Tribune would say whether any landlord has been credibly accused of taking rent relief money and improperly ousting their tenants, or whether they have imposed penalties on landlords for doing so.

Some tenants who spoke to the Tribune about their cases said they called a hotline used to report fraud, waste and abuse in the state rent relief program and never heard back about their complaints.

Scott said she complained to a program staffer in October about her landlord's conduct, and the staffer referred the complaint to the program's anti-fraud division. Two months later, Scott received an email acknowledging her complaint - but said she hasn't heard back since.

"I was a good tenant"

Stephanie Gates also thought the state rent relief program would save her from an eviction. In her case, the check arrived in time - but went to the wrong place.

At the height of the pandemic in 2020, Gates, a 42-year-old Round Rock resident, saw her hours as a temp working in guest services at Austin-Bergstrom International Airport cut in half, and by January 2021 she was behind on rent for her two-bedroom apartment. In June, Gates said she lost her job after she missed a week of work because of a medical problem.

But in September, Gates received good news: Not only did she qualify for help paying back rent, but the program would cover her rent through November - 11 months all together, totaling $12,740.

"I'm sitting thinking, 'My rent's paid, OK, all I have to worry about is December and January,''' Gates said.

Then in December, the property owner filed an eviction case against Gates and gave her a notice to vacate.

It turns out the state program had sent the check in September - to the wrong address.

At a Jan. 10 eviction hearing, Gates said she told Williamson County Justice of the Peace KT Musselman she had been approved for rent relief and explained that the check went to the wrong address - facts she said the property manager, who represented the landlord in court, backed up.

Despite that, the property manager told Musselman they wanted to proceed with the case, Gates said. Musselman sided with Gates' landlord and granted the eviction.

In a phone interview, Musselman declined to say why he ruled in favor of Gates' landlord. But Musselman expressed sympathy for the landlord, noting that they had gone 11 months without rent from Gates. Even if the rent relief check was in hand, it wouldn't have covered the amount sought by the landlord, Musselman said.

"I can understand an apartment complex coming at this point in the process and saying, 'It's time to figure out what's going to happen here or move forward,'" Musselman said.

Alexander Stamm, an attorney with Texas RioGrande Legal Aid who is representing Gates, said Musselman shouldn't have let the trial take place at all because of a Texas Supreme Court order requiring judges to postpone eviction cases if a landlord confirms they have joined a tenant's application for rent relief.

"In our view, the judge made a mistake letting the trial proceed as soon as (the property manager) confirmed that the owner had a pending application for rental assistance," Stamm said in an email.

On Jan. 27, Williamson County constables came to execute the eviction. Newly homeless, Gates stood on the curb in the cold guarding her belongings until a friend could get off work to help her move them.

"I did everything right, and to still have my stuff thrown down the street ... it's just something that I'm still trying to process," Gates said.

Less than two weeks after Gates' eviction, she spotted something in her online account with the rent relief program: A pair of checks totaling $12,650 had cleared the property owner's bank account. Her former landlord had taken the rent relief funds after they evicted her.

Attempts to reach the property owner - RDRH Holdings Inc., an Austin-based corporation - and its president were unsuccessful. Lee Reznicek, a property manager who oversees Gates' former home for Austin-based Hill Country Property Management, declined to comment when reached by email.

Stamm alleges that RDRH Holdings violated six requirements set out by the program in a contract landlords must sign in order to receive funds.

For example, the program bars landlords from accepting rent relief payments after they evict a tenant. The rent relief checks cleared RDRH's bank account on Feb. 4 - less than two weeks after Gates was evicted.

Landlords who received rent relief dollars can't evict tenants "for any reason related to rent or fees during the time period covered by the funds," according to the program requirements. But those are the exact grounds that RDRH Holdings cited when it sued to evict Gates, Stamm said.

According to the program rules laid out in the agreement Gates' landlord signed July 13 to receive the funds, if a landlord receives rent relief money after evicting the tenant, they're supposed to send the money back to TDHCA within 10 days. As of Feb. 17, Gates' former landlord hadn't done so, Stamm said.

"You can't have it both ways with Texas Rent Relief," Stamm said. "You can't get paid directly, and also break the promises you made that were designed to keep someone in their home."

At the moment, Gates is bouncing back and forth between her father's house and a friend's while she appeals her eviction in an attempt to strike it from her record and make it easier for her to find a new place.

"I was a good tenant," Gates said. "You know, we just had the problems from (the pandemic) last year, which everybody did."

"Tenants are still the ones holding the bag"

Both the federal and state government added enforcement provisions when they created the rent relief programs. In Texas, two state agencies - the TDHCA, which oversees the statewide rent relief program, and the State Auditor's Office - have the authority to look into allegations of waste, fraud or abuse within the program. At the federal level, that job falls to the U.S. Treasury Department's Office of Inspector General.

TDHCA operates the state hotline where complaints originate. If the agency finds the allegations are credible, it can refer the cases to the state auditor's office, the Treasury's inspector general or local law enforcement agencies.

TDHCA says it has received more than 7,500 complaints through the hotline - not all of them related to fraud, waste or abuse - but the agency won't say how many times it has referred cases to outside agencies for investigation. The State Auditor's Office declined to say whether it has launched any investigations into potential fraud, waste and abuse of the program.

As of last week, $20.1 million in rent relief has been recaptured, TDHCA spokesperson Kristina Tirloni said, adding that not all of that was connected to allegations of fraud, waste or abuse.

Tirloni said the agency doesn't track what portion of those clawed-back funds came from landlords found to have improperly evicted their tenants after receiving assistance - or categorize what scenarios would result in recapturing the money.

"TDHCA has taken very seriously the responsibility of helping Texas renters and landlords overcome the financial burden brought on by the pandemic," Tirloni said.

But none of that recovered money is helping tenants ousted from their homes, said Julia Orduña, Southeast Texas regional director for Texas Housers, a nonprofit low-income housing advocacy group.

"Maybe the money will be returned to Treasury and the wrong will be righted for the government," Orduña said. "But the tenants are still the ones holding the bag."

That happens even when tenants win their eviction cases in court.

Diana Johnson, 35, was waiting on rent relief in January when her landlord tried to evict her and her seven children from their three-bedroom apartment in Southeast Dallas.

Johnson, a manager of a hair salon and certified nursing assistant, had asked the program in October for help covering rent while she recovered from giving birth to her son and couldn't work. Texas Rent Relief approved her for a little over $3,100 - about three months' worth of rent.

Johnson's landlord - a partnership owned by Mark Musemeche, a Houston developer - had already accepted more than $4,200 in federal money in August to pay four months of rent, according to a copy of Johnson's rent ledger she provided to the Tribune. Around that time, Johnson said she caught COVID-19 and had to miss a month of work.

Johnson had asked the office manager whether they had received the latest check, she said. They told her there was no way to see if they had received it, she said.

The morning of her March 18 eviction hearing, a Texas Rent Relief staffer told Johnson that her landlord had cashed the check two days earlier and gave her the check number. Johnson's lawyer recorded the call.

When Dallas County Justice of the Peace Juan Jasso heard about the check and phone call, he asked the property manager whether they had received the check, Johnson said. The property manager quickly confirmed that they had - and Jasso tossed the eviction.

But Johnson's victory was short-lived. The same day, her landlord told Johnson her lease wouldn't be renewed when it expired the following week, she said.

Johnson's trying not to dwell on the saga. She's focused on finding a new place for her and her seven children to live. Her landlord gave her until the end of May to do so.

"The more I sit here and think about it, I just know to just go ahead and do what I need to do," Johnson said.

Calls to Musemeche were not returned. An employee at the apartment complex, Crestshire Village Apartments, declined to comment.

"It takes away your pride"

Since their October eviction from their Katy apartment, Scott and her four children have lived in hotels and other temporary settings.

She said the past few months have been hard. Around the time of the eviction, Scott and her husband separated. He took the car, which made it difficult for Scott to hunt for work and shelter. Then she gave up her job at the Katy hospital to care once more for her youngest daughter.

Weeks after her eviction, Scott received an email from Texas Rent Relief on Nov. 9 acknowledging that it had initially sent the check to the wrong address. But the program had fixed that error, the email said.

"As the tenant was evicted from the unit associated with this application, pursuant to program policies, rental arrears are only approved for the time period the tenant was in the unit," the email reads.

In other words, Scott had already been evicted, but Texas Rent Relief was letting the landlord keep the money - more than $11,000 - in apparent contradiction of its own policy.

Tirloni, the TDHCA spokesperson, declined to discuss individual tenants' cases, including Scott's, citing state law that prevents TDHCA from disclosing information about people who receive benefits from programs administered by the agency. But she said the program doesn't allow landlords to receive back rent if they've evicted a tenant - the opposite of what the email to Scott said.

"We strive to always do better," Tirloni said in an email. "As much as we work to mitigate human error, the potential for application errors exists. If issues are discovered or brought to our attention, like payments sent to an incorrect address, or payments sent to a landlord who has evicted the tenant, we will take corrective measures, like recapture or other necessary steps."

Meanwhile, Scott is trying to rebuild her life. In late March she started a new job teaching at an early learning center. But she still hasn't found a place to live. She said she has spent thousands of dollars on application fees to at least 10 homes and apartment complexes - and all of them have denied her because she now has an eviction on her record.

"It's embarrassing," Scott said. "It takes away your pride and makes me feel like I failed as a parent. It hurts, that really hurts. But I don't want to give up."

Disclosure: The Texas Apartment Association has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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