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CARES Act is a Good Start, But More is Needed to Help Low-Income Renters

Last week, Congress approved, and President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion fiscal stimulus bill to respond to the COVID-19 pandemic.  The comprehensive legislation includes funding and initiatives to provide relief to individuals, businesses, and state and local governments impacted by the pandemic.  The CARES Act will authorize direct financial aid to many Americans, expand unemployment insurance, make available hundreds of billions of loans to businesses, and channel resources to state and local governments and healthcare providers. 

The legislation will provide much needed relief for many American communities and individuals, struggling with the health and economic consequences of the coronavirus.  NHT applauds Congress and the White House for enacting this bill quickly, although much more assistance is still needed to protect the lowest income Americans. 

At NHT, we believe that federal and state policy makers should ensure that Americans maintain their homes throughout this crisis by taking steps that reflect these core principles: 

  1. Protect residents; 

  1. Preserve existing affordable housing; and  

  1. Produce affordable housing. 

This memo reviews last week’s relief package according to these precepts and explores what additional help is needed. 


The CARES Act Will Help 

Protect Residents 

COVID-19’s spread means that low-income renters with service or hourly jobs who cannot work remotely or whose workplaces have closed may face an immediate and dramatic loss of income.  These residents may have been struggling to make ends before the pandemic and now suddenly have fewer resources to do so.  NHT is pleased that the CARES Act includes $12.4 billion in funding for a variety of critically important HUD programs, including:  

  • $5 billion for the Community Development Fund;  

  • $4 billion for homeless assistance through Emergency Solutions Grants;  

  • $1.25 billion for Tenant-Based Rental Assistance, including $850 million for increased public housing agency administrative and operational expenses and $400 million for increased per-unit voucher costs due to COVID-19;  

  • $1 billion for Project-Based Rental Assistance;  

  • $50 million for the Section 202 Housing for the Elderly program; and 

  • $50 million for additional administrative expenses incurred by HUD due to COVID-19. 

The bill also provides  

  • $900 million for the Low-Income Home Energy Assistance Program (LIHEAP). 

These emergency funds will help ensure that renters in HUD-assisted housing, who may lose their jobs or experience temporary drops in income, can meet their housing costs without taking on additional debt.  

The CARES Act also authorized a moratorium on evictions for 120 days after enactment of the bill.  During this period, owners of certain rental properties may not initiate any legal action to evict a tenant for nonpayment of rent or charge any fees or penalties to a tenant for nonpayment of rent.  Rental properties covered under this provision include properties with any housing program covered under the Violence Against Women Act, which includes HUD-financed properties and properties financed with Low-Income Housing Tax Credits (Housing Credits), properties participating in the rural housing voucher program, and properties with federally backed mortgage loans. 

Preserve Existing Affordable Housing 

As a result of some residents’ inability to pay their rent because of the pandemic, affordable rental property owners may experience a loss of revenue on which they rely to operate and maintain their buildings and offer critical services to residents.  Through emergency funding for HUD programs, including PBRA and Section 202, the CARES Act will provide operating assistance to private housing owners and Public Housing Authorities (PHAs) to offset rent reductions, cover added administrative costs, and provide services to quarantined residents.   

The CARES Act also would allow owners of multifamily properties with federally backed loans to request forbearance of their servicers for up to 90 days if the owner/borrower is experiencing a financial hardship during the COVID-19 emergency, if the borrower was current on their mortgage payments as of February 1, 2020.  The owner must request forbearance during the “covered period,” which is from the date of enactment of the bill until either the termination of the COVID-19 natural emergency declaration or December 31, 2020, whichever is sooner. 

In order to be eligible for forbearance, the owner must not evict or initiate eviction of any tenant solely for nonpayment of rent or fees for the full period of the forbearance. They also cannot charge the tenant late fees or penalties for late payment of rent.  

The bill applies the forbearance opportunity to borrowers with multifamily mortgage loans that are insured, guaranteed, supplemented, or assisted in any way by the federal government or in connection with any HUD program or related program administered by any federal agency, or for loans purchased or securitized by either Fannie Mae or Freddie Mac. 


More Help is Needed 

Protect Residents 

Additional emergency rental assistance will be needed to defray rental costs so that residents do not face eviction once the eviction moratorium is lifted or take on debt to stay in their home.  Future federal relief funding should be targeted for rental assistance.  In addition, states and localities should prioritize the use of flexible local funds and federal stimulus funding to create rental assistance programs. It is important that these funds extend to renters in properties that do not receive federal subsidies, including Low-Income Housing Tax Credit (Housing Credit) properties and naturally occurring affordable housing, where most residents bear the full share of rental payments.  

In addition, renters need continued access to essential life-sustaining utility services.  NHT and Energy Efficiency for All urge utility regulators and state and local governments to require utilities to:  

  • Reconnect water, electricity, natural gas, and telecommunications services for residential customers that are currently without services due to non-payment without assessing a reconnection fee.  

  • Prohibit involuntary terminations of water, electricity, natural gas, and telecommunications service for residential and business customers.  Moratoria on disconnections should extend at least 60 days after the end of state-declared state of emergency to give customers who were impacted economically from COVID-19 some time to recover financially.   

  • Waive late fees for residential and business customers.  State and local governments should also take actions to protect residents from losing their homes. They should enact eviction moratoria to ensure that renters not covered by the federal moratorium can remain in their homes. They should also allocate funding for rental assistance payments as is being done in Delaware and Saint Paul, Minnesota (To learn more about actions state and local governments are taking to help renters, visit Energy Efficiency for All’s COVID-19 resources webpage).

Preserve Existing Affordable Housing 

To supplement the rental and operating assistance provided in the CARES Act, federal and state policy makers must allocate funding to defray unpaid operating costs due to reduced rental income for properties that do not otherwise have access to federal government subsidies, including Housing Credit properties and naturally occurring affordable housing.  Many of these properties will experience a 50 percent or more reduction in revenue, making them unable to service mortgages, fund operations and provide resident services, let alone pay for the increased costs for cleaning, sanitizing and securing properties when residents are quarantined and/or are at extremely high risk. This assistance could be in the form of grants or forgivable low interest/no interest loans.  Additionally, state Housing Finance Agencies (HFAs) should offer forbearance for multifamily borrowers who have experienced a decline in earnings due to COVID-19 in exchange for halting evictions.  

Federal and state governments also must provide emergency assistance to housing providers to address the needs of especially vulnerable populations, such as the elderly.  In subsidized senior housing, service coordinators are essential to assisting isolated and/or quarantined senior residents with support for food, health care, and integration to daily life when social isolation concludes. Only half of Section 202 senior housing properties are funded by HUD to employ a service coordinator.  Congress should provide emergency funds to ensure that all Section 202 properties without a service coordinator could employ one.  

State lawmakers also must help alleviate the economic burden on affordable housing residents and owners by planning for the resumption of low-income energy efficiency programs as soon as possible.  Improving the energy efficiency of affordable housing will reduce energy costs to building owners and residents.  Financial savings will be needed to help building owners and residents weather the economic downturn caused by the crisis.  Utility regulators should require utilities to prioritize the resumption of low-income programs to the extent that energy efficiency upgrades can be implemented safely and without the risk of exposing residents and workers to COVID.  Utility regulators should also adopt flexible policies to allow utilities to roll over unspent low-income energy efficiency budgets to be used in future program years or cycles, rather than re-direct funding to non-low-income programs or reclaim funding for ratepayers.   

Congress also must protect Community Development Financial Institutions (CDFIs), which provide critical capital to support affordable housing and community development across the country, but they do not enjoy the same federal protections as other lenders and financial institutions.  Protections and guarantees protecting federally chartered financial institutions must be extended to CDFIs, which will be on the front line of preserving existing affordable housing. 

Produce Affordable Housing 

In addition to protecting residents and preserving existing affordable housing, federal and state policy makers must provide resources to ensure that the impact of a slowdown in construction and rehabilitation is minimized, and housing preservation and production continue.  The COVID crisis is already causing delays in the construction and preservation of affordable housing as a result of supply chain interruptions, worker absence, construction slowdowns, and inability to get local inspections.  These delays will increase costs, prevent homes from being completed and imperil affordable housing developers. 

In the anticipated fourth COVID relief bill, Congress should provide flexible funding to support housing stability and stimulate production.  As was the case during the Great Recession, affordable housing developers will require additional financing sources to compensate for a decline in Housing Credit value and/or state and local tax revenue.  States and localities should ensure that a portion of new federal funding is available to housing developers to fill project financing gaps.  

Congress also should stabilize the value of Housing Credits to bolster housing production and preservation. The 4 percent Housing Credit supports roughly half of all developments financed each year with the Housing Credit.  However, the 4 percent Housing Credit rate is much lower than Congress originally intended because the rate fluctuates based on federal borrowing rates. With federal borrowing rates effectively zeroed out in response to COVID-, the 4 percent Housing Credit rate is at an all-time low of 3.12 percent and will likely dip even further.   

The federal and state government also must increase access to capital to enhance housing construction and preservation. Making soft funds available to real estate developers will help ensure that investments in affordable housing infrastructure continue even as an uncertain economic environment persists beyond the immediate crisis. The US Department of Treasury as well as state and local jurisdictions should use the existing CDFI infrastructure to quickly provide capital to intermediaries positioned to ensure affordable housing continues to be built and preserved. CDFIs have deep experience effectively providing below market patient capital that will allow affordable housing developers to weather the storm.   

In addition to making more funds available, state HFAs should be allowed to make more loans at lower interest rates. This can be accomplished by the Administration or Congress reauthorizing the Federal Housing Administration (FHA)--Federal Financing Bank (FFB) initiative, which provided long-term, competitively priced financing to FHA-HFA risk-sharing loans.  Reauthorization of the FFB financing initiative would provide liquidity for and substantially reduce the financing cost of affordable housing preservation and construction, while speeding up the approval process.