California Tenants Caught Up in State Fraud Probe, Told to Return Rent-Relief Payments

When Flor Rodriguez got a $9,000 rent-relief check in the mail last December, it felt like an answer to her prayers. 

Even before the pandemic started, it was hard for Rodriguez to make rent. She worked in Napa’s vineyards for years, but wildfires put her out of her job picking grapes. Then COVID slashed her hours cleaning houses. 

She struggled to come up with $1,650 a month for the two-bedroom apartment she shares with the 9-year-old and 2-year-old daughters she’s raising on her own. The 39-year-old immigrated from Guatemala four years ago and has an asylum case pending.

She was stressing about the possibility of losing their home when a social worker told Rodriguez about the state’s COVID rent-relief program, which launched in mid-March of 2021 and allowed tenants and landlords to apply for up to 18 months in assistance.

Rodriguez got approved and says she used the money to help cover her rental debt. But five months later, in April, the state told her she had to return the money. 

California has handed out more than $4.3 billion in emergency COVID rent relief since the start of the pandemic. For Rodriguez and many other tenants with lower incomes who fell behind on rent, it’s been a lifeline. 

Now the state is asking thousands of applicants to pay back the money — in most cases, after they received it. 

“How am I going to come up with that money if I don’t have it?” Rodriguez said. 

Who’s caught — and who’s caught up?

The state has issued almost 19,000 notices to California tenants and landlords who were originally approved for rent relief, saying they actually weren’t eligible. The vast majority of those denials — over 16,500 of them — went to people who’d already received the funds. 

It’s part of an effort to catch fraud, according to the Department of Housing and Community Development.

“People get really clever. They are very, very smart and they do a lot of things to try to end-run around whatever kind of security you build into your systems,” said Jessica Hayes, who, as federal recovery branch chief for the HCD, manages its rent-relief operation and other federally funded programs.

With brazen examples of fraud in pandemic-aid programs surfacing around the country, Hayes touts the department’s track record. Administrators had to balance responsibly managing taxpayer money with a mandate from state lawmakers to get the program running quickly, she says.

“It would have been 100% preferable to have caught every single one of these on the front end,” she said. “But it’s also not possible. There’s no physical way when your goal is to be as open as possible and really help as many people as possible.” 

Hayes wouldn’t disclose specific fraud-protection measures out of concern it would compromise the department’s work.

But advocates say tenants who desperately needed the assistance have gotten wrongfully caught up.

A helping hand

At the Napa County Recovery Center, case workers have been working to help clients like Rodriguez. 

The center was one of many community organizations around the state that got a grant to work with renters in need and help them access the program. 

But out of 147 people who got approved with their help, 35 were later denied. For many of them the news came months after they’d received the money. 

“It felt like a stab in the back,” said Becky Castañeda, 20, one of the case managers in Napa hired to reach out to potential applicants and support them through the process. “What was supposed to be an assistance to get tenants out of debt just put them back in it.”

The state does give applicants a chance to appeal before coming to a final decision and sending out a “recapture notice.” But advocates say the appeal process is overly difficult. Many of the denial notices cite “inconsistent or unverifiable information” but offer no specifics.

“How are they supposed to know what supporting paperwork to provide on their appeal?” Castañeda said. 

She’s working with a mother of four named Monica who’s being asked to pay back $3,400. (We’re not using Monica’s last name to protect her privacy because she’s undocumented.) She says she lost her income when the restaurant where she works closed for a year early in the pandemic. She applied for aid in November, and was approved in mid-February. In March, after receiving a check, she got a notice informing her she’d have to pay it back.

After reviewing the application, Castañeda and her colleagues couldn’t identify any inaccuracies or unverifiable information, so, like they’ve done with many of these appeals, they sent in the same documents again — PG&E bills, lease agreements, income documentation. They submitted the appeal in early April and are still waiting on a decision, Castañeda says. 

“It would have been better if they were honest from the beginning because now it seems like it was all a trick,” said Monica, 34, who’s desperate for an answer on the appeal. She’s stressed, wondering how the state will collect. She and her husband are back to working part-time now, she says, and while they’re caught up on rent for the time being, they’re still behind on some bills.

Vague charges, denied appeals

In San Francisco, attorney Ora Prochovnick is representing a tenant who’s been told that her property manager needs to return $31,000 in rent relief they got on her behalf. Prochovnick, director of litigation and policy for the Eviction Defense Collaborative, got involved after the client appealed the decision and was denied. She says the reason given for the denial was so vague it didn’t give her client a real chance to defend herself.

Prochovnick says HCD finally provided a detailed list of the alleged problems with the application two months after the notice was issued, and only after she applied pressure. 

“None of them had any merit and it didn’t take a lot of digging to find that,” Prochovnick said. “So it seems that what they did is a very cursory surface investigation and latched on to the easiest opportunity to deny rather than doing any homework so that they could approve.”

Among the list of issues reviewers flagged was an objection to the quality of her driver’s license photo and the font used on it, Prochovnick says. She has seen the license and calls the implication that it’s fraudulent “one of the craziest accusations I’ve ever read.”

The tenant is facing eviction, but Prochovnick says the landlord has agreed to put the process on hold while lawyers try to resolve the problem.

For Prochovnick, the case points to broader equity concerns.

“I am an experienced attorney who’s been a litigator for more than 35 years and I’m dumbfounded by this process,” she said. “I’m just imagining all of the many tenants who don’t have those types of resources and are just told, ‘Give back the money.’”

Earlier this summer, tenant advocacy groups filed a lawsuit on behalf of renters who were denied rent relief. A judge has ordered the state to stop issuing denials while the suit moves forward. For now, HCD officials say demands for repayment are on hold to ensure people have a chance to appeal. 

“We hope the ultimate outcome of our lawsuit is a fairer process to ensure that everyone has an equal opportunity to get the help they need in order to stabilize their housing and not become homeless,” said Lorraine López, senior attorney for the Western Center on Law and Poverty who’s working on the case.

The suit alleges HCD’s denial process doesn’t provide applicants due process, and seeks a more transparent appeals process that grants them access to details about the reasons they were denied. 

Of the 18,871 denials HCD issued after applicants were approved, only 2,503 have been appealed, according to the department, but there’s still time. 

In Napa, case managers at the recovery center have only had seven appeals approved at this point, of the 25 they submitted. 

An uncertain future

Even as Flor Rodriguez waits on her appeal, she’s preparing to move. 

She’s being evicted by her landlord — not because of her difficulties with the rent-relief program, but because the landlord told Rodriguez she plans to renovate the apartment. 

At home, with her 2-year-old daughter, Carmen, in her arms, Rodriguez is waiting for a ride from a friend to go see another apartment. But the odds aren’t in her favor. The vacancy rate for rental housing in the city of Napa is just 2%, according to the city’s Housing Division. 

After weeks of looking for apartments, Rodriguez still hasn’t found anything. She says her 9-year-old daughter has started to ask what’s going to happen. “She’s worried we’re going to end up on the streets,” Rodriguez said. 

She tells her daughter it will be OK. She’s trying to convince herself, too.

Shortly after KQED published this story, attorney Ora Prochovnick received word from the state Department of Housing and Community Development that her client’s case was resolved and she would be able to keep the rental assistance she already received.