On March 27, Congress finalized and passed a bipartisan $2 trillion coronavirus relief package. The unprecedented package of legislation, known as the CARES Act, hopes to mitigate the negative economic impact of the coronavirus pandemic for affected industries, small businesses, and individuals.
Under the CARES Act, roughly $500 billion of aid is expected to go directly to citizens, in addition to a $250 billion expansion of unemployment insurance. Small businesses (those with 500 or fewer employees) can expect $350 billion in emergency loans, as well as $10 billion in emergency grants and $17 billion in relief funds to cover Small Business Administration loan payments. Major corporations in affected industries, including the hospitality and housing industries, will receive $500 billion in liquidity assistance.
How the CARES Act Benefits Businesses
The legislation also establishes a fully refundable tax credit for businesses that have been impacted by the virus. The credit covers up to 50 percent of payroll, or the first $10,000 of compensation, for each employee. Health benefits are also covered as part of the credit. Small businesses, or those with less than 100 full-time employees, the credit can be applied to all employee wages and benefits. For businesses with 100 or more full-time employees, the credit may be applied to wages paid for those currently unable to provide services.
The CARES Act and the Hospitality Industry
While those in the restaurant industry are expected to benefit from the provision of emergency loans and grants, the many in the hotel industry have found that the CARES Act falls short. The American Hotel & Lodging Association and the Asian American Hotel Owners Association (AAHOA), while praising the legislation for its aid efforts, have both expressed concern regarding the legislation’s loan program.
Cecil Staton, the President and CEO of AAHOA, issued a statement for the organization stating that, despite the successes of the CARES Act, the organization is nevertheless “disappointed that Congress was unable to increase the limits on Small Business Administration loans so that they would be more workable for [the hotel] industry during this unprecedented halt in travel.”
Staton further claimed that, “Under the current limits, hoteliers will only be able to meet their payroll and debt service obligations for an estimated four to eight weeks,” while decreased travel and revenue due to the COVID-19 outbreak is likely to last for a longer time period. As a result, many hoteliers risk missed payments, layoffs, and even closure. AAHOA has suggested Congress address this shortcoming as it shapes additional relief bills in the coming weeks.
The CARES Act Benefits the Housing Industry
For those in the housing industry, the greatest benefit is likely to be seen not from those loans and grants available to businesses, but from funding meant to support individuals and families. As renters struggle to make their monthly payments amidst soaring rates of unemployment, direct cash payments to citizens and increased employment benefits can help provide the boost tenants need in order to make rent.
Despite these added protections, however, there will likely be tenants who still lack the finances needed to make their rent payments by the first of the month. For multifamily owners with HUD-backed mortgages, evictions, late fees, and other penalties must be halted for the first 120 days that the CARES Act is in place. Fannie Mae and Freddie Mac have also announced their own relief plan for multifamily borrowers: those who agree to halt evictions for residents impacted by the virus are eligible for 90 days’ mortgage forbearance from lenders.
As outbreaks of the novel coronavirus continue to upend businesses across the United States, including those in the hospitality and housing industries, the federal government is seeking out ways to provide support.
The CARES Act provides $2 trillion in relief to impacted businesses and individuals, though many question whether it will be enough to carry beneficiaries through the duration of the outbreak. In the coming weeks, Congress is expected to bring yet another COVID-19 relief bill to the floor. In the meantime, impacted restaurants, hotels, and multifamily housing owners will be able to receive crucial financial support from the CARES Act.