The Paletz Law Blog

State of Michigan Eviction Diversion Program

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On June 26, 2020, Executive Order No. 2020-134 was signed by Michigan Governor Gretchen Whitmer.[1] It created the Eviction Diversion Program (EDP), which took effect on July 16, 2020 immediately after the expiration of her eviction moratorium.

The EDP, which will be administered by the Michigan State Housing Development Authority (MSHDA) and run through the Housing Assessment and Resource Agency (HARA) on a county by county basis, provides rental assistance to landlords in exchange for allowing tenants to remain in their rental premises, while forgiving some amounts due and mandating installment payments. Below are additional details:

• EDP funds can only be used on rent that became due beginning on March 1, 2020, and through the end date of the Governor’s COVID-19 State of Emergency, which remains ongoing.
• Tenants with income up to 100% of the area median income are eligible for the assistance. The amount of assistance depends on the tenant’s income, and the lower the income, the greater percent of assistance they are eligible for. EDP funds are anticipated to last until the end of the year, based on State projections. Tenants can only participate in the program one time.
• Up to 90% of a tenant’s COVID-19 debt can be paid with EDP funds. However, in order for a landlord to receive EDP funds, it must waive any late fees or penalties, and must forgive 1/9th (approx. 11.1%) of the remaining amount due for every dollar received with EDP funds. For example: If a Landlord receives $450 of EDP funds on a $1,000 COVID-19 arrearage, it must forgive $50 (which represents 1/9^th of $450), and the tenant then has up to 12 months to pay the remaining $500 in equal installments.
• Conditional Dismissals entered at court will outline the payment terms, and they typically allow the opportunity for a judgment and writ to be sought upon default. The implication is that a court case would ultimately need to be filed in order to protect the landlord’s remedies. Further, the share of the debt paid by EDP funds will be paid in a lump sum.  However, the tenant’s share of the debt is to be paid in either 12 equal monthly installments or a potentially shorter period if agreed to by all parties and approved by the court as well as the agency administering the funds.

Given that the EDP is a new program, application of it may vary based on jurisdiction[2] and it is subject to change. Also, Landlords are not required to opt-in to the Eviction Diversion Program. The administration of these funds is no doubt going to be slow, and giving tenants up to 12 months to pay the balances, as well as the rent discount, is going to deter many from opting in.

It is also very concerning from an equitable standpoint that the EDP is giving a rent discount to those who have not paid rent for perhaps several months, whereas those who have diligently made efforts, even often in times of hardship, to follow the terms of their lease with the landlord end up paying more. This moral hazard seemingly rewards those who did not adhere to their lease obligations, and monetarily punishes those who did.

The Bottom Line: Any funds available to landlords through the eviction diversion program are a good development, as well as and more importantly finally allowing the judicial branch to handle landlord-tenant cases. But government funds come with government strings – so we shall see how this is going to play out.

[1] https://www.michigan.gov/whitmer/0,9309,7-387-90499_90705-533074–,00.html

[2] The City of Detroit, in a partnership with Lakeshore Legal Aid, Michigan Legal Services, and the United Community Housing Coalition (UCHC), is also making available funds to Detroit renters through a separate program. The State has allocated $50 million for this program, which will be run through the end of the year with funds dispersed on a first-come basis.