With Senators Returning To Washington, CRE Industry Seeks More Stimulus, PPP Changes
In the five weeks since President Donald Trump signed the CARES Act into law, issues have arisen with its small-business lending program and the coronavirus crisis has worsened, leading business groups to push for more legislation.
Now, as the Senate returns to Capitol Hill Monday for the first time since March, real estate associations say they have several major legislative priorities for Congress to help ensure the stability of the industry.
"What we're encountering is Congress coming back to face the continued reality that even with the massive amounts of economic stimulus they've put out legislatively ... what they will need to realize is that additional, substantial assistance is going to be needed," National Multifamily Housing Council Vice President for Government Affairs Kevin Donnelly said.
Rent Relief Fund
The top priority for NMHC, Donnelly said, is an emergency assistance fund for renters. NMHC and the National Apartment Association sent a letter to congressional leaders April 7 urging them to establish a fund to help apartment tenants pay rent.
Donnelly said NMHC is working with the chair of the House Financial Services Committee, Rep. Maxine Waters, a Democrat from California, on a $100B relief fund for renters. House members are not scheduled to join senators in returning this week; House Democrats proposed a new proxy voting system, but Minority Leader Kevin McCarthy instead suggested a hybrid system that would allow committees to convene while keeping the full House chamber closed, the Associated Press reports.
"Even with the work Congress did in the CARES Act to provide emergency unemployment expansion and direct recovery rebates, there is still going to be a significant population of renters who are going to need additional housing assistance to protect their housing stability," Donnelly said. "There is a ton of economic pressure already on these families, and this crisis is only going to make it worse."
"Rent is not being paid. Some because people don't have the money and some because people are scared," DeBoer said. "That rent obligation chain needs to be restored, because it allows landlords to pay their maintenance workers and security workers, to meet their utility requirements or to support lenders and servicers who are having a difficult time meeting their obligations."
Fixing The Paycheck Protection Program
Real estate industry organizations would like to see significant changes made to the Paycheck Protection Program, which is providing billions of dollars in loans to small businesses.
The program's requirement that 75% of funds be spent on payroll has created challenges for businesses such as restaurants that are unable to serve customers during the pandemic and have more immediate financial obligations. DeBoer said the Real Estate Roundtable wants Congress to remove the payroll requirement from the program.
"We would like to get rid of this cap on the ability to use the money for anything other than payroll, and that is not to suggest we do not want the employees to get the money they need to take care of their families," DeBoer said. "We want to give more flexibility on how businesses use that money. I think that's very important."
Some real estate companies have been unable to qualify for the PPP program, even if they have fewer than 500 employees. Donnelly said the Small Business Administration, in its implementation of the program, has used old rules that prevent companies with passive income streams — such as owners and builders of apartments — from benefiting from SBA loan programs.
"We're faced with the reality in the implementation that PPP boxed out major slots of real estate, and for our purposes, multifamily owners and developers are explicitly excluded from being eligible," Donnelly said.
The Real Estate Roundtable, NMHC, NAA and several other industry groups wrote a joint letter to Treasury Secretary Steven Mnuchin April 16 asking to confirm that developers and landlords quality for PPP loans.
"These businesses are currently desperate for help and must have ready access to PPP loans to pay employees and their benefits, and help cover rent, utility bills, mortgage interest, and other essential operating expenses," the letter said.
Aligning Eviction And Forbearance Protections
Renters are protected from evictions under the CARES Act for two months longer than borrowers were given mortgage forbearance, Donnelly said, a disconnect that puts apartment owners at risk.
The CARES Act prevented property owners from evicting tenants for 120 days, and after that required 30 days notice, essentially extending the noneviction period for 150 days. At the same time, Congress allowed 90 days of mortgage forbearance for borrowers with federally backed loans, Donnelly said.
"That mismatch of 60 days leaves the borrower vulnerable where they have no rental income from a large portion of their revenue," Donnelly said. "Mortgage forbearance provisions need to ride along on the exact timeline of any local, state or federal eviction moratorium."
Pandemic Risk Assurance
After the 9/11 attacks, the insurance industry was unable to price in terrorism risks, and Congress passed the Terrorism Risk Insurance Act to provide a federal backstop for losses associated with acts of terrorism.
The Real Estate Roundtable has pushed Congress to reauthorize TRIA multiple times, most recently in December. DeBoer said a similar policy is going to be necessary for risks associated with pandemics like the coronavirus.
"We think this situation is very similar, and we think that for businesses, particularly construction activity and refinancings of buildings and retail centers, the lenders are going to require some sort of protection against the pandemic rebounding, coming back or a new pandemic," DeBoer said. "We definitely are working very hard on trying to figure out how to backstop this coverage."
Since taking office, Trump has put forward the idea of a large-scale infrastructure package, but Congress has yet to move forward with a spending bill. As it is now spending trillions of dollars and looking for ways to stimulate the economy, DeBoer said it would be a perfect time to move forward with an infrastructure program.
"How we pay for it is not the driving factor right now; a lot of stuff has been put on the credit card," DeBoer said. "So one could argue that infrastructure would put people back to work quickly and should be the centerpiece of a program going forward this summer."
But Senate Majority Leader Mitch McConnell said last week he does not plan to include infrastructure in the next coronavirus relief bill, The Hill reported. DeBoer said it will likely have to be considered later in the year.
"I don't think it will be part of the next stimulus; I think it will be later on if it comes up," DeBoer said. "I know the House Democrats would like to propose an infrastructure program, and we would like to see that, so hopefully it can be wedged in there."