The National Association of Realtors (NAR) and several leading groups are saying the $2 trillion stimulus package President Trump signed into law to bolster the economy doesn’t do enough for our industry. Indeed, the plan offers some relief to real estate, though the cash payments to individuals and a boost in unemployment insurance could (in theory) help ease some economic pain for renters, landlords and lenders.
The costliest spending bill in American history was signed Friday March 27th, in response to the coronavirus crisis that has devastated the nation and economy.
The U.S. Department of Labor reported an all time high 3.3 million jobless claims filed last week, as hotels, retailers, and small business owners were hit with mass layoffs. According to the Wall Street Journal, Congress is planning for another stimulus package in April, which may be even larger than the last. This may be a good thing considering the current relief package does little for many landlords, who do not have federally-backed mortgages or subsidized renters.
New Jersey Attorney Alan Hammer who specializes in multifamily real estate, is instructing his clients to be proactive about reaching out to existing lenders to see what programs they could qualify for, in lieu of federal or state help.
“There’s nothing really in the CARES Act that provides for landlords,” said Hammer, referring to the stimulus package’s official name — Coronavirus Aid, Relief, and Economic Security Act. “But you’ll never hear me complain that life has been unfair to landlords as a group.”
Francis Greenburger, CEO of the Time Equities real estate firm , said the plan “could be better,” adding that programs to offer forbearance for 90 days on some mortgages may not be helpful in the long run adding:
“Kicking the can down the road is not as good as it sounds if the crisis is still here in three two four months”.
Many experts in the real estate sector warn of a big disconnect with elected officials, and say the government has done little to protect against the expected drop-off in rents come April 1. If renters do not pay rent en masse on Wednesday and in the few days after, state revenue from real estate taxes will be negatively impacted.
The question of what will happen to mortgage lenders remains unclear.
Just last week, the MBA (Mortgage Bankers Association) estimated that mortgage companies could be on the hook for at least $75 billion on short notice, and possibly more than $100 billion if homeowners and landlords sought forbearance across the country.
Low-income renters already receiving federal subsidies will also see help from the federal stimulus, which set aside $1.25 billion for tenant-based rental assistance. That helps renters receiving Section 8 assistance. Renters who are not subsidized will benefit from a one-time $1,200 check from the government.
While landlords across the country prepare for a decline in rent checks, tenant organizers are carefully weighing a potential rent strike – which is different from a country-wide inability to pay rent Whether or not a mass rent strike occurs, landlords will find themselves in need of loan forbearance as tenants who are unable to pay withhold their checks. It is the property owners who are leveraged significantly, and they operate month-to-month.
The Real Estate rental industry is all about cash flow, and you need those dollars to keep the industry working. A big concern is that if this doesn’t get resolved rather quickly, it is anyone’s best guess what happens to this industry.
It’s difficult to rebound.