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While lawmakers provided aid to small businesses across the country through their multitrillion-dollar stimulus legislation, landlords have been unable to apply for funding – leaving some facing serious financial challenges.
The Paycheck Protection Program is designed to incentivize companies with fewer than 500 employees to keep staff despite difficult economic conditions that have resulted from the coronavirus pandemic. Applicants can receive up to $10 million, which can be forgiven in certain cases.
However, the Small Business Administration based eligibility on standards that have been adopted for most other 7(a) programs, which typically exclude passive businesses such as those owned by developers and landlords.
Without further guidance from the administration, it appears these individuals are ineligible – despite the fact that their operations have continued.
“Many landlords still had to have essential building personnel at their properties to maintain them in good repair and working order as well as keeping the tenants safe,” Marc Wieder, a partner at Anchin, Block & Anchin LLP, said in a statement to FOX Business. “Why did the SBA and Treasury make landlords and even more specifically apartment buildings ineligible for PPP loans, when all residents were being quarantined, meaning that all apartment buildings were fully occupied, more of a reason to have building personnel on duty and therefore still employed?”
But the problems don’t end there.
Businesses around the country are struggling due to coronavirus-related lockdown and social distancing measures – and rents are often one of the larger expenses business owners have.
As previously reported by FOX Business, landlords often have little leeway when it comes to rent relief since they don’t keep the money. The cash is instead put toward the costs of maintaining the building, real estate taxes owed to the city and state and bank financing. In the end the landlord may only keep 10 percent to 20 percent.
The entire situation is shaping up to be problematic, industry experts are warning.
Houston Rockets owner and Landry's CEO Tilman Fertitta told FOX Business’ Neil Cavuto on Wednesday that pandemic-related rent challenges are eventually going to become “a commercial real estate problem.”
“Tenants cannot pay these high rents and this is going to cause a whole other calamity if we don’t do something to get ahold of it,” Fertitta said.
On the other hand, the residential real estate market has shown signs of improvement as state economies begin to slowly reopen. Mortgage purchase application activity has risen for five consecutive weeks, while the pace at which homeowners are requesting to enter into forbearance agreements has slowed.