As the COVID-19 pandemic began to shut down the economy, lawmakers in Washington responded, reaching agreements on several bills intended to help the country survive the economic chaos caused by the pandemic. Congress passed three relief bills in March, and the House passed a fourth bill in May that was headed for further negotiations with the Senate.
“Phase I” was H.R. 6074, the Coronavirus Preparedness and Response Supplemental Appropriations Act, signed March 6. It provided approximately $8 billion in additional funding to federal health agencies and eased regulations to allow for over-the-phone consultations between Medicare recipients and their health providers. The bill also empowered the Small Business Administration (SBA) to issue an Economic Injury Disaster Loan declaration, which makes loans of up to $2 million available to small businesses.
The second phase of COVID-19 relief legislation was H.R. 6201, the Families First Coronavirus Response Act. The bill provided $192 billion in additional spending geared to supporting small businesses (those with fewer than 500 employees). Among other steps, the bill:
This “Phase II” went into effect on March 18. Before the provisions of Phase II were fully in effect, however, the scope of the economic problems made it clear that a more substantial “Phase III” relief would be needed. By mid-March, millions of businesses across the country had closed down or were closed down due to state government orders. Landlords and tenants alike began to worry about their ability to pay mortgages and rent.
Phase III of Washington’s legislative response was the Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act, a $2.2 trillion economic relief package. NAIOP worked closely with its allies in the real estate field as well as representatives on Capitol Hill to contribute to the bill. In the end, this measure did much to boost commercial real estate, as well as shore up tenants’ declining cash flows. The legislation:
The rapid rollout of the PPP and confusion as to eligibility of certain businesses that applied for loans were problematic at the outset. NAIOP and its real estate allies have been active in efforts to encourage the Trump administration and Congress to address the program’s deficiencies in Phase IV legislation.
While lawmakers were passing legislation, the Federal Reserve was also taking steps to protect the economy. On March 3, it cut the target rate for federal funds by 0.5 percentage points, to a target range of 1% to 1.25%. It cut rates again on March 15, lowering the target rate for federal funds by 1.0 percentage point, to a target range of 0% to 0.25%. At the same time, the Fed announced it would buy at least $500 billion of Treasury securities and at least $200 billion of agency mortgage-backed securities.
On March 22, the Fed announced unlimited expansion of bond purchasing programs, created two new lending facilities to support credit to large employers and a third to enable the issuance of asset-backed securities (e.g. student, auto, and credit card loans, and loans guaranteed by the Small Business Administration). On April 9, the central bank announced the formation of a Main Street Business Lending Program to support lending to eligible small- and medium-sized businesses, complementing efforts by the SBA, and expanded the eligibility of assets that can be purchased by its asset-backed purchasing facility to commercial mortgage-backed securities.
The actions taken by Congress and the Federal Reserve thus far are the first steps in what is likely to be a continuing federal response to the COVID-19 pandemic and the resulting economic devastation. NAIOP will be working with policymakers in the coming months and over the longer term to ensure policies address the challenges faced by the commercial real estate industry as a result of this crisis.