Editor's Note: Congress has agreed on a new COVID-19 relief stimulus package - read more in our latest Insights here.
The government response to the COVID-19 pandemic initially provided a boost to small businesses, protection for renters, additional unemployment funds and a stimulus check for many Americans. But as the pandemic persists to plague the country and new waves of infection continue to spread, negotiations over a second stimulus package have repeatedly stalled. For multifamily investors, the lack of a comprehensive solution to the economic downturn and widespread unemployment has resulted in a feeling of uncertainty about the future.
What’s been done so far
The stimulus package known as the CARES Act, which was signed by President Trump on March 27, included several provisions that impacted the multifamily property sector.
First, stimulus checks of up to $1,200 per adult and $500 per child under age 16 were sent to families, which enabled many tenants to pay their rent.
Second, unemployment benefits of an additional $600 per week were part of an expanded unemployment benefit program that extended benefits to more people and for a longer period. Once those benefits expired, President Trump signed an executive order to provide $300 per week in additional unemployment benefits for six more weeks.
Third, an eviction moratorium was enacted and then expanded by an order by the CDC to prevent tenants who were impacted by the pandemic and economic shutdown from being evicted due to nonpayment of rent through the end of 2020.
Fourth, the Federal Housing Finance Agency and private lenders allowed many multifamily owners to delay payments on their mortgages.
Short-term fix with long-term uncertainty
In the short-term, stimulus checks and additional unemployment benefits allowed some tenants to pay some or all of their rent. But many renters have fallen behind even with government help because of their long-term unemployment or under-employment. An analysis by Moody’s Analytics in August estimated accumulated back rent would be nearly $70 billion by the end of 2020, with an estimated 12.8 million renter households owing an average of $5,400.
While renters are protected by the eviction moratorium this year and some multifamily owners are temporarily protected by forbearance, the long-term outlook is unknown. Both renters and multifamily owners may be in a precarious position without an additional stimulus package that provides rental assistance to cover back rent and fees and to help renters make payments until the economy recovers.
The House of Representatives passed a revised Heroes Act October 1, but negotiations between the White House, the House and the Senate have repeatedly stalled. President Trump suggested attempting to pass several stimulus bills targeted at specific industries such as the airlines or for small businesses in addition to direct stimulus checks.
The revised Heroes Act includes $59.1 billion for rent relief and other housing programs, but the Heals Act, introduced by the Senate July 27, does not address housing issues directly. Both of those acts include provisions for a second stimulus check of $1,200 per adult and $500 per dependent child under 16. In addition, both acts include a proposed extension of enhanced unemployment benefits.
States are also addressing the issue for landlords and renters. For example, in California, tenants are protected from eviction until Feb. 1, 2021 as long as they pay at least 25% of their rent and their inability to pay is related to the pandemic. To protect landlords, foreclosures are prohibited on buildings with four or fewer units if the tenants are unable to pay rent due to the pandemic. Beginning in March 2021, landlords will be allowed to sue for back rent owed from 2020. However, without substantial renter assistance programs, it may be difficult for renters to pay that accumulated rent even if they are employed again.
Whether direct assistance will be provided to renters or to multifamily owners by the federal government remains to be seen, particularly since negotiations are bumping against the outcome of the November election.