The third COVID-19 stimulus package, titled “the American Rescue Plan,” was signed into law on March 11, roughly two and a half months after the second relief aid package was passed.
The new legislation contains $1.9 trillion worth of stimulus funds, more than double the $900 billion provided in the second round, and it expands, extends and introduces a number of policies to help households and businesses suffering from the financial fallout of the pandemic. In this piece, we focus on the initiatives that could boost multifamily real estate over the coming year.
More Funds for Rental Assistance
The second stimulus package contained $25 billion for rental assistance and homeless needs, and the American Rescue Plan takes it a step further. The latest stimulus round has allocated more than $30 billion for emergency rental assistance, housing vouchers, housing counseling, and homeless support services.
Notably, there’s $21.55 billion available for state and local governments as well as American territories for helping eligible households with rent, rental arrears, and utilities and home energy costs (and arrears) for up to 18 months. Households must meet the same eligibility requirements of the prior rental assistance initiative contained in the second stimulus package.
Additionally, there is $5 billion available for rental housing vouchers for individuals or families who are homeless, at risk of being homeless, or in domestic distress, and another $5 billion for homeless support services.
Larger Stimulus Checks
The new legislation includes $1,400 stimulus checks for each adult and “head-of-household” filer (and each of their dependents) making under $75,000 and $112,500 annually, respectively. Married couples making under $150,000 annually will receive $2,800. This exceeds the stimulus checks provided in the first and second rounds, in which individuals received $1,200 and $600 each, respectively. The stimulus funds will not be available for individuals, head of households, and couples making at least $80,000, $120,000, and $160,000, respectively.
The stimulus checks will help many Americans pay their rent. More than 28.2 million people have already used or plan to use stimulus payments for rent, according to U.S. Census Bureau estimates collected from Feb. 17 through March 1.
Extension of Weekly Enhanced Unemployment Payments
The first stimulus package in March 2020 contained $600 in extra weekly payments for jobless persons who qualified for unemployment benefits. It was extended until March 14th 2021, but reduced to $300 in the second stimulus package, and the American Rescue Plan extended the extra $300 per week until Sept. 6.
The country’s workforce, which had lost more than 20 million jobs in April 2020 and reached an unemployment rate of 14.7% as a direct result of the pandemic, has reclaimed nearly 13 million jobs and the unemployment rate is currently 6.2% as of February 2021. Businesses have continued to reopen and employees are returning to the workforce, but there are currently more than 20 million Americans still receiving unemployment benefits, who may require the extra payments to pay bills, like rent.
Expansion of the Child Tax Credit
Households will get even more relief aid under the new stimulus package with expanded and advance payments of the child tax credit. The existing child tax credit provides $2,000 per child for individuals and married couples whose annual income is under $200,000 or $400,000, respectively. Now, the credit could be as high as $3,600 per child under 6 years old, and $3,000 between ages 6 and 17. Families can qualify for this expansion if they meet the new income thresholds of $75,000 for individuals, $112,500 for head-of-household filers and $150,000 for married couples. Additionally, the new legislation allows for up to half of the tax credit to be made in monthly advance payments beginning in July and ending in December. The remainder can be claimed when filing 2021 taxes.
Additional Funds for PPP Loans
The new law allocates an additional $7.25 billion for the Small Business Administration’s Paycheck Protection Program (PPP), which provides forgivable loans to small businesses and nonprofits to keep workers on staff and operational expenses paid. Forgivable loans are available for entities with 500 or less employees for a first loan or 300 or less for a second loan. At least 60% of PPP loan proceeds must be used for payroll, and the remainder could be used for qualifying expenses, such as mortgage interest, rent, utilities, and even property damage that occurred in 2020 due to public disturbances and are not covered by insurance.
The PPP program has been credited with saving millions of jobs, allowing individuals to continue to meet their financial obligations. Aside from helping companies retain workers, some real estate-related business, including property management and leasing companies, can apply for loans from the PPP funds. The ability to apply for a new first or second draw loan ends on March 31.
Whether it’s through direct stimulus checks, extra unemployment benefits, or funds to help businesses keep people employed, the third stimulus package will provide significant relief for Americans who have been suffering financially from the effects of the pandemic. It even doubles the funds for rental assistance and homeless services. These initiatives will allow many households to pay their rent, continuing to support the multifamily real estate industry much like the previous rounds of relief.