Written By: Jacquelyn Annete García Vadnais
The COVID-19 pandemic has caused a great disruption not only in the American economy, but also in the global economy. One of the areas of the economy that has faced great challenges is both in commercial and residential real estate. The reason for this is due to the many citizens that have lost their jobs or experienced entire industry disruptions, it has become quite difficult to be able to afford basic day-to-day costs including rent. As a result of this sudden shift in 2020, many states created emergency legislation to ensure certain protections were available to those whose finances had been negatively impacted by the COVID-19 pandemic. Many states also have been having a severe budget shortfall due to the lack of aid that they received from Congress in comparison to the severe costs they incurred due to enforcing COVID-19 health protocols. Due to the unique combination of shortage of state budgets and citizens not being able to afford basic day-to-day expenses, there have been shifts both in taxation and real estate regulations in order to respond to the COVID-19 pandemic. To learn more about some of the major shifts in the real estate market, review the information below:
Recent Shifts in Real Estate Law & Regulations in the United States
Residential Eviction Moratoriums & Foreclosure Protections
Eviction moratoriums have been put into effect in many parts of the United States and are constantly shifting. Since the CARES Act was passed in 02 2020, there were protections put into place at the federal level; however, many states also extended existing protections due to the unique needs of their citizens. One state that recently extended its eviction moratorium and foreclosure protections was New York State. As it stands currently, the eviction moratorium and foreclosure protections are extended until 05 2021. What this means is that tenants who can show documentation that their inability to pay is a direct cause of the COVID-19 pandemic will not be able to be evicted until 05 2021 unless the deadline is further extended by Governor Cuomo. In addition, it is not permitted for properties to be foreclosed due to lack of payment from hardship caused by the COVID-19 pandemic. Another state that has extended such protections is Connecticut where the residential eviction moratorium was extended through 02 09 2021. Other states such as Delaware have tied their eviction regulations to when the state of emergency ends within their state. For Delaware, this is set to expire on 02 09 2021 depending on how the virus progresses. Hawaii, regardless of its distance from other states has also extended its residential eviction moratorium through 02 14 2021. Illinois has joined suit in extending their eviction moratorium until 02 06 2021 along with Minnesota with an extension of the eviction moratorium until 01 13 2021 with the possibility of an extension.
Commercial Eviction Moratoriums
One of the top issues that has occurred during the COVID-19 pandemic is the difficulty for businesses to pay their rents on commercial leases due to forced closures across the country. In some cases, states have provided legal protections for businesses under such circumstances. For example, Colorado has put into place an eviction moratorium that expired on 12 19 2020 that prevents the evictions of commercial tenants unable to pay due to COVID-19 reasons. In addition, this eviction moratorium has been extended to prevent late fees from being charged to both residential and commercial tenants until the end of 01 2021.
Rent Increase Freezes
Certain states have opted to freeze rent increases on certain sectors of their real estate market in order to help existing tenants who are struggling to make their basic rent payments to not get further behind. One such state is New Jersey, which passed a regulation to suspend all rent increases for units that the New Jersey Housing and Mortgage Finance Agency has. This policy could impact upwards of 36,000 units within the state.
Security Deposit Application Towards Delinquent Rent Payments
Another regulation that was passed in New Jersey was permitting tenants to access their previously paid security deposits and use them as a rent payment to their landlords in Executive Order 128. While many landlords normally do not permit this practice due to the New Jersey Rent Security Deposit Act, it does serve as a way for a landlord to be compensated while their tenant may be having trouble paying their basic monthly rent payment. While this is not a permanent solution, it is something that the state of New Jersey implemented during the COVID-19 pandemic.
Increased State Taxation or Upcoming Taxation Considerations in 2021
Another important trend nationwide during the COVID-19 pandemic is the shortfall that state budgets have experienced due to the lack of funding provided to them by Congress. Two states that have had the largest budget issue have been New York and California due to the high case numbers in those states and the pre-existing debt that both states had prior to the COVID-19 pandemic. While both of these states have had historically high taxes, they have also considered increasing their taxes for their wealthier residents to make up for the shortfalls in their overall budgets. California has experienced many citizens relocating to states such as Florida and Texas in order to avoid the high-income taxation that has been proposed. Even after residents are already leaving California, there is already another high cost bill being considered to raise taxes on residents making over $1 million per year to finance a $2.4 billion bill to provide more government services to the homeless population in California. In New York, another law that is being considered that is highly controversial is Senate Bill S44A that would provide taxation on Pied-à-Terre wealthier residents in New York City that have a second residence that don’t meet traditional residency requirements. This law has been met with a great deal of controversy since it may cause wealthier individuals to not invest in New York City, which could cause other unwanted ripples in New York City’s already struggling real estate market during the COVID-19 pandemic.
Final Remarks
2020 caused a substantial shift in the global economy due to the unprecedented global financial crisis brought on by the COVID-19 pandemic. What has made the COVID-19 pandemic unique is the non-traditional way it has greatly hurt some industries and caused others to flourish. What remains the central issue is the unexpected distribution to so many global industries without warning at once and then the implication of many citizens and businesses being unable to afford their basic expenses due to unforeseen closures or extensive layoffs. As a result of these strains, the real estate market across the United States has been widely impacted both in sales as well as regulations that have been put in place to further protect citizens who are unable to pay their housing expenses through no fault of their own. This has also caused many states to raise taxation to make up for their budget shortfalls, which has caused an exodus of many wealthier residents to Texas and Florida. As the COVID-19 pandemic continues a year later, It will be important to pay close attention to the real estate market, as 2021 is likely to bring many new regulations and shifts to the already rapidly changing sector.
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Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
The COVID-19 pandemic has caused a great disruption not only in the American economy, but also in the global economy. One of the areas of the economy that has faced great challenges is both in commercial and residential real estate. The reason for this is due to the many citizens that have lost their jobs or experienced entire industry disruptions, it has become quite difficult to be able to afford basic day-to-day costs including rent. As a result of this sudden shift in 2020, many states created emergency legislation to ensure certain protections were available to those whose finances had been negatively impacted by the COVID-19 pandemic. Many states also have been having a severe budget shortfall due to the lack of aid that they received from Congress in comparison to the severe costs they incurred due to enforcing COVID-19 health protocols. Due to the unique combination of shortage of state budgets and citizens not being able to afford basic day-to-day expenses, there have been shifts both in taxation and real estate regulations in order to respond to the COVID-19 pandemic. To learn more about some of the major shifts in the real estate market, review the information below:
Recent Shifts in Real Estate Law & Regulations in the United States
Residential Eviction Moratoriums & Foreclosure Protections
Eviction moratoriums have been put into effect in many parts of the United States and are constantly shifting. Since the CARES Act was passed in 02 2020, there were protections put into place at the federal level; however, many states also extended existing protections due to the unique needs of their citizens. One state that recently extended its eviction moratorium and foreclosure protections was New York State. As it stands currently, the eviction moratorium and foreclosure protections are extended until 05 2021. What this means is that tenants who can show documentation that their inability to pay is a direct cause of the COVID-19 pandemic will not be able to be evicted until 05 2021 unless the deadline is further extended by Governor Cuomo. In addition, it is not permitted for properties to be foreclosed due to lack of payment from hardship caused by the COVID-19 pandemic. Another state that has extended such protections is Connecticut where the residential eviction moratorium was extended through 02 09 2021. Other states such as Delaware have tied their eviction regulations to when the state of emergency ends within their state. For Delaware, this is set to expire on 02 09 2021 depending on how the virus progresses. Hawaii, regardless of its distance from other states has also extended its residential eviction moratorium through 02 14 2021. Illinois has joined suit in extending their eviction moratorium until 02 06 2021 along with Minnesota with an extension of the eviction moratorium until 01 13 2021 with the possibility of an extension.
Commercial Eviction Moratoriums
One of the top issues that has occurred during the COVID-19 pandemic is the difficulty for businesses to pay their rents on commercial leases due to forced closures across the country. In some cases, states have provided legal protections for businesses under such circumstances. For example, Colorado has put into place an eviction moratorium that expired on 12 19 2020 that prevents the evictions of commercial tenants unable to pay due to COVID-19 reasons. In addition, this eviction moratorium has been extended to prevent late fees from being charged to both residential and commercial tenants until the end of 01 2021.
Rent Increase Freezes
Certain states have opted to freeze rent increases on certain sectors of their real estate market in order to help existing tenants who are struggling to make their basic rent payments to not get further behind. One such state is New Jersey, which passed a regulation to suspend all rent increases for units that the New Jersey Housing and Mortgage Finance Agency has. This policy could impact upwards of 36,000 units within the state.
Security Deposit Application Towards Delinquent Rent Payments
Another regulation that was passed in New Jersey was permitting tenants to access their previously paid security deposits and use them as a rent payment to their landlords in Executive Order 128. While many landlords normally do not permit this practice due to the New Jersey Rent Security Deposit Act, it does serve as a way for a landlord to be compensated while their tenant may be having trouble paying their basic monthly rent payment. While this is not a permanent solution, it is something that the state of New Jersey implemented during the COVID-19 pandemic.
Increased State Taxation or Upcoming Taxation Considerations in 2021
Another important trend nationwide during the COVID-19 pandemic is the shortfall that state budgets have experienced due to the lack of funding provided to them by Congress. Two states that have had the largest budget issue have been New York and California due to the high case numbers in those states and the pre-existing debt that both states had prior to the COVID-19 pandemic. While both of these states have had historically high taxes, they have also considered increasing their taxes for their wealthier residents to make up for the shortfalls in their overall budgets. California has experienced many citizens relocating to states such as Florida and Texas in order to avoid the high-income taxation that has been proposed. Even after residents are already leaving California, there is already another high cost bill being considered to raise taxes on residents making over $1 million per year to finance a $2.4 billion bill to provide more government services to the homeless population in California. In New York, another law that is being considered that is highly controversial is Senate Bill S44A that would provide taxation on Pied-à-Terre wealthier residents in New York City that have a second residence that don’t meet traditional residency requirements. This law has been met with a great deal of controversy since it may cause wealthier individuals to not invest in New York City, which could cause other unwanted ripples in New York City’s already struggling real estate market during the COVID-19 pandemic.
Final Remarks
2020 caused a substantial shift in the global economy due to the unprecedented global financial crisis brought on by the COVID-19 pandemic. What has made the COVID-19 pandemic unique is the non-traditional way it has greatly hurt some industries and caused others to flourish. What remains the central issue is the unexpected distribution to so many global industries without warning at once and then the implication of many citizens and businesses being unable to afford their basic expenses due to unforeseen closures or extensive layoffs. As a result of these strains, the real estate market across the United States has been widely impacted both in sales as well as regulations that have been put in place to further protect citizens who are unable to pay their housing expenses through no fault of their own. This has also caused many states to raise taxation to make up for their budget shortfalls, which has caused an exodus of many wealthier residents to Texas and Florida. As the COVID-19 pandemic continues a year later, It will be important to pay close attention to the real estate market, as 2021 is likely to bring many new regulations and shifts to the already rapidly changing sector.
--
Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
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