What’s in the $2 Trillion Stimulus Package for the Housing Market?

On Wednesday March 25th, 2020, the Senate unanimously passed the largest stimulus package in the history of the United States to address the pandemic caused by the novel coronavirus, dwarfing the $800 billion stimulus package signed into law by President Obama in 2009 to address the Great Recession. The $2.2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act) package was passed by the House two days later and signed by President Trump. Some of the money is going straight to the pockets of some Americans, expanding unemployment benefits, and giving hospitals $100 billion. However, the 880-page economic bill addresses a wide range of issues including real estate investing. As most Americans are told not to leave their homes to slow down the infection rate, real estate properties nationwide are responding to the crisis. Many rental buildings have canceled any tours whatsoever or shifted to virtual tours. Open houses are simply not an option in places such as New York City or California, where residents are asked to shelter in place. So, what’s in the stimulus package for the housing market and how will it affect the current and future market?

Real estate agents are typically independent contractors and are not covered by unemployment benefits. The stimulus package addresses that by expanding benefits to gig workers and freelancers while increasing assistance to $600 per week for four months. What could be crucial is the $350 billion in loans to be provided to small businesses such as smaller real estate brokerages operating in New York, where real estate activity has effectively been frozen by government officials. Additionally, real estate investors do not have to claim any of their losses for this year and two retroactive years. This lifts restrictions from the 2017 tax-cut package which stipulated that married couples could shelter the first $500,000 losses from nonbusiness income (such as capital gains from investments), and any other losses got rolled over to subsequent years.

As with any bill, this one is far from perfect, but with a unanimous vote in the Senate of 96-0 and a voice vote in the House, it is clear a stimulus package is needed now more than ever. Some critics of the bill argue that it gives tax breaks to the 1% of taxpayers (those earning more than $500,000 per year), according to data from the Internal Revenue Service. Page 203 of the bill stipulates that real estate investors can use some of their losses from depreciation as a result of their investments to offset other taxes. This includes investments in the stock market, which could lead to estimated costs of $170 billion for the IRS over the course of 10 years. Whatever the outcome is from this stimulus package is yet to be seen, but we can expect another stimulus package to be passed as soon as within the next month or two. Just like the virus, the uncertainty surrounding this bill and how it will affect the housing market in the long run is undoubtedly noteworthy.