COVID-19 relief bill includes $25B in rental assistance

UBS Global Wealth Managaement Jonathan Woloshin joined Yahoo Finance to break down how the recent stimulus bill will impact real estate as Americans continue to struggle paying their rent.

Video Transcript

ADAM SHAPIRO: The package that the $900 billion relief bill that came out, who would that help most? Renters, landlords? I keep hearing about rent relief, but I don't hear about helping landlords.

JONATHAN WOLOSHIN: Well, thanks for having me, Adam. It's a very fair question. You know, the relief will go to renters, but by extension, it will help landlords to a degree. You had $25 billion that was allocated to rent relief, that that money should ultimately go directly to landlords. You also have between the $600 direct payments that are going to people below a certain income level, number one, and number two, the extended federal unemployment benefits of $300 a week for 11 weeks should help people pay rent.

I think where we still need to be thinking about the landlords is in terms of relief for them. Now you have had Fannie Mae and Freddie Mac that extend their forbearance program, which is certainly good. But, again, that is kind of just really kicking the can down the road. And also, paying real estate taxes, we still have to contend with that issue.

So, look, at the margin, is this an incremental benefit for landlords? I think the answer is absolutely yes. Is it a game changer? I would say probably not. I think probably the industry that got the most benefit out of this real estate perspective would likely be hospitality. Because if you look at the $284 billion that was given in PPP loans, a fair amount of that is going to go into either restaurants or hotels.

It's been where they can spend their money has been expanded, number one. Number two, any cost associated with the PPP loans is now tax deductible. And they can also use up to 3 and 1/2 months of payroll up to $2 million in terms of getting loans. So, a little bit of expansion there. So, net-net, I would say, at the margin, better. Game changer? Probably not.

SEANA SMITH: Hey, Jon. Then, you mentioned the relief there for hospitality. It was also that $15 billion for live venues, for independent movie theaters. I guess the question is whether or not this is enough or if more relief is going to be needed either a month from now or a couple of months from now.

JONATHAN WOLOSHIN: Well, you could probably figure out from my background that I'm a big music fan. So I do hear a lot from musicians that I follow that more relief is needed. And I think it's probably likely now that we have the event-- the elections behind us that we're going to see more relief. So the $15 billion for the live venues, independent movie theaters, museums, and so forth is a start. I mean, ultimately, I think we're probably going to need-- and it's we're probably likely to see more stimulus go that way.

ADAM SHAPIRO: How would you like to see that targeted if we-- you know, the Biden administration, they're already talking about $2,000 stimulus checks. How would you like to see relief targeted to help real estate?

JONATHAN WOLOSHIN: I'm going to quote a colleague of mine. I don't think the thing should be spread like peanut butter. There are people who definitely are in need, whether they're individuals, whether they're businesses. And I think we really need to target need. The $600 checks that are going out are not necessarily based on need. i.e., as long as you fall below a certain income bracket, you're going to get that money. But no one asks if you're unemployed or not.

And so, if it were me, I would sit there and say, I would make sure that I'm targeting both the individuals and the businesses that are truly, truly in need. But I also recognize the inherent political challenges involved in that. But that's how I think it should be approached. And if we're going to talk about relief for individuals, when we talk about it, we have to talk about relief for businesses.

And there is this belief out there that landlords have this unlimited pool of money. The vast majority of real estate is not actually owned by the public or private equity. It's owned by individuals. And so, we have to think about them paying their mortgages, their real estate taxes, their employees, and so forth and so on.

SEANA SMITH: Jonathan, just real quick. I'm just curious just about the price correction that we've seen in big cities. Do you think some cities like New York, like San Francisco, are due for a steeper price correction?

JONATHAN WOLOSHIN: Well, it depends. If you're looking at the residential market, actually, the data from New York shows that we've hit a bottom in prices. And you've actually seen an uptick both in volume and prices. Not dramatic, but there has been a bottoming, particularly in the luxury market. Now, New York tends to be a very expensive market.

And then, if you look at San Francisco, again, this is on the residential side. Home prices have held in very well. I think where you've seen the real pain is on the rental side, net effect of rents. And what I mean by that is rents not only, what they call face rents have declined. But once you take into account concessions, free rent, and what have you, those are down precipitously.

The other area that is, obviously, really taken on the chin is the office market, again, with net effect of rents. I suspect that as we get the vaccines rolled out further and we start to bring people back to the offices, we'll definitely get a stabilization there. How long it takes to get back to normal, I think is going to take some time.