Extended Moratorium, American Families Plan, and More: The Five
Summer is right around the corner and developments in the real estate world are heating up. President Biden’s proposed American Families Plan, while focusing on education and families, implicates investors due to the tax implications that will be used to fund the programs. Even though much progress has been made in containing the pandemic in the US, the FHFA has decided to extend the moratorium on evictions until the end of September to provide further support to renters. While renters do have billions of dollars in relief available, inefficient distribution and lack of awareness have limited the use of these funds. When it comes to homeownership, sky-high lumber prices are limiting the prospect of purchasing a home for many Americans. Keep reading for insights into these topics and more.
President Biden has introduced the American Families Plan to invest in childcare and education. To pay for these programs, if the plan becomes a bill and is then passed, taxes will go up. As things progress, adjustments will be made to the Plan. Various tax implications are discussed including the proposed change of raising capital gains taxes to 39.6% for households making more than one million dollars. At the moment, the highest level of the capital gains tax is 20%. So we’re talking almost double. Significantly larger capital gains taxes can have a negative impact on real estate. While real estate will remain a solid investment, there may be large shifts in the type of assets that are invested in. Also, there will likely be an increase in residential property prices as demand goes up.
The moratorium on evictions was set to expire at the end of the month. The Federal Housing Financing Agency has said not so fast. Despite dropping COVID-19 cases in the US, the FHFA cited many renters being unable to benefit from rising home prices as they still try to recover financially from the pandemic. As a result, the moratorium has been extended until the end of September. Rumors are that the CDC will follow suit in extending its own moratorium.
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$45 billion in rent relief—a large amount—is available to renters who meet certain criteria. These funds are each state’s responsibility to distribute. However, states have been unable to handle this responsibility efficiently. Since distributing funds like this have not traditionally been under a state’s purview, they do not have plans and resources in place to handle the duty. To further complicate matters, many renters are not even aware that relief is available to them. Since there is no centralized system to distribute funds, renters have to navigate the more than 340 rental assistance programs that are in place. The result? Confusion.
The price of lumber has been an issue since 2020. When you combine skyrocketing lumber prices and supply chain challenges, it is not difficult to see why new home construction has slowed down despite the demand. Even the existing homes market is difficult to navigate as homes are getting scooped up in the blink of an eye or exceed prospective home buyers’ price ranges. As prices continue to rise, affordability is a real problem as prospective homeowners cannot afford to build new homes.
As the weather is heating up, so is the real estate market! With the prospects of the American Families Plan becoming a bill over the next couple of months, investors should be on the lookout for how this plan will affect them. Renters will have continued support with the extension of the moratorium from the FHFA and should also look at state resources that may provide additional funds. As sky-high lumber prices continue, the possibility of owning a home seems out-of-reach for many Americans.
We’ll catch you next time for another selection of hand-picked resources to boost your real estate investing business.
Stay safe, stay healthy, and happy (and profitable) investing.