The passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 provided significant stimulus aid for individuals, families and businesses nationwide, and played a major role in supporting the multifamily sector during the pandemic. Last year, apartment occupancy and rent payments remained at high levels as the multifamily industry was resilient in the face of an unprecedented economic environment.
The federal government’s follow up stimulus package, the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act, was passed eight months after the CARES Act on Dec. 27, and has many important implications for the multifamily industry as well. The new relief package extends policies in the CARES Act and includes new funding for programs that exhausted funds in the previous round. Furthermore, the second package adds a much-needed rental assistance program to help tenants and landlords alike.
Here’s how the new stimulus package could impact the multifamily industry.
Stimulus Checks to Help Households Meet Their Financial Obligations
Under the new relief package, individuals earning up to $75,000 annually or “head of household” filers making up to $112,500 will receive $600, and couples earning up to $150,000 will receive $1,200. These payments have been reduced from $1,200 for individuals and $2,400 for couples in the CARES Act. However, households will also receive an extra $600 per child, up from $500 in the first relief package.
The stimulus check amounts will be reduced for people with earnings above those income thresholds and will phase out completely at $87,000 for individuals, $124,500 for head of households, and $174,000 for couples. In the first round of stimulus aid, renters used the funds to cover immediate financial obligations, such as rent and utilities, and families are once again expected to use it cover household bills.
Additional $300 Per Week in Unemployment Insurance Benefits Extended
The CARES Act provided an additional $600 per week in unemployment insurance benefits, which helped tenants stay current on rent. Those extra payments officially expired in July 2020, but were reintroduced through a presidential executive order in August for up to $400 in extra payments per week.
The second stimulus package provides $300 in extra unemployment benefits per week through March 14, 2021. The funds are anticipated to help many meet rent and other household expenses as they continue to look for work. More than 18 million people continue to claim unemployment insurance benefits as of the writing of this article.
Eviction Moratorium for Nonpayment of Rent
The national eviction moratorium on nonpaying renters, which was declared by the U.S. Centers for Disease Control and Prevention in September 2020, was set to expire on Dec. 31. The second stimulus act extended the eviction ban to Jan. 31, 2021.
The eviction ban only prohibits the removal of renters based on the nonpayment of rent, but does not prevent evictions for other lawful reasons. Additionally, the legislation does not nullify renters’ lease obligations, and rents are still due and late fees may be applied. In order for tenants to obtain this protection, they must sign and submit a declaration under penalty of perjury to their landlord.
$25 Billion in Rental Assistance for Tenants Affected by COVID-19
In addition to the eviction ban extension, the new federal stimulus relief policy included $25 billion in rental assistance for tenants who have been affected by COVID-19 in order to help keep American families in their homes. An estimated 14 million adults are behind on rent, according to the Center on Budget and Policy Priorities. This will also help landlords meet mortgage payments and other operating expenses for their properties.
Renters are eligible to receive up to 12 months of rental assistance, and potentially three extra months through the program. The funds are dispersed directly to landlords, which can apply on behalf of at-risk tenants for the rental assistance. The U.S. Treasury Department will distribute the aid through states, many of which have already started helping renters via the Coronavirus Relief Fund.
Extension of the Availability of Coronavirus Relief Funds
The CARES Act allocated $150 billion for the Coronavirus Relief Fund, which provides funding to state, local and tribal governments to reduce the financial burden of COVID-19 response measures. The second stimulus package extended the date when the states and localities could make use of the funds for one year to Dec. 31, 2021.
Many states have appropriated part of the funds they’ve received to establish housing assistance programs, which includes initiatives to prevent and reduce homelessness, assist low-income and COVID-19 affected tenants with rent payments, and help renters pay utility bills.
$284 billion PPP loans for small businesses to keep workers on payroll
The Small Business Administration’s Paycheck Protection Program (PPP), which provided forgivable loans until August 2020 to businesses to keep workers on staff and cover expenses, was allocated $284 billion from the new stimulus package. Additionally, the new relief legislation clarified that business expenses paid for with the forgivable loans are tax deductible.
Although the first PPP loans were met with some controversy, experts credit it for saving millions of jobs during the pandemic. At least 60% of loan proceeds must be used for payroll, and the remaining 40% on qualifying expenses, like mortgage interest, rent and utilities. The new bill also expanded the list of qualifying expenses that borrowers are allowed to use PPP funds to cover, and now allows businesses to pay property damage costs that occurred in 2020 due to public disturbances that were not covered by insurance.
The second round of federal COVID-19 relief aid is expected to benefit the multifamily industry, much like the first, as households received another round of direct stimulus checks and renewed extra unemployment insurance payments to help meet financial obligations. Additionally, the new legislation includes rental assistance to keep families in their homes and help ease the burden on landlords. The relief policy also provides aid for businesses in the form of forgivable loans, which helped save millions of jobs last year.
Looking ahead, experts have suggested that there may be yet another stimulus package coming as President Joe Biden’s administration has taken the reins of the White House and the Democratic Party controls both chambers of Congress. A potential third stimulus round with similar or improved initiatives could be an additional tailwind for the multifamily industry.