Many renters in the US housing market have been economically impacted by the spread of Covid-19 and have been leftunable to pay rent. In fact, according to the US Census Bureau, around 1 in every 5 renters had rent arrears at the start of 2021. Consequently, real estate investors owning rental homes have also been affected by the pandemic. Fortunately, if you are a landlord who has been experiencing financial hardship because your tenants are unable to pay rent, the latest stimulus package signed by President Joe Biden brings some hope. Included in the Covid relief bill is the $25 billion Emergency Rental Assistance Program (ERAP).
As a landlord, information on how new government policies will impact you and your tenants is invaluable. In this article we’ll walk you through the basics of the Emergency Rental Assistance Program so that you can understand how to benefit from it.
Related: US Real Estate Market Data Shows Covid-19 Effect
The Emergency Rental Assistance Program: What Is It All About?
The ERAP was launched by the U.S. Department of the Treasury on January 5, 2021. The program is meant to help households that are unable to pay rent and utilities as a result of the ongoing Coronavirus pandemic. The funds have been dispersed directly to US states, territories, local authorities, and Native American Tribes.
The money is used by grantees to provide rent assistance to eligible households through existing rental assistance programs or newly created ones. While the allocation is based on population, the Emergency Rental Assistance Program will provide each state with a minimum of $200 million.
As part of the initial response to Covid-19, several regional short-term emergency rental housing assistance programs were administered in 2020 such as the Los Angeles Emergency Renters Assistance Subsidy Program (ERAS) and the Illinois Emergency Rental and Mortgage Assistance Program (ERMA). However, many of these programs closed down in anticipation of the rolling out of the new ERAP.
Related: Covid-19: Mortgage Relief Programs for Real Estate Investors
Why Is the ERAP Important to Real Estate Investors?
In order to stop a wave of evictions because of the pandemic, some of the Biden housing policy proposals were meant to protect tenants from eviction by providing financial assistance to help middle-class and poor Americans get safe and quality low income housing. To achieve this, the CDC extended the eviction ban to March 31 with some states scheduling their moratoriums for even longer. If the eviction moratorium were allowed to expire, multiple households would have been evicted.
While the eviction ban protects renters affected by Covid-19, it put pressure on small property owners who were struggling to pay their own bills and risk foreclosure. Moreover, the bans limited the supply of low income housing.
Related: What Landlords Can Do During the Coronavirus Eviction Ban
However, the newly created Emergency Rental Assistance Program uniquely unites landlords and tenants. The funds earmarked for rental assistance will help keep renters risking eviction from their homes while also protect rental property owners from losing their rental businesses.
Who Qualifies for the Covid-19 Emergency Rental Assistance Program?
Both landlords and tenants can apply for rental assistance from the state. However, if a landlord applies for rent assistance, he/she will be doing so on behalf of a tenant who meets the minimum requirements. This means that the tenant needs to co-sign the application.
Related: 5 Things You Didn’t Know About Becoming a Landlord
According to the U.S. Department of the Treasury, for a renter household to be eligible for the ERAP, it must meet the following criteria:
- One or more individuals in the household qualify for unemployment or have experienced financial hardship as a result of the Covid-19 pandemic.
- One or more individuals in the household can prove they are likely to experience homelessness or housing instability.
- The household income should be at 80% of the area median income (AMI) or less. However, rent assistance is prioritized for households that earn less than 50% of the area median income.
What Assistance Can Eligible Households Receive?
The Emergency Rental Assistance Program includes up to 12 months of assistance. However, eligible households may receive an extra 3 months of assistance if grantee funds are available and the grantee establishes that the additional months are necessary to ensure housing stability.
Under the Emergency Rental Assistance Program, priority is given to current housing-related arrears that could lead to an eligible household being evicted. It’s only after an eligible household’s rental arrears are reduced that the household may get assistance for forthcoming rent payments.
However, an eligible household may only receive assistance for up to three months at a time. After every three-month period, if the total time limit for assistance is not exceeded, a household that still needs assistance may reapply for additional assistance to make sure it still meets the requirements.
How Can One Apply for Assistance Under This Program?
An application for financial assistance under the Emergency Rental Assistance Program is technically supposed to be submitted by an eligible household. However, a landlord can also apply on behalf of a tenant if needed. The applications must be made through programs established by grantees.
Grantees are typically supposed to make payments directly to the landlord or to a utility provider. However, in the event they decline to participate in the program, payments can go directly to the eligible household.
The Bottom Line
Due to the effects of the Coronavirus pandemic on the economy, many individuals and families have found themselves out of work and struggling to pay rent. As a result, and coupled with the eviction moratorium, rental property owners have grappled to pay their mortgages. The Emergency Rental Assistance Program will be crucial in ensuring that vulnerable households stay housed while also helping real estate investors maintain their rental businesses. For months to come, the ERAP will alleviate tension between renters and landlords and help stabilize the rental industry.
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