House Democrats passed their $2.2 trillion “updated HEROES Act” legislation this week on a largely party-line vote. Although the updated legislation closely mirrors the original HEROES Act released in May, several provisions have been revised and trimmed down. Most notable for the multifamily industry, the $100 billion rental assistance fund was reduced to $50 billion. In addition, this package includes a 12-month extension and an expansion of the CARES Act eviction moratorium.
The release of this updated legislation comes after months of debate across the aisle on how best to move forward. After the Democrat-led House passed the original HEROES Act in May, Senate Republicans proposed the $1 trillion HEALS Act in July. Both pieces of legislation stalled in the months following their release due to partisan-driven lack of consensus.
While both Speaker Nancy Pelosi (D-CA) and Treasury Secretary Mnuchin have agreed to continue to meet through the weekend in an effort to reach an agreement, at this point and time, no agreement has been reached. For this reason, Speaker Pelosi decided to hold a vote on the slimmed down $2.2 trillion Democrat package on Thursday, October 1.
NMHC is actively working with lawmakers to ensure our industry’s priorities are top of mind as the final relief package is formed. We continue to stress the important role government assistance has played in ensuring our residents have been able to meet their financial obligations, while also highlighting the catastrophic effects mass non-payments of rent could have on our industry, residents and the overall economy. In addition, we are continuing to stress the long-term implications of protracted eviction moratoriums on the industry. Instead of offering support to those most hard hit, the enactment of these moratoriums call into question the future viability of the multifamily industry and threatens the stability of the housing stock for millions of Americans.
NMHC Viewpoint and Detailed Analysis:
Read on to learn more about the following specific provisions and NMHC’s viewpoint.
The updated HEROES Act comes in at about $2.2 trillion. This compares to the more than $3 trillion included in the original HEROES Act legislation and the $1 trillion proposed by Republicans in the HEALS Act.
- NMHC Viewpoint:NMHC supports the creation of an emergency rental assistance program for those impacted by COVID-19 and are struggling to pay their rent. An extension of existing federal unemployment benefits, in conjunction with direct rental assistance for those not able to access those funds, is necessary to protect the housing stability of millions of Americans.
The updated HEROES Act includes $50 billion in emergency rental assistance. This figure is down from the originally proposed $100 billion in the first HEROES Act. This reduced amount envisions resources for a four-month period versus 12 months.
Although Democrats trimmed the original state funding figures to bring down the cost of the new legislation, the updated HEROES Act still includes over $150 billion in emergency aid for state, local and tribal governments. This includes $21 billion in funding to address the needs of homeowners “struggling to afford their housing due directly or indirectly to the impacts of the COVID-19 pandemic.”
The updated HEROES Act authorizes a second round of Recovery Rebates of $1,200 per single taxpayer, $2,400 for joint filers, and an additional $500 per dependent. The incentive would be phased out for single filers earning over $75,000 and joint filers earning over $150,000.
- NMHC Viewpoint: The enhanced unemployment benefits and stimulus checks have clearly helped families and individuals pay their bills, including rent. While this is good news, it is unclear how long apartment renters will be able to keep this up if the economic recovery is prolonged and unemployment remains at elevated levels. NMHC is continuing to push policymakers about the importance of extending federal unemployment benefit as well as creating a rental assistance program for those not able to access the unemployment funds.
Unemployment benefits remain one of the issues of continued debate – specifically, the amount of the additional benefit.
Congress enacted $600 per week in additional unemployment benefits at the outset of the pandemic. However, those benefits expired July 31, 2020. The original HEROES Act called for a continuation of the $600 enhanced unemployment benefit, while the HEALS Act proposed a two-stage reduction to the current $600 enhanced benefits: an enhancement of $200, and then a cap of 70 percent of a recipient's prior income. Some employers and the Trump Administration have raised concerns that the $600 per week has been a disincentive for many to return to work.
Ultimately, the President took action by ordering the extension of additional unemployment payments of $400 a week using FEMA Disaster funds. In practice, the rollout and funding levels have varied from state to state and much of the funding has already been used.
The updated HEROES Act calls for a continuation of the $600 per week enhanced unemployment benefits through January 2021. It would also enact a transition period through March 2021, so those receiving enhanced unemployment do not experience an abrupt loss of that income.
Additionally, the legislation brings back the Pandemic Unemployment Assistance program enacted as part of the CARES Act, which allows those traditionally not eligible for unemployment (like gig and temporary workers) to collect benefits. Lastly, the updated legislation would create the Pandemic Emergency Unemployment Extension Compensation that would provide up to 13 weeks of federal benefits to any individual who exhausts state or local benefits before January 31, 2021.
- NMHC Viewpoint: NMHC opposes the HEROES Act eviction moratorium as an unstainable, half-measure that does not address renters’ underlying financial distress, while putting apartment providers at significant risk. Instead, NMHC supports the creation of a rental assistance program that supports renters and housing providers alike. We also support the availability of mortgage forbearance protection for all multifamily properties and an alignment between moratorium and forbearance timelines.
The CARES Act had a short-term federal moratorium on evictions that expired July 25. Upon expiration, the Administration enacted a nationwide eviction moratorium through the CDC that will be in effect until December 31, 2020. Importantly, the CDC Order includes criteria that directly ties the moratorium to those experiencing hardships and requires an explicit affirmation that rent obligations cannot be met. The updated HEROES Act instead includes a blanket moratorium that extends and expands the CARES Act eviction and foreclosure moratorium to include all properties, not just those with government loans. The legislation also expands mortgage forbearance protections to all multifamily loans and properties and aligns the forbearance provision with the proposed eviction moratorium extension.
The updated HEROES Act enhances the employee rehiring and retention tax credit enacted as part of the CARES Act. Among other modifications, the legislation would enable eligible taxpayers to gain reimbursement of up to 80 percent (from 50 percent) of wages paid while also increasing to $45,000 (from $10,000) the limit on wages taken into account per employee.
- NMHC Viewpoint: NMHC recognizes that credit reporting and debt collection is an important and necessary business practice. We oppose efforts that would limit these practices or restrict the accuracy or transparency of credit information which would hamper apartment firms’ ability to responsibility manage risk and operate their properties.
The CARES Act required that furnishers to credit reporting agencies (like apartment firms, credit card companies, etc.) who agree to modified (rental) payments with respect to an obligation or account of a consumer that has been impacted by COVID-19, must report such obligation or account as “current” or as the status reported prior to the accommodation during the period of accommodation unless the consumer becomes current. Such credit protection ends at the later of 120 days after enactment of the legislation or 120 days after the date the national emergency declaration related to the coronavirus is terminated.
The updated HEROES Act would suspend negative credit reporting during the COVID-19 and “other declared major disasters plus 120 days.” The bill also prohibits the collection of consumer debt during a national disaster plus 120 days.
- NMHC Viewpoint: NMHC is working to ensure that all multifamily firms and others in the real estate community are able to take advantage of the Paycheck Protection Program (PPP) and Main Street Lending Program (MSLP), but several rules issued by the Treasury Department and Small Business Administration have excluded certain types of businesses, including many multifamily firms. We believe that Treasury, SBA, and the Federal Reserve have the authority to make the changes necessary to ensure that all types of multifamily businesses are eligible for these programs as we strongly believe Congress intended. We have sent several letters to Treasury and the SBA requesting they address this issue and asked members of congress to weigh in on behalf of the industry.
The updated HEROES Act sets aside funding for Paycheck Protection Program (PPP) loans for certain categories of borrowers – including businesses with 10 or fewer employees and nonprofits while also allowing hard-hit businesses to apply for a second loan. It also permits taxpayers who receive forgiven Paycheck Protection Program loans to deduct expenses financed by the proceeds of such loans.
- Permitting non-corporate taxpayers to fully deduct business losses. Instead, the Heroes Act reimposes and makes permanent a provision limiting excess business losses. A non-corporate taxpayer has an excess business loss to the degree that total business deductions exceed business income, plus $250,000 for single filers and $500,000 for joint filers; and
- Enabling taxpayers to carryback net operating losses (NOLs) arising in 2018, 2019, or 2020 for five years. Instead NOLs arising in 2019 or 2020 could be carried back only to 2018. In addition, certain taxpayers would be denied the ability to carryback losses altogether.
The updated Heroes Act also includes proposals detrimental to the multifamily industry that would reverse provisions in the CARES Act:
- NMHC Viewpoint: NMHC has been pushing Congress to direct the Federal Reserve Board and Treasury to create a Federal Reserve Credit Facility for Mortgage Servicers to help facilitate the extension of credit to multifamily mortgage servicers. NMHC was pleased to see these provisions included in the HEROES Act, however, the restriction on evictions for the entire duration of the loan is not a favorable feature.
The CARES Act authorized the Federal Reserve and Treasury to make loans, loan guarantees and other investments to provide liquidity to eligible businesses related to losses incurred as a result of the coronavirus pandemic. The updated HEROES Act expands on this by establishing Credit Facilities issued by the Federal Reserve for rental property owners and the Treasury for mortgage servicers. The facilities would protect mortgage servicers to ensure liquidity and would provide low-interest loans to rental property owners to temporarily compensate owners for documented financial losses caused by reductions in rent payments, in return for obtaining a loan under this facility the owner would be prevented from evicting a tenant for the duration of the loan, for non-payment of rent.
- $5 billion in Community Development Block Grants
- $5 billion in ESG homelessness grants
- $4 billion for Tenant Based Rental Assistance
- $2 billion for Public Housing Operating Fund
- $2 billion for CDFIs to respond to COVID in distressed communities
- $750 million in Project Based Rental Assistance
- $500 million for housing for the elderly
- $309 million in USDA rural rental assistance
- $45 million for housing for persons with disabilities
- NMHC Viewpoint: NMHC continues to support additional funding for important rental assistance and homelessness and other HUD programs such as the Section 8 Voucher programs, CDBG, HOME and Multifamily FHA programs that help ensure families and individuals stay stably housing both during and after the COVID pandemic.
In an attempt to help keep “Americans stably housed,” Democrats allocated hundreds of billions in additional housing related relief – including a few big-ticket provisions like funding for tenant based rental assistance, ESG homelessness grants and CDBG grants. The below list reflects additional housing related allocations: