Next on the Horizon: the COVID-19 Response from State and Local Leaders
On Monday, I wrote a blog about the swift response to the COVID-19 outbreak at the state and local level. It was encouraging to see the ability of our state and local leaders to move decisively, impose eviction moratoriums and turn water and utilities back on for thousands of households.
But those short-term interventions to stabilize households are only the beginning. Much more has to be done in order to weather this storm and protect renters, homeowners and the industry in the long-term.
As the Virus Evolves, So Must Policymakers
Now that most impacted jurisdictions are under some type of eviction moratorium, renters can plan accordingly knowing that their housing is secure – for the time being. After all, moratoriums will be lifted at some point, and the rent will come due. In order to ensure the long-term stability of households and financial viability of affordable housing providers, it will be imperative to provide rapid rental assistance as early as possible.
Some state and local governments have already stepped in to do exactly that. The city of Columbus, OH, passed a $1 million emergency assistance fund to provide emergency housing and food assistance tapping into their own general funds. In Minnesota, a state bill to impose a moratorium on evictions and late fees also calls for the creation of a temporary housing assistance program. Minnesota legislators are seeking an allocation of state general funds for the program. The county of San Diego announced Monday the creation of an emergency fund to help nonprofits provide rental and utility assistance as well as address food insecurity and other issues facing low-income residents. The San Jose City Council is also contemplating adding small businesses to their eviction moratorium and looking at creating an emergency fund to help residents and business owners make rent payments.
The absence of substantial rental assistance creates unstable situations not only for tenants, but for providers of affordable housing as well. Many operators of multifamily housing depend on rents for cash flow to maintain their operations, maintenance and debt service requirements. In addition to immediate protections for tenants that may be facing a loss of income, we need our affordable housing providers to have the financial strength and security to continue maintaining, investing in, and developing much-needed affordable housing.
In addition to providing emergency rental assistance, governments will need to take quick action to protect homeowners. We can look back to the financial crisis of 2008 for some best practices, including leadership from banks to provide forbearances and loan forgiveness – both to individual homeowners and multi-family borrowers. There is also an opportunity to reinvest in housing counseling services to help homeowners navigate resources.
Easier Said Than Funded
While demonstrating a great willingness to protect households, state and local governments will soon face serious funding limitations in the form of lost revenue from declining tax bases.
In Washington, DC, where the hospitality industry accounts for 30 to 50 percent of the city’s sales tax revenue, the District estimates that it may have to reduce 2020 spending by $500 million if hospital businesses remain closed, and could experience a temporary unemployment rate of 15 to 20 percent.
New Orleans is bracing for a big hit to its tourism industry that could ultimately result in layoffs, furloughs and revenue losses that would limit city operations. The city had initially estimated $206 million in 2020 sales taxes collections, almost one-third of the city’s $721.8 million budget, half of which comes from tourism-related activities that are expected to be significantly scaled back in the coming weeks and months.
The City of Seattle recently estimated it could collect $110M less than expected in general-fund tax revenue this year, which represents a 7% reduction. The State of Washington does not have an income tax and therefore is heavily dependent on the sales tax for its revenue. And Atlanta, home to Delta Airlines, forecasts that the hospitality business could experience a 30-50% reduction in activity over the next couple of months.
These examples highlight a unique and ongoing challenge at the state a local level: all states (except one) and most localities are under constitutional or statutory requirements to balance their budgets. They don’t have the luxury of spending into deficit during times of crisis, which forces them into last-resort measures such as taping into Rainy Day Funds. Only the federal government can take necessary measures to keep the country afloat during times such as these.
Now, More Than Ever, the Federal Government Must Be a Willing Partner in Funding Housing Solutions
Enterprise applauds the bi-partisan nature of the “Coronavirus Preparedness & Response Supplemental Appropriations Act” and recognizes it as an important first step, however, it is critical that Congress does not stop there. The federal government is uniquely positioned to provide widespread relief to protect homeowners and renters while stabilizing the industry. Some key strategies for rental assistance and flexible grants include, but are not limited to:
- $10 billion for supplemental HOME grants, which can be used for temporary project-based and tenant-based rental assistance, including for homeless people. It is important that HUD receive broad waiver authority so that HOME can be used for services such as increased cleaning, food delivery fees for residents, as well as covering tenant missed payments.
- Supplemental funding for Tenant-Based Rental Assistance (TBRA) and Project-Based Rental Assistance (PBRA). Even before the coronavirus crisis, the demand for HUD’s TBRA programs far outpaced the availability of federal resources—a supplemental appropriation will help close this gap and ensure that households facing the prospect of quarantine and loss of income are stably housed for the duration of the public health emergency.
- $35 billion for supplemental CDBG funds that allow for states and localities to reimburse themselves for extra costs of public safety; grants to nonprofits for homeless services, medical services, temporary housing costs. This must be coupled with broad waiver authority, similar to what is allowed for with the CDBG-DR funds, so creative new economic development grants and loans that create or preserve jobs for people at or below 80% of AMI are allowed.