COVID-19, also known as the novel coronavirus, has caused unease around the world. A health crisis has compounded into an economic crisis, and, as a result, many families are unsure where their next paycheck will come from. To help Americans keep food on the table and cover their expenses, the federal government has decided to issue a $1,200 stipend to every citizen that makes less than $75,000 a year. An unprecedented infusion of cash into the SBA loan program is also being used to keep businesses afloat and people employed.
But even with these measures, tenants across the country are unsure if they’ll be able to make their next rental payment. According to the National Multifamily Housing Council, 31% of renters had not paid rent as of April 5th (for comparison, that number was just 18% for the same period last year).
Landlord’s can be doing their part to ease the financial hardship of their tenants. But many simply do not operate with enough margin to waive or reduce rent and they’re feeling left out in the cold by the massive stimulus package.
However, the U.S. government has thrown landlords a financial lifeline of sorts. While the efficacy of these “rescue” programs remains to be seen, it does seem that they will help many landlords get through this trying time.
Listed below are five government financed programs designed to help landlords.
Financial Rescue Programs That Will Help Landlords
The $2 trillion CARES Act was signed into law in record time and contains hundreds of billions of dollars for a variety of programs, two of which were mentioned above. But the rescue package does not contain any specific legislation that directly targets the millions of landlords who own between one and ten rental units. Indirectly, however, there are a number of programs that will greatly help landlords recover some of the lost revenue attributed to the coronavirus.
1. Enhanced unemployment benefits for tenants who lose their job
As part of the recently passed CARES Act, people who are out of work and who have applied for unemployment insurance will be getting an additional $600 a week in unemployment payments, on top of the normal payment amount.
For example, in New Jersey, unemployment insurance weekly payments maxes-out at $713 a week. Now, as part of the government’s stimulus program, the weekly payment will increase by $600 a week to $1,313 or $5,252 a month. Among other things, it is hoped that this enhanced benefit will allow those who lost their jobs the ability to continue to pay their monthly rent.
2. Tax deduction benefits for some landlords
Some landlords can get tax breaks that will ease their precarious financial situation. Others cannot. Landlords can take losses greater than $500,000 this tax year if their mortgages are backed by Fannie Mae or Freddie Mac, according to CNBC. They can also get mortgage forbearance if they don’t evict tenants. Some owners of multi-family units can get help too.
3. State programs for landlord financial relief
A number of states have passed legislation to help those who are having trouble paying their mortgages, including landlords.
For example, the state of New York has ordered a 90-day moratorium on mortgage payments for those who are facing financial hardship due to the coronavirus crisis. This can include small landlords who are having trouble paying their mortgage because their tenants aren’t paying their rents.
4. Paycheck Protection Program for Small Businesses
This financial relief program also targets small businesses who are having trouble keeping employees on the company’s payroll. The virus has hit retail and restaurant tenants particularly hard, shutting many down.
Small businesses who keep paying their employees can apply for a loan at their local bank and the Small Business Administration. It’s hoped that this will hold them over until things get back to normal. What’s really amazing is that these loans do not have to be paid back.
What the program expressly prohibits, however, is that these loans NOT go to the payment of rent. An indirect benefit does exist for landlords, however. These small business loans – or better put, grants – will keep people employed, thus able to pay rent.
5. Mortgage Forbearance
Some landlords can have their mortgage payments reduced or paused for up to three months if they can show that they have suffered financially because of the Coronavirus pandemic. This is particularly true if the mortgage is backed by the federal government.
The government sponsored programs highlighted above are not intended to be a comprehensive list of all the programs that can help landlords during this crisis. Local jurisdictions, the U.S. Congress, the Federal Reserve Bank, the President, and private businesses are adding new relief provisions on almost a daily basis. Landlords should review the provisions of the CARES Act – you don’t have to read all 820 pages of it – and look into local programs that are intended to help the real estate industry.
And if these programs don’t do the job, it seems there is more to come.
Is $2.2 Trillion Enough? More Money is on its Way
On April 6, the Speaker of the House, Nancy Pelosi, said that another $1 trillion will be needed beyond the already authorized $2.2 trillion in relief funding. She said that current direct payments to U.S. households and payroll protection programs for small businesses are not enough.
On the next day, Mitch McConnel, the Republican Senate Majority Leader said that the current level of spending may not be enough for small businesses. Shortly afterward, Treasury Secretary Steven Mnuchin asked lawmakers for an additional $250 million to help small business owners secure loans from banks. Demand has been so overwhelming that banks need additional funds.
To the amazement of many, much of the typical partisan rancor of Washington has given way to a consensus on, believe it or not, more federal spending. It’s clear that everyone recognizes the need for government, at all levels, to do what it takes, no matter the cost, to maintain the economy and defeat the virus.
Staying Informed, Staying Positive
For landlords, uncertainty, particularly when it comes to their source of cash flow, is always scary. But we’re in unprecedented times and unprecedented actions are being taken by governments, businesses, and individuals at all levels. Legislation and policy changes are coming out at a blistering pace and staying up-to-date on the opportunities you have as a landlord can make a huge difference. Remember, this is a national crisis and people want to help. Stay informed, stay positive, and stay safe.