March 30, 2020 - From the March, 2020 issue

National Multifamily Housing Council Reacts to CARES Act

With April 1 approaching, and authorities racing to react in real-time to the impacts of the COVID-19 reality, on Friday, March 27, Congress delivered, at long last, the Coronavirus Aid, Relief and Economic Security (CARES) Act—a $2 trillion federal stimulus aimed at easing the pain of putting the global economy on ice. Presented here is the response from the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) on the law’s impact on multi-family rental housing markets. As well a summary of the Act’s provisions pertaining to the U.S. Department of Housing and Urban Development.


Doug Bibby

“Instead, what should be a limited protective step is expanded to those who have not been financially impacted by the pandemic”

The National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA), on behalf of the 40 million Americans who call an apartment home and the 17.5 million jobs the industry supports, applaud Congress’ quick action on the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) intended to stave off total economic collapse in the face of the COVID-19 pandemic.a

While there are a number of important provisions included that will be helpful to the industry and its renters, there are others that will create substantial challenges for rental property owners and imperil housing stability Americans need and deserve during this crisis. 

To its credit, Congress took important steps to provide relief to affected American renters and property owners. Boosting funding to U.S. Department of Housing and Urban Development (HUD) programs, expanding unemployment benefits and providing substantial tax relief are welcome resources. Yet, more must be done. NMHC and NAA have identified three areas where the legislation, while well-intended, falls short and will be detrimental to the stability of the rental housing market.

First, while we understand the intent of the national eviction moratorium included in the legislation, lawmakers inadvertently neglected to specifically tie the moratorium to those affected by the COVID-19 crisis. Instead, what should be a limited protective step is expanded to those who have not been financially impacted by the pandemic. This is already creating an expectation that unaffected renters do not have to meet their lease obligations. The unintended consequences of the eviction moratorium will wreak havoc on the stability of the rental housing market and places it out of step with similar state and local actions. Congress must swiftly address this discrepancy.   

Second, the current package provides substantial financial support to residents though HUD and unemployment insurance, however, more direct emergency rental assistance is necessary—particularly for those who do not presently receive federal housing assistance but now find themselves needing it.

Finally, at the urging of NMHC and NAA, Congress provided mortgage forbearance for multifamily property owners negatively impacted by the COVID-19 outbreak. The legislation, however, only provides this relief to owners with federally backed mortgages, such as those through the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac. This protection needs to be expanded to all types of mortgages. Owners and operators are tasked with ensuring the viability of apartment communities. They, too, are experiencing financial hardships sometimes tenfold as renters in the communities across the country struggle. 

Further, the provision limits forbearance to a 90-day time period, which is out of alignment with the 120-day eviction moratorium. Unless it is fixed, this disconnect could result in a mass wave of financial delinquencies and defaults from rental housing providers of all types and sizes, jeopardizing the stability of entire communities. 

As the country moves forward, there will be significant uncertainty and growing challenges. NMHC and NAA are committed to working with Congress to address the continued need for relief as outlined above and ensure apartment residents and the industry are supported and protected in future legislation.

More resources on COVID-19 from NMHC and NAA can be found here and here.

 

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For more than 25 years, the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) have partnered on behalf of America's apartment industry. Drawing on the knowledge and policy expertise of staff in Washington, D.C., as well as the advocacy power of 155 NAA state and local affiliated associations, NAA and NMHC provide a single voice for developers, owners and operators of multifamily rental housing. One-third of all Americans rent their housing, and 40 million of them live in an apartment home. 

 

Here is a proprietary summary of the CARES Act provisions pertaining to the

 U.S. Department of Housing and Urban Development (HUD)

  

VIII. U.S. Department of Housing and Urban Development (HUD)

Community Development Block Grant (CDBG) – $5 billion. Distribution of Funds, as follows:

 $2 billion direct allocation to states and local governments through the regular program formula (all grantees that received a CDBG allocation in FY20 will receive this funding). HUD must allocate the funds within 30 days of enactment of the bill.

 $1 billion to states based on a new formula (public health needs, risk of transmission of coronavirus, number of coronavirus cases compared to the national average, economic and housing market disruptions, and other factors determined by HUD)

States will allocate the funds to entitlements/non-entitlement communities

HUD must allocate all funds within 30 days of enactment of the bill.

 _2 billion to be allocated directly to states and local governments via a new formula to be developed by HUD (prioritizing risk of transmission of coronavirus, number of coronavirus cases compared to the national average, and economic and housing market disruption resulting from coronavirus). The funds will be used to cover or reimburse allowable costs incurred by a state or locality regardless of the date on which the costs were incurred.

 Provisions Related to the $5 Billion CDBG Allocation

o Extends the deadline for submission of the FY19 and FY20 con plan/action plans. Due date is now August 16, 2021.

 Suspends the 15 percent cap on public services.

o Suspends in-person public hearings; allows grantees the option of holding virtual hearings.

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o Allows HUD to waive further program requirements (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment).

Homeless Assistance Grants – $4 billion. These funds will enable state and local governments to address coronavirus among the homeless population. These grants, in combination with additional waiver authority, will provide effective, targeted assistance to contain the spread of coronavirus among homeless individuals. These grants will also provide state and local governments with homelessness prevention funding for individuals and families who would otherwise become homeless due to coronavirus. Distribution of Funds, as follows:

 $2 billion allocated through the regular program formula to all grantees that received funding in FY20

 HUD must allocate the funds within 30 days of enactment of the bill

 $2 billion allocated to states and local governments to areas with the greatest need via a formula to be developed by HUD (risk of transmission of coronavirus, high numbers or rates of sheltered homeless, and economic and market conditions)

 Very low-income individuals and families (30 percent or less of AMI) at risk of homelessness are eligible for homelessness prevention assistance

 Additional provisions on ESG:

o Allows recipients to deviate from regular procurement standards when procuring goods and services to prevent, prepare for, and respond to the coronavirus

o Recipients can use up to 10 percent of the allocation for administrative purposes. In addition to the 10 percent for admin, these funds can be used to provide hazard pay, including for time worked prior to the date of this bill, for staff working directly to prevent, prepare for, and respond to coronavirus among the homeless or persons at risk of homelessness.

o The funds are not subject to the citizen participation requirements

o No match requirement

o No cap on emergency shelter activities

o Funds can be used to provide temporary shelters (through leasing of existing property, temporary structures, or other means) to prevent, prepare for, and respond to the coronavirus

o Environmental review standards will not apply to these funds

 

Tenant-Based Rental Assistance – $1.25 billion. These funds will preserve Section 8 voucher rental assistance for seniors, the disabled, and low-income working families, who will experience loss of income from the coronavirus. 

Public Housing Operating Fund – $685 million. These funds will provide Public Housing Agencies with additional operating assistance to make up for reduced tenant rent payments, as well as to help contain the spread of coronavirus in public housing properties.

 Rental Assistance Protections for Low-Income Americans – $3 billion is included for housing providers to help more than 4.5 million low-income households made up of more than 9.6 million individuals currently assisted by HUD to safely remain in their homes or access temporary housing assistance in response to economic and housing disruptions caused by COVID-19. This includes:

 $1.935 billion to allow public housing agencies (PHAs) to keep over 3.2 million Section 8 voucher and public housing households stably housed;

 $1 billion to allow the continuation of housing assistance contracts with private landlords for over 1.2 million Project-Based Section 8 households;

 $65 million for housing for the elderly and persons with disabilities for rental assistance, service coordinators, and support services for the more than 114,000 affordable households for the elderly and over 30,000 affordable households for low-income persons with disabilities; and

 $65 million for Housing Opportunities for Persons with AIDS in order to maintain rental assistance and expand operational and administrative flexibilities for housing and supportive service providers to assist nearly 61,000 households. Given that this population is particularly vulnerable, the bill includes temporary relocation services to contain and prevent the spread of COVID-19 for these at-risk households.

Mortgage Relevant Provisions:

   In the single family residential space, the loans that are insured or otherwise guaranteed by FHA, VA, USDA, Fannie Mae and Freddie Mac are prohibited from foreclosure actions for 60 days starting March 18 for borrowers who request it. Penalties and delinquency related fees may not be charged to the consumer if forbearance is requested. Borrowers may extend their forbearance for up to an additional 4 months if they can demonstrate a COVID-19 related hardship. This borrower-requested forbearance expires the earlier of December 31 or the termination of the emergency declaration.

 In the multi-family residential space, loans that are insured or otherwise guaranteed by FHA, VA, USDA, Fannie Mae or Freddie Mac or are part of HUD-assisted housing are eligible for a 90 day forbearance on mortgage and interest payments. Evictions are prohibited for borrowers who receive forbearance. This

 

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© 2020 The Planning Report | David Abel, Publisher, ABL, Inc.