The U.S. Supreme Court struck the Biden Administration’s nationwide ban on residential tenant evictions yesterday, ruling that only Congress has the authority to enact such a moratorium through legislation. (New York Times
, Aug. 27; Wall St. Journal
, Aug. 27)
The high court’s conservatives issued a majority, 6-3 opinion striking the latest iteration of the eviction ban issued by the Centers for Disease Control (CDC) on Aug. 3. (Roundtable Weekly, Aug. 20). “If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it,” the Justices decided.
- The gist of the ruling is that the CDC’s public health role could not be stretched so far to encompass the federal ban. “[T]he CDC has imposed a nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination,” the majority wrote. “It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts.”
- The majority recognized the financial burden on landlords deprived of rent payments with no guarantee of recovery. “Despite the CDC’s determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means” the majority wrote. “And preventing them from evicting tenants who breach their leases intrudes on one of the most fundamental elements of property ownership—the right to exclude.”
- Three justices in the Court’s liberal minority would have kept the moratorium in place due to the surge of the Delta variant.
Focus on Disbursing Rental Assistance
- A coalition of national real estate organizations – led by the National Apartment Association and the National Multifamily Housing Council, and including The Real Estate Roundtable – has consistently opposed the CDC’s eviction ban.
- The latest figures released by the Treasury Department this week on the status of rent relief disbursements remain disheartening. While more funds are reaching tenants and landlords, only $5.1 billion out of a total $46.5 billion in Emergency Rental Assistance has been distributed by states and localities through the end of July. (AP, Aug. 25)
- Roundtable President and CEO Jeffrey DeBoer commented, “Federal, state, and local policymakers must act with urgency to ensure that tenants and housing providers in distress due to the pandemic receive the aid the Congress appropriated for them – and help bring stability to our housing markets.”
- States have had varying levels of success in getting federal rent assistance out the door. “Texas and Virginia have distributed the largest percentages of their allocated funding at around 34% and 41% respectively, while New York State hasn’t even doled out 1% of its federal rental assistance.” (U.S. News, Aug. 25).
- The Treasury Department has a website to help tenants and landlords find rental assistance programs in their local areas. The National Multifamily Housing Council (NMHC) also has an online hub that provides resources for renters and housing providers to access COVID-19 emergency relief.
While the Supreme Court’s ruling is the end point for litigation challenging the Biden Administration’s actions, progressives in Congress could attempt to re-impose the eviction ban via legislative enactment in the coming weeks.
House Democrats are quickly advancing a $1.9 trillion coronavirus relief proposal through committees to create a final bill that may face delays in the Senate, but is expected to give President Biden his first major legislative accomplishment by March. (BGov, Feb. 18)
- The Real Estate Roundtable has consistently urged Washington policymakers to take aggressive actions to combat the pandemic and its economic repercussions. (Roundtable Weekly, Feb. 12)
- Speaker Nancy Pelosi (D-CA) last week said she expects the House will approve a bill “by the end of February so we can send it to the president’s desk before unemployment benefits expire” on March 14. (CNBC, Feb. 11)
- The House legislation is being considered under a budget reconciliation process that allows passage in the Senate with only a simple majority – yet certain measures such as a minimum wage increase face opposition from Democratic Senators that could pose delays in the 50-50 upper chamber. (The Hill, Feb. 17)
- House Majority Leader Steny H. Hoyer (D-MD) told his Democratic colleagues in a Feb 16 letter that “Members should be aware that the House may need to remain in session through the weekend next week to complete consideration.”
- Anticipating potential changes to the House bill from the Senate, Hoyer added, “During the week of March 8, the House will continue in legislative session. We will be ready to take further action on the American Rescue Plan in the event the Senate amends it and sends it back to us.” (Rep. Hoyer’s Feb. 16 Dear Colleague letter)
- The Democratic House bill include $25 billion in assistance to renters and their landlords, as well as $10 billion for assistance to homeowners. It would also provide $350 billion for state and local governments, territories and tribal governments to respond to the economic downturn caused by the pandemic. (“Where things stand on the COVID-19 relief measure,” The Hill, Feb. 17)
- The two chambers must reconcile differences before a final bill is sent to Biden’s desk. Comparisons of the Democratic and Republican proposals are available from CNN, The Wall Street Journal, and USA Today.
Foreclosure Moratorium Extended
- President Biden on Feb. 16 further extended a ban on home foreclosures for Americans with federally backed mortgages through June 30, as well as a residential mortgage payment forbearance program that allows people to pause or reduce payments. On his first day as president, Biden issued an executive order extending eviction protections for the country’s 44 million rental households until March 31. (USA Today, Feb. 16 and Forbes, Feb. 3 )
- According to a White House Fact Sheet, the extension benefits 2.7 million homeowners currently in COVID forbearance and extends the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.
The White House statement on the extensions also referred to the pandemic relief package under consideration in Congress. “To bolster these efforts, it is critical that Congress pass the American Rescue Plan to deliver more aid to struggling homeowners. The rescue plan creates a Homeowners Assistance Fund which will provide states with $10 billion to help struggling homeowners catch up on their mortgage payments and utility costs,” according to the Feb. 16 statement.
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Vice President Kamala Harris broke a 50-50 tie in the Senate on Feb. 5 to pass a budget resolution that will allow President Biden’s proposed $1.9 trillion pandemic relief package to advance without GOP support. (New York Times, Feb. 5)
- The budget resolution triggers special “reconciliation” procedural protections that prevent a possible filibuster by Senate Republicans – and will give tax-writing and other committees in both chambers until Feb. 16 to report legislative language for consolidation into a final pandemic relief bill. (“Budget Reconciliation: The Basics,” House Committee on the Budget)
- Senate Majority Leader Chuck Schumer (D-NY) said, “This was a giant first step. So we will keep working as hard as we can to pass this legislation through the House, through the Senate as we go through the reconciliation process and hopefully put it on the President’s desk.” (Schumer statement, Feb. 5)
- ‘House Speaker Nancy Pelosi and Senate Majority Leader Schumer issued a joint statement on Feb. 1 to unveil the budget resolution. “Congress has a responsibility to quickly deliver immediate comprehensive relief to the American people hurting from COVID-19. The cost of inaction is high and growing, and the time for decisive action is now,” according to the statement.
- Additional unemployment assistance and other pandemic aid measures are scheduled to expire in March as calls increase for more funding to support vaccine distributions, direct payments to households, school reopenings, and relief for businesses. (AP, Feb. 2)
- Earlier in the week, President Biden’s $1.9 trillion pandemic relief package proposal was countered by a $618 billion Republican proposal. The GOP counter-proposal did not include aid for state and local governments, rental assistance, or further extension of the CDC’s eviction moratorium beyond its current expiration date on March 31. (Comparisons of the Democratic and Republican proposals have been prepared by CNN, The Wall Street Journal, and USA Today).
- Roundtable President and CEO Jeffrey DeBoer said,” The Real Estate Roundtable is encouraged by both Democratic and Republican efforts to work toward additional economic relief from the pandemic. Given the continuing great need for additional assistance to cities, people and businesses, we continue to urge policy makers to find a path forward.”
Changes Possible Before Final Package
- White House Press Secretary Jen Psaki commented there may be some changes to Biden’s “American Rescue Plan” to achieve compromise on the next pandemic package, including lowering the qualifying income threshold for the proposed $1,400 in direct payments. (AP’s YouTube channel, Feb. 2)
- The reconciliation process allows for congressional tax-writing committees to consider measures that could potentially be added to the package. A group of 120 House and Senate Democrats – led by Ways and Means Member Lloyd Doggett (D-TX) and Senate Finance Committee member Sheldon Whitehouse, (D-RI) – this week urged congressional leaders to reinstate the full limitation on net operating losses and active business losses that were part of the Tax Cuts and Jobs Act of 2017. The CARES Act included tax relief that allowed businesses to carry back 2018-2020 net operating losses to prior years, thus allowing them to claim refunds for taxes paid in earlier years.
- The letter states that proceeds from reversing the NOL measure “should be repurposed to help Americans who have lost income due to the pandemic and its economic fallout.” (Feb. 2 letter)
Separately, a power-sharing agreement for the 50-50 Senate was unanimously adopted on Feb. 3 by the chamber after Majority Leader Schumer and Minority Leader Mitch McConnell (R-KY) finalized terms. The agreement allows Democrats to take control of Senate committees and formalize their leadership. (Wall Street Journal and Politico, Feb. 3)
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Commercial real estate executives confirmed a downturn in Q2 market conditions due to job losses and business shutdowns related to COVID-19, according to The Real Estate Roundtable’s 2020 Q2 Economic Sentiment Index released today. The report also shows there is an expectation for an improvement in market conditions by next year, dependent upon the return of jobs and the ability to safely reopen businesses.
- “The commercial real estate industry, like all industries, experienced in the second quarter a sudden onset of economic disruption due to business lockdowns and stay-at-home shutdown orders put in place to combat the pandemic,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “The economic damage to commercial real estate has been particularly harmful for the retail and lodging sectors of the industry. Although our Q2 survey results show there is hope for improved conditions within the next year, there are significant concerns that other sectors of the industry could be dragged down if jobs don’t rebound and government assistance tapers off. The fear is that business and residential tenants may be suddenly unable to pay rent beyond the sectors already impacted and struggling to come back,” DeBoer added.
- The report’s Topline Findings include:
- The Real Estate Roundtable Q2 2020 Sentiment Index registered a score of 38, a decrease of 14 points from the first quarter of 2020. Many respondents confirm tenants are having increased difficulties paying their rent obligations as a result of massive job losses. Most survey participants expect the eventual reopening of businesses and resolution of rental obligations will lead to improved real estate market conditions.
- Many survey respondents have seen the industry quickly adapt to new social distancing environments by implementing technologies and online processes that provide some continuity for current operations. Market volatility is leading to uncertainty about how future retail real estate and multifamily demand will be affected.
- Job losses have led to widespread economic uncertainty. Lockdowns and stay-at-home orders have also impaired the ability of survey respondents to accurately value commercial real estate assets. As a result, transactions have slowed until a medical solution to the outbreak may allow reopening of properties, renewed business activity and underwriting of investments.
- The majority of survey participants indicated the availability of debt and equity are worse today than one year ago. Many respondents indicated they believe there is plenty of equity capital on the sidelines, but it is unwilling to invest in a market without price discovery. As for debt markets, debt funds have been largely absent from the market and only the most pristine assets are qualifying for new debt capital.
- The Roundtable’s Q2 Overall Sentiment Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.
- The Q2 Current Conditions Index dropped to 13 from Q1’s score of 55 – yet the Q2 Future Conditions Index increased 12 points to register 62 when compared to Q1’s score of 50.
- The 49-point disparity between the Q2 Current Index (13) and Future Index (62) is the most significant difference registered by The Roundtable’s Quarterly Economic Sentiment Survey in its 12-year history. The next highest disparity previously occurred in Q1 2009, when the difference between current and future indices registered 40 points during the financial crisis.
- DeBoer noted, “The unprecedented wave of job losses is disproportionally impacting women, minorities and veterans. Unemployment and business closures have added tremendous stress on people worried about taking care of their families and maintaining their housing. And it also has added to the worries of business owners, particularly in terms of meeting their payroll and rent obligations. The Roundtable continues to support the Federal government’s efforts to date including the CARES Act, the FED lending facilities and the expanded unemployment benefits. In addition to finding ways to improve and extend these programs, we now call on Congress to create a temporary assistance program specifically designed to help COVID impacted residential and commercial tenants meet their rent obligations.”
- He added, “Such a program would help people and businesses cope with the current economic downturn. It would help building owners maintain their workforce that is necessary to ensure that visitors to buildings are safe and healthy. It would ease pressure on financial institutions and local governments. The next COVID relief bill must include a rent assistance program for people and businesses.”
Data for the Q2 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf. The Roundtable’s Q3 Sentiment Index will be released in early August.
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The Real Estate Roundtable on June 8 urged Congress to develop a policy solution that assists residential and business tenants, economically harmed by the pandemic, with meeting their due and owing rent obligations. The letter sent was submitted for the record of a June 10 virtual hearing on “The Rent is Still Due: America’s Renters, COVID-19, and an Unprecedented Eviction Crisis” by the House Financial Services Subcommittee on Housing, Community Development.
- The Roundtable emphasizes in the letter that a specific rent assistance program for both residential and business tenants is needed to:
- Keep workers housed and employed;
- Maintain property taxes for state and local budgets that pay for essential community services;
- Safeguard Americans’ retirement savings; and
- Avoid a cascade of mortgage foreclosures.
- The letter explains that tenants’ rental revenues are the foundational link in an “obligation chain” that supports local government property taxes to pay for essential community services, provides the revenue to pay the salaries and benefits of real estate industry workers, maintains the stability of the mortgage system, and supports Americans’ pension and retirement savings.
- Articles and studies cited in an attachment to the letter describe drastic declines in rent collections since April, especially from businesses in the retail and hospitality sectors. A cited article published in the Washington Post on June 3 – “The next big problem for the economy: Businesses can’t pay their rent” – reports:
- “The problem for the broader U.S. economy is that when businesses … stop paying rent, it sets off an alarming chain reaction. Landlords are now at risk of bankruptcy, too. Commercial real estate prices are falling. Jobs at property management companies and landscapers face cuts. Banks and private investors are unwilling to lend to most commercial real estate projects anymore, and cash-strapped city and local governments are realizing the property taxes they usually rely on from business properties are unlikely to be paid this summer and fall”
- Additionally, the letter cites CoStar Risk Analytics, which reports the commercial real estate market can expect to see borrowers default on more than 13,000 loans totaling $148 billion in value.
- The depressed state of business rent collections is a foreboding sign of diminishing commercial real estate asset values, which translates to lower property tax revenues for state and local governments to pay for infrastructure and essential health care and first-responder services.
- The letter’s proposes that “Congress should strengthen the ‘obligation chain’ with a robust rental assistance program specifically designed to help business and residential tenants through the current crisis.” General assistance criteria for business and residential tenants to qualify for emergency rent support are suggested in The Roundtable’s June 8 letter.
- The House subcommittee also heard from a coalition of national housing associations that submitted a letter focusing on the need for a residential rent assistance program. “It is a top priority for the rental housing industry that Congress establish an emergency rental assistance program,” the groups wrote in their June 9 letter. “We expect a significant number of residents will continue to be negatively affected by the pandemic, inhibiting their ability to pay their rent, even with the assistance provided in the CARES Act.”
The need for policies to preserve the “rental obligation chain” and sustain economic recovery from the fallout of Covid-19 was a central topic during The Roundtable’s June 11-12 Virtual Annual Meeting.
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The Centers for Disease Control and Prevention (CDC) this week released a comprehensive summary of its initiatives and tools to enable fuller reopening of communities and businesses, as all 50 states are taking steps to return to a “new normal” after months of COVID-19 shutdowns and stay-at-home orders. (CDC’s “Activities and Initiatives Supporting the Covid-19 Response” and NYTimes national map, May 21)
- CDC’s “Activities and Initiatives” summary describes its measures to date to control the spread of the pandemic and enable contact tracing to slow transmission. CDC’s initiatives support the White House’s guidelines for “Opening Up America Again” through a phased approach that governors, mayors, and state/local public health officials may implement statewide or community-by-community.
- Six “gating criteria” that consider a community’s “downward trajectory” of patients treated for the virus over a 2-week period, availability of Covid-19 testing, and public health capacity, provide the basis to guide officials’ decisions to “move between phases” toward gradual re-opening. (CDC’s “Activities and Initiatives,” p. 7)
- CDC’s “Activities and Initiatives” also sets forth a “menu of safety measures” as “interim guidance” (Appendix F) to supplement its recent “decision tools” to advise businesses, restaurants and bars, mass transit systems, and schools on how to safely reopen during the pandemic. (Roundtable Weekly, May 15, 2020)
Meanwhile, the U.S. Environmental Protection Agency (EPA) recently issued an information resource and checklist to address water quality in buildings as they ramp-up operations. EPA recommends that owners and managers take proactive steps to minimize water stagnation in plumbing systems during temporary shutdowns or reduced operations, prior to building re-population. See:
Additionally, Roundtable Board Member Owen Thomas (CEO, Boston Properties) was interviewed yesterday on CNBC’s Squawkbox (photo above) about the pandemic’s impact as employees return to office environments and how cities may compare to suburbs as major work hubs of the future. (CNBC interview, May 21)
- “We have a pandemic underway; there will be a gradual return to the office. But I do think companies will be actively using their offices in the long-term,” Thomas said.
- “I also hear from customers that remote work is not an acceptable replacement for the in-person interactions that happen in the office space. The ability to mentor younger employees. The spontaneous collaboration and creativity that occurs and also the culture that companies develop – it’s very difficult to do it when we’re all on Zoom and Webex.” (Thomas CNBC interview, May 21)
- Roundtable members who have recently been interviewed about workplace return strategies and technologies include Immediate Past Chair Bill Rudin, Roundtable Member Scott Rechler and others. (Roundtable Weekly, May 15)
Two industry reports issued this month also address return-to-work guidelines and COVID-19 operational contingency plans:
- A CBRE analysis of 203 companies’ operations across the globe – “ReEntering the World’s Workplaces” – shows many companies have implemented return-to-work guidelines stricter than local government requirements (CBRE news release, May 15) / (GlobeSt, May 18)
- A Deloitte survey of 100 senior financial service institutions’ (FSI) executives with responsibility for crisis management and business continuity planning reveals that at least half of the respondents are developing COVID-19 operational contingency plans spanning at least the next three months. Part of the complexity around re-opening has to do with the scale and scope of FSI real estate. (Deloitte, May 15)
The Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy.
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