The recent federal COVID-19 relief package passed by Congress and signed by the president on Dec. 28, 2020 contains numerous provisions that may affect commercial and multi-family real estate owners and investors.
Most prominently from a real estate finance and investment standpoint, the legislation provides an additional $25 billion in nationwide assistance to help renters cover their obligations.
The funds allow:
- for direct financial assistance to renters, and is designed to cover overdue rent and utility payments and future rent.
- for services to promote housing stability, such as case management.
- renters to collect up to 12 months of assistance. Certain renters may be eligible for up to 15 months of assistance.
Payments to Landlords
The legislation— The Bipartisan Emergency COVID Relief Act of 2020—is an expansion of The Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March 2020.
Among the notable changes from the previous law, landlords may now apply for financial assistance on behalf of their tenants, as long as they obtain the tenant’s permission to do so. Funds will be paid directly to the landlord (or utility) in most circumstances.
To be eligible for assistance, renters must:
- have experienced a coronavirus-related financial hardship. This may include unemployment, a large reduction in household income, or significant COVID-related costs.
- demonstrate that they risk losing their homes.
- have income below 80 percent of their area’s median income. Households with incomes at or below 50 percent of the median income in an area or that have had an unemployed household member for more than 90 days will receive priority consideration for aid.
- Household income may be calculated on a monthly basis or annual basis. Monthly incomes must be calculated every three months to determine continuing eligibility.
In addition, the legislation extends the current Centers for Disease Control eviction moratorium until Jan. 31, 2021, with the incoming Biden administration likely to consider renewal at that time.
Among other provisions of interest from a real estate finance perspective, the bill allocates an additional $284 billion in funding for the Paycheck Protection Program (PPP), a move which may help a number of struggling commercial real estate tenants pay their rents. The program allows borrowers to obtain forgivable loans that can be used to retain employees and to pay operating expenses.
The legislation also includes the extension of a number of tax breaks for real estate owners and investors and increases fair housing funding. In addition, the act creates a minimum low-income housing tax credit rate of 4 percent effective in 2021. This provision concerns the calculation of Section 42 low-income tax credits stemming from acquisitions and developments financed by housing bonds.
Also, Section 179D deductions for energy efficient commercial buildings have been permanently extended, with amounts adjusted for inflation after 2020. And the mortgage debt forgiveness exclusion has been extended for an additional five years.
We will continue to closely monitor regulatory developments and the new federal COVID relief package affecting real estate finance law and our real estate industry clients. Contact us for a consultation to learn more.