As the multifamily sector welcomed the inclusion of $25 billion in rental assistance in the federal relief package, it rushed to decipher the 5,000-page bill.
Here are some key details.
The funds will be meted out by eligible states and localities, which are tasked with designing means-tested programs along the federal guidelines.
But the funds themselves, from the U.S. Treasury Department, may take a month to arrive. That means renters and landlords should not expect a check until late January at the earliest.
The rent relief will be apportioned not only to states, but to cities with populations greater than 500,000, based on their share of the overall U.S. population. That means more populous states like New York, Florida and California will get a bigger slice — $1.3 billion, $1.4 billion and $2.6 billion, respectively — of the $25 billion rent-relief pie.
But New York will end up shortchanged because tenants make up such a high percentage of its population. About two-thirds of New York City dwellings are rentals, roughly twice the U.S. average.
As a result, California will get twice as much rent relief as New York despite having only about 38 percent more tenants: 18 million to New York’s 13 million.
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Rental payments have stayed remarkably steady during the pandemic, but it’s unknown how long rents can keep flowing. Federal unemployment benefits in the aid bill, up to $300 per week, will help, especially if tenants continue to prioritize paying the rent over other expenses.
“It’s something,” Robert Gilman, who co-chairs the real estate group at public accounting firm Anchin, said of the rental relief. “But my concern in general is that people have gone months without extra money.”
The relief may not arrive soon enough for some landlords, especially as the deadline for paying property taxes draws near. Gilman said that while property owners had set aside money to make property tax payments in July, some were expecting additional aid in the form of tax breaks, and may have entered into forbearance agreements with no requirement to escrow property taxes. Those tax breaks didn’t materialize — and with Congress failing to help states and cities balance their budgets, tax hikes may be on the horizon.
Distributing the rent relief money efficiently may also prove to be a challenge for states.
New York has struggled to pay out a previous allocation of $100 million in rent aid, and declined most applications for relief. After the state provided $40 million in rent vouchers, it slightly expanded the program two weeks before the federal government would have taken the remaining $60 million back. The deadline to use the new funding is September 2021, and states now have more time to use the initial federal funding from the March CARES Act.
The bill urges state and local governments to target the aid to those who need it the most. The program, in general, should provide relief only to households making less than 80 percent of the area median income or that can demonstrate housing instability or risk of homelessness. Renters can do this by showing an eviction notice or past-due utility bill, or by documenting unhealthful or unsafe living conditions.
Programs should prioritize aid for those who make less than 50 percent of area median income and have been unemployed for three months or more upon applying, the bill says.
The program is meant to pay down mounting rent debt, which could be as much as $70 billion nationwide, rather than to subsidize future rents. The funds can be used to pay up to 12 months of rental arrears, and up to three months of future rent. States can provide more aid, as long as they have the funds to do so, and have renters apply for it separately. If they do so, renters will need to re-document their income eligibility every three months.
Landlords also need not worry about tenants using rent aid for other expenses. The checks will be made out directly to property owners, unless they prefer otherwise. Property owners can also apply for the funds on behalf of tenants — as long as tenants are aware of the aid application and sign it.
The post The nitty gritty on federal rent relief appeared first on The Real Deal Los Angeles.
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