Founder, CEO of Blue Lake Capital LLC. Helps passive investors grow wealth through real estate. Podcast Host: REady2Scale.
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Recognizing the devastating impact that the pandemic has had on every facet of our economy, Congress passed a $900 billion Covid-19 relief package that took effect on December 27, 2020. This second stimulus package included a new round of direct payments to consumers, as well as enhanced unemployment benefits, education funding and financial relief to various areas of the economy severely ravaged by the pandemic and renewed funding of the Paycheck Protection Program (PPP).
Are New Provisions Helping Tenants And Landlords?
The second stimulus package included $25 billion to help renters pay their current rent as well as assistance for utility bills and unpaid back rents. It also allowed landlords to apply for funds on behalf of tenants so they can be paid for both current and past-due rent. While the package helped landlords collect a significant portion of rents month over month since the pandemic started, there are an estimated 10 million renters around the country who are behind on their rent, according to recent data by the Census Bureau.
Any help with rent payments is a true blessing, and the bill that was designed to help renters just made multifamily an even stronger asset class. While the Biden administration’s proposed $1.9 trillion American Rescue Plan doesn’t include an extension of the eviction moratorium that is scheduled to expire on March 31, it does include nearly $30 billion in additional funds for rent relief programs. As of this writing, the bill has passed the House and Senate awaits the president’s signature.
According to the latest National Multifamily Housing Council’s Rent Payment Tracker, 79.2% of apartment renters made a full or partial rent payment by February 6, which is less than 2% lower than a year earlier. While the December stimulus package has helped many tenants pay their rent, the landlords who suffered the largest impact are the small, independent operators who own approximately 22.1 million rental units, representing more than half of the nation’s supply. Many of these independent operators have their life savings tied up in their properties, and they’ve been operating in the red for many months. The stimulus package has helped, but most agree that a lot more needs to be done.
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A big concern is that revenue losses from nonpayment of rent could result in significant payroll cuts for on-site staff, as well as deferred building maintenance. The resulting impact of lack of maintenance on properties could be felt for months, if not years, to come.
The other concern is that while the eviction moratorium has prevented many renters from being evicted, they will still owe the back rent that hasn’t been paid. The focus is on renters who haven’t been able to pay their current rent of $800 to $1,000, for example, and now owe many months of back rent. Even with the promised additional direct payments of $1,400 to consumers, unless the nation’s employment picture improves significantly, tenants who owe unpaid rent will be hard-pressed to become current.
Keeping Small Businesses Open
Helping to keep small businesses open and employees working is one of the keys to keeping rents current. The last stimulus package had $325 billion in small business funds, which means that businesses with fewer than 300 employees can apply for a second Paycheck Protection Program (PPP) loan, as long as they can demonstrate a 25% reduction in revenues. Those funds will help to bring employees back to work, with an indirect benefit to both tenants and employees because this much-needed money will help to pay rent.
One of the major benefits of the PPP loan is that as long as the businesses meet specific requirements, they can apply for loan forgiveness and won’t have to pay back any of the funds that were borrowed. This is a key benefit for small businesses because loan forgiveness will help to keep employees on board and working.
Helping To Stabilize Rents
The combination of a new round of business funds and direct payments to consumers is helping to keep rents stable, which is a boon for landlords. Many property owners had to resort to lowering rents and increasing incentives to keep tenants renewing their leases, but it appears that the additional funds from the second stimulus package is helping to keep tenants in place.
Instead of having to lower rents or provide rental incentives, we’ve actually increased rents by 29% and more at some of our properties, particularly in the Atlanta area. It depends on the market you’re in, and the Atlanta area is benefitting from the exodus from New York City. Atlanta is just one area; Miami is also experiencing a population influx from New York as well.
Summary
The second stimulus package passed in December of 2020 has had a positive impact on both tenants and property owners. The $25 billion in rental assistance has helped many tenants stay current with their rent, and the $325 billion in small business funds is helping small businesses rehire workers and add new employees as well.
There is still a lot of work to be done, and the Biden administration’s American Rescue Plan will provide much-needed funds to consumers for back and current rent and utilities. Additional funds for businesses and states will also help to keep people employed, which will definitely benefit multifamily property owners by providing funds for rent.
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