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What the American Rescue Plan Act means for property owners in California, Texas, Arizona, and other states

Now that President Joe Biden’s $1.9 trillion stimulus plan has been passed, there is new hope among property owners and residents who have struggled to pay their bills over the past year as the coronavirus pandemic devastated the American economy.

How the American Rescue Plan Act addresses rental crisis

The American Rescue Plan Act of 2021 is one of the largest economic rescue packages in American history, designed to address one of the nation’s greatest economic catastrophes. The housing market is but one sector in crisis: nearly 20 percent of renters are behind on their rent by four months, owing an average of $5,600. A total of $57.3 billion is owed by some 10 million American renters, according to an analysis from Moody’s Analytics and the Urban Institute.

The rescue plan addresses this need head on, setting aside some $21.6 billion for rental assistance programs. Federal money will be provided to states and local governments, which can then provide grants to pay for back rent or utility bills.

How does geography impact property owners and residents?

The aid arrived just in time for some. The Center for Disease Control’s ban on eviction for some renters will expire at the end of March. Still, geography determines destiny for many owners and residents: 

  • In Texas, one judge has declared the CDC’s ban unconstitutional and despite the moratorium on evictions, some cities like Houston have seen thousands of cases filed in the last year. 
  • California, with some of the strongest renter protections in the nation, in February extended its eviction moratorium through June 30 and set up a $2.6 billion fund to aid residents and small property owners. It’s expected that the fund will double with the new stimulus money set aside for housing
  • An investigation by the Arizona Republic into the more than 8,000 evictions filed from March 26-July 26 in Maricopa County, the state’s most populous county and home to Phoenix, found more than 10% violated the federal Coronavirus Aid, Relief and Economic Security (CARES) Act.
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Eviction notice

With another $21.6 billion flowing in the troubled rental market, there is renewed hope for residents who are in arrears, and owners who are facing increasing debts. (Credit: Getty Images)

The threat of eviction is the most powerful tool landlords have to compel residents to pay back rent, and with $1,400 stimulus checks flowing to Americans who earn $75,000 a year or less, the coming months may offer landlords a chance to recoup some of the $57.3 billion owed in back rent. 

How are states addressing eviction?

Here’s a breakdown of how some states are addressing the issue:

California

The state’s effort to protect residents with its eviction moratorium through the end of June does not absolve them from paying back rent. And though residents are responsible for making good on all arrears, California’s law prohibits owners from using those unpaid amounts as a basis for eviction, even after the moratorium expires.

In addition, California established its $2.6 billion fund in late January, taken from federal rental assistance monies, to income-qualified residents most at-risk with unpaid back rent. (Money from the rescue plan should push this amount over $5 billion.) 

This program also offers owners 80 cents on the dollar if they agree to waive 20 percent of unpaid rent. If property owners agree to the waiver, they will qualify for 80 percent in rent reimbursements for the period between April 1, 2020 and March 31, 2021. 

The State Rental Assistance Program began accepting applications from property owners and residents on March 15. To be eligible for the aid, residents must make less than 80 percent of the local median income and be able to show some impact from the Covid-19 pandemic.

The California Apartment Association is urging property owners to get in touch with eligible residents so they can work together when applying for an aid package.

“This is the best chance most landlords are going to have to be compensated for the significant portion of past due rent,” Debra Carlton of the California Apartment Association told KQED, the public news organization in San Francisco.

Sid Lakireddy of the California Rental Housing Assn., which represents property owners, agreed. He told the Los Angeles Times that many owners are likely to agree to forgive the 20 percent of rent because it would be hard to get more than the 80 percent the state is offering.

But if owners have a longtime resident who is paying below-market rate because of California's rent control laws, the owner may prefer to let the debt build up and evict a resident so the property’s rent can be raised to the market rate.

Texas

Tenant protections are far less entrenched in Texas, and more than 13,000 evictions have been filed since the CDC moratorium was put in place, and more than 24,000 evictions that have been filed in the Houston area since the start of the pandemic, according to research from Eviction Lab and data consulting firm January Advisors.

With no state or local moratorium, more renters have been evicted in Houston during COVID-19 than almost anywhere else in the country. In Austin, where a local moratorium protects renters, fewer than 900 cases filed in the same period. 

Property owners have an ally in a Texas judge who ruled at the end of February that the federal moratorium on evictions is unconstitutional. U.S. District Judge John Barker, an appointee of former President Donald Trump, said he expected the U.S. Centers for Disease Control and Prevention to withdraw the moratorium. He called the moratorium harmful to landlords and property owners.

“The federal government cannot say that it has ever before invoked its power over interstate commerce to impose a residential eviction moratorium,” Barker wrote. “The federal government has not claimed such a power at any point during our nation's history until last year.”

But there is help available for renters in Texas. 

The Texas Department of Housing and Community Affairs (TDHCA) has received approximately $1.3 billion in Emergency Rental Assistance funds from the Coronavirus Relief Bill Rental Assistance Program. With the new stimulus plan, more funds for distressed residents and property owners is on the way.

TDHCA began accepting applications on Feb. 15, and is using the funds to help Texas renters pay rent and utility bills. Households must have incomes at or below 80 percent of the Area Median Income and meet other qualifications.

Arizona

Maricopa and Pima counties, which include Phoenix and Tucson, will be receiving funding directly from the federal government to set up their own rental assistance programs, according to the Arizona Department of Housing.

The state set up a program in August that allowed owners to apply for as much as $50,000 in assistance if residents stopped paying rent. In all, Arizona set aside $10 million for resident and owner assistance programs last year, in addition to millions more from local governments.

But now that the $1.9 trillion recovery plan has been passed, the state’s beleaguered renters and landlords are looking for more relief.

Despite the upheaval caused by the pandemic, experts at the real estate website Zillow predict that Phoenix will be America’s second-hottest housing market this year, part of a list of mostly Sun Belt cities expected to continue heating up faster than the nation’s large coastal markets. (These experts’ prediction for the hottest market: Austin, Texas.)

The Phoenix metro area’s population is expected to increase to 7.7 million by 2050, up from about 5 million today. It has led the country in population growth over the last 5 years, and its growth rate of 1.4 percent a year is double the national average. AZBigMedia predicted that a total of 1.765 million new residents will require a total of 630,000 single family and multifamily housing units in the coming years, leading to a housing crunch that is driving home prices — and rents — higher. 

Nevada

Las Vegas and Reno are two other cities expected to see population growth in the coming years, and Nevada is expected to add about 160,000 people by 2023 and be home to some 3.3 million. This increase is partly fed by Californians fleeing higher taxes and housing prices next door, and Nevada has ranked among the fastest-growing states in the country in the last few years.

With the vaccine rollout moving forward, tourists are expected to return to Las Vegas later this year and the state’s economy should recover. Gov. Steve Sisolak has extended a moratorium on most residential evictions through March 31, and the state has rent assistance programs in effect for residents, and they can apply if they meet the following conditions:

  • They give their landlord a signed declaration and truthfully state that they are unable to pay their rent
  • They have tried to obtain rental assistance, have made their best efforts to pay partial rent.
  • They have either received a stimulus payment or will make less than $99,000 this year.
  • Eviction might leave the tenant homeless or forced into a group living situation.

Though the state’s economy struggled in pandemic-plagued 2020, the housing market told a different story, especially in Reno. For the first time, the median price of an existing, single family home in Reno has hit $500,000.

The story in Las Vegas is similar. The median price of single-family homes sold in Southern Nevada during January held steady at $345,000, matching the record set in November and tied in December of 2020, according to LVR, the group representing realtors in the Las Vegas area. It’s also up 13.1 percent from a median price of $305,000 in January 2020. Condos and townhomes sold for a median price of $193,000 in January, up up 10.3 percent from $175,000 in January of 2020.

And rents have not fallen either. The average rent for an apartment in Las Vegas is $1191, a 6.38 percent increase from last year. Still, smaller property owners are under duress because of unpaid rents, and some have challenged the CDC's eviction ban in an effort to salvage their portfolios.

Real estate broker and Las Vegas Realtors President Aldo Martinez said smaller property owners usually don't have enough leverage to cover a tenant’s missed rent payments for an extended period of time, adding that some clients are now looking to sell their rental properties.

“They’re just cutting their losses where they can,” Martinez told the Las Vegas Review-Journal. “If you think owning rental properties is a good idea because there’s someone helping you pay down the property plus you’re making some income, all of that makes sense. But then you run into COVID and an eviction moratorium and now a state that was actually very good for landlords has become a catastrophe for them.”

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