Shlomi Ronen of Dekel Capital on why apartment residents and property owners will benefit directly and indirectly from the mega relief bill that was recently approved by Congress.
A college engineering professor of mine always said that to understand numbers you needed to experience them or feel them. Last month, the U.S. Government passed a $1.9 trillion COVID-19 relief bill that is of a scale that is tough for most of us to understand when taken at face value. Let me attempt to give you a “feel” for this humongous amount of capital that the relief bill will fund.
For starters, our national GDP in 2020 was $22 trillion, so the $1.9 trillion represents 8.6 percent of our nation’s GDP. Said differently, $1.9 trillion is about one month’s worth of economic activity for the entire country. Taken a step further, it is equivalent to our national GDP in 1976, and if distributed directly to the 128.45 million U.S. households, each household would receive a payment of just under $14,800 each.
The bill has a number of programs and allocations that will both directly and indirectly impact real estate. The provisions that directly impact real estate owners and tenants are as follows:
These programs and allocations have a direct focus on the housing and restaurant industries, with housing being the biggest beneficiary. Multifamily properties will be able to recoup lost rent from tenants who are delinquent on their rent. This should help avoid a tidal wave of evictions and the displacement of renters who experienced a loss of income due to the pandemic. Likewise, homeowners behind on their mortgage payments will receive assistance that should stave off foreclosures and potential losses to the financial institutions and investors holding the mortgages.
The provisions that will indirectly impact real estate:
These indirect programs will have a short term and long-term impact on real estate. In the short term, providing payments to individuals will hopefully translate to more discretionary spending, helping cities to make up for revenues lost when most people were staying home and limiting expenses. In the long term, the funding of capital projects will help our cities grow.
In all, spent over the coming years, this far-reaching bill that will touch all parts of the economy should speed up the economic recovery (think “V” chart) and provide a catalyst for economic growth for years to come, as individuals and businesses return to a new normal.
Shlomi Ronen is managing principal of Dekel Capital.