Denver could be stuck with tens of millions of dollars in homelessness mitigation costs, after the city’s request for federal pandemic-relief reimbursement for homelessness mitigation was initially deemed ineligible.

The Federal Emergency Management Agency (FEMA) has said part of Denver’s requested $40 million reimbursement for homeless sheltering, dating back to July 2021, is not eligible for reimbursement because of changes made to the city’s public health orders in early 2021.

Denver city officials estimate the portion in question could be between $9.4 million and $16.8 million.

FEMA provided $84 million to Denver’s congregate sheltering and non-congregate sheltering operations conducted from March 2020 through June 2021, a FEMA spokesperson explained. But when local public health orders changed by “removing social distancing requirements for critical businesses, such as emergency shelters, and ‘strongly encouraging’ those type of mitigation measures instead,” FEMA spokesman Phil Wernisch explained in an email, the city’s congregate sheltering practices no longer qualified for the federal program intended to help local governments.

“FEMA has communicated to the city that changes to local and state Public Health Orders, which no longer require social distancing, along with updated FEMA policy meant that congregate sheltering costs will no longer be eligible for reimbursement.“

City officials have stressed that the federal agency is only considering a denial of the request, and that a final decision hasn’t been made.

“We are in active negotiations with FEMA on this and continue to believe the costs are eligible for reimbursement,” Denver finance department communications director Julie Smith wrote in an email.

Between $23.7 million to $31 million of the $40 million request should qualify for reimbursement still, Smith said.

“We have recommended that the city separate items within the current request so costs can be clearly understood, and FEMA can proceed with reimbursement for eligible expenses.” Wernisch explained, “Once an official determination has been issued, the city has the right to file an appeal of the decision within 60 days.”

Even though the public health order changes predate the reimbursement made to the city through June 2021, Wernisch said FEMA does not intend to take back any of the funding already provided to the city.

What a denial of the reimbursement could practically mean for the city’s homelessness efforts isn’t clear.

“We have not received a denial of federal emergency funds, and thus, we have not made decisions about what such a loss could mean for our programs,” Denver Department of Housing Stability communications director Sabrina Allie wrote in an email. “Since the pandemic began two years ago, we have worked diligently to consider every possibility and scenario for how to fund and provide these life-saving services.”

A recent report on homelessness found that the number of people using emergency shelters on a given night in metro Denver increased 40% last year, and the number of people experiencing homelessness for the first time nearly doubled. Almost half of the homeless population goes without shelter on any given night, same report found. 

On Feb. 1, Denver Mayor Michael Hancock announced a new initiative to house hundreds of people experiencing homelessness in the coming months, and touted the success of a similar program from late 2021.

For additional information and to access the housing resources, click here.