From a small northwestern observatory…

Finance and economics generally focused on real estate

Back rent problem — take 2

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In my previous post, I talked about the accumulated “back rent” problem stemming from the COVID recession. It’s a growing problem, and one which the newly signed COVID relief bill only partially addresses. Here’s what we know today about rental assistance forthcoming.

I would stress at the onset that state and local agencies will be the conduits for this relief, as was done in the previous CARES Act. Notably, it took weeks or months for many of these agencies to spin-up the actual relief payments. Hopefully they have some lessons learned from earlier this year, but don’t expect relief to come in the next few days.

Relief payments must be used to fund the following:

  • Rent and rental arrears
  • Utilities and other home energy expenses, but current and in arrears
  • Other pandemic-related housing expenses

Assistance may continue for up to 12 months, and in some circumstances for up to 15 months if situations warrant. Eligible tenant households must meet all of the following three criteria:

  1. An individual in the household has qualified for unemployment benefits or the household has experienced an income reduction, experienced significant pandemic-related costs, or can document other pandemic-related financial hardships. (Note: applicants must attest to this in writing.)
  2. One or more individuals in the household must demonstrate a risk of experiencing homelessness or other housing instability, such as a past-due utility or eviction notice or unsafe or unhealthy living conditions.
  3. The household income is less than or equal to 80% of the area median income, based either on total income for the year 2020 or confirmed monthly income at the time of the application.

Priorities will be given to households with income less than 50% of the area median and households where one or more persons have been unemployed for 90 days or more. Landlords may provide application assistance but will need to obtain the signature of the tenant, provide documentation of the application to the tenant for their records, and use any payments for current or past-due rent.

As noted, the conduit for all of this will be state and local government agencies and tribal units. Those agencies will be responsible for collecting and reporting certain documentation to the U.S. Treasury Department, including the number of eligible households receiving payments and average payments per household, the types of assistance provided, the acceptance rates, the average number of payments covered by the assistance, and the household income levels by median income category (e.g. — less than 30%, 30% to 50%, and 50% to 80%).

We’re all waiting to see how this pans out, and quite obviously this will not cure the problem. However, it is clearly a step in the right direction. Please stay in touch — we look forward to hearing from you all.

John A. Kilpatrick, Ph.D. — john@greenfieldadvisors.com

Written by johnkilpatrick

December 29, 2020 at 8:43 am

Posted in Uncategorized

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