From a small northwestern observatory…

Finance and economics generally focused on real estate

So what do we know about COVID relief?

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I spoke with some folks “in the know” this morning, and the details are still unfolding. The real estate sector should pay very close attention to this, as so many aspects of the relief bill affect it.

First, what do we think we know? There are apparently 6 categories of aid in this package:

Supplemental Employment InsuranceWeekly payments of $300 (half of what was provided in the original CARES Act) for up to 11 weeks
Direct PaymentsOne time payment of $600 for individuals making under $75,000 and for each dependent child (again, half of the CARES Act)
Small Business ReliefPPP loans of $284B (about $100B less than CARES) plus $15B specially allocated to theaters and live entertainment venues
Rental Assistance$25 Billion, and the national moratorium on evictions extended until Jan 31
Vaccine Assistance$48 Billion for healthcare, and $20 Billion for vaccine distribution
Education$82 Billion for local schools, colleges, & child care plus $13 Billion for supplemental nutrition programs
Thanks to my friends at Marcus and Millichap for much of this information.

It is axiomatic that the lowest wage earners, who have generally been hit the worst by this recession, are most likely to be renters. Further, a large portion of rental properties are owned by small real estate investors. Hence, there is a bit of a two-edged sword here, in that some parts of this may flow directly to those landlords who are often retirees or others dependent on rent collection. From a practical perspective, the eviction moratorium isn’t nearly as powerful as it seems, because so many landlords would rather keep a non-paying tenant in place than to go thru the cost of eviction only to have an empty property.

It’s far too early to even conjecture as to how much (or little) impact this will have. Many businesses kept their doors open only due to the CARES Act PPP loans, but all too many of those have now shuttered permanently. For example, CNN Business reported last week that 10,000 restaurants have closed for good in the past 3 months. Every one of those restaurants had a landlord who is now not getting paid. Back in September, YELP reported that 163,735 small businesses that they track had shut their doors, and that almost 98,000 of those were projected to be permanent closings. Of course, large chain bankruptcies and closures are well publicized.

One intriguing study from suggests that apartment and rental housing vacancies vary widely according to location — inner city versus suburbs. Apparently, major cities are seeing an uptick in apartment vacancies (Manhattan’s has tripled), but suburban vacancy rates are actually down, suggesting renters are fleeing congested cities. Indeed, non-metro area vacancy rates are also down.

By the way, this is usually the week I re-visit our REIT Fund-of-Funds, ACCRE LLC, and report on the S&P correlations and other diversification benchmarks. Going forward, I’m going to consolidate the two ACCRE reports into one at the beginning of each month. This mid-month blog post will now be just about economic and real estate issues.

This is also my last post (I think!) before the Christmas holiday. All of us at Greenfield hope you and yours are enjoying a safe holiday season. I know we’ve lost all too many friends and colleagues this year, and we look forward to getting COVID under control in the very near future. Best wishes,

John A. Kilpatrick, Ph.D. —

Written by johnkilpatrick

December 22, 2020 at 3:51 pm

Posted in Uncategorized

One Response

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  1. When potential evictions and business closings were first on everyone’s radar, it seemed to me that a large part of the problem was the need for everyone to be paying off debt. I speculated that a way to minimize the problem would be to press the pause button on the payment of all debt. For the duration of the pandemic, pretend like time had stood still–no payments would need to be made and no interest would accrue. Those people who relied on income from payments on loans would be supported in the same way has those who couldn’t work. If everyone had enough money to live on, just buying essentials like food and medicine (and toilet paper!) then we could all ride out the storm and once it was safe to do so, un-pause the economy and get a more rapid recovery. I know there must be flaws with this plan, otherwise people smarter than me would have pursued it. I am curious about why it wouldn’t work. Is it a question of constitutional limits on the ability of the government to modify contracts, or are there economic complications that make this approach overly simplistic? Or is it something else? A mutual friend pointed me to your blog as someone who might have some insight into these questions.


    Cathy Zupke

    December 27, 2020 at 10:09 am

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