The COVID-19 pandemic has wreaked utter havoc on Americans' finances, and unfortunately, it doesn't appear to be slowing down. In March, the CARES Act was passed to provide relief during the ongoing crisis, and it included a number of notable features such as boosted unemployment benefits.
Unemployment insurance exists so that when people lose their jobs through no fault of their own, they're entitled to state unemployment benefits. Regular unemployment benefits (also known as UI benefits) typically replace just a portion of jobless workers' missing paychecks, so what the CARES Act did was allow for federal unemployment benefits -- specifically, a $600 weekly benefit on top of the standard state benefit a claimant would otherwise get. That additional $600 a week kept many workers afloat, replaced their paychecks in full, and enabled them to pay their bills.
But unfortunately, that $600 federal weekly benefit expired at the end of July, leaving millions of people in the lurch in the absence of an extended unemployment boost. Meanwhile, lawmakers have been trying to come to terms on a second COVID-19 relief package that would include boosted unemployment benefits, but after weeks of negotiations, they've yet to reach a consensus. Therefore, President Trump is seeking to take matters into his own hands.
President's Trump new executive order
On August 8, President Trump signed an executive order that allows for boosted unemployment benefits in the amount of $400 per week. Of that, the federal government would be responsible for $300, with states picking up the tab for the remaining $100. Seeing as how every unemployed worker is already missing that $600 weekly benefit boost, this is good news, at least in theory.
How will boosted unemployment benefits impact real estate investors?
Taking away enhanced unemployment doesn't just hurt the jobless; it impacts the economy as a whole. When unemployed workers can't pay their rent, landlords suffer. And when these same workers have to drastically cut spending, it means they have less money to pump into the economy.
Many businesses, however, are already struggling to pay their own rent and keep up with operating expenses -- especially small businesses that don’t have the resources larger companies do. Boosting unemployment by $400 a week therefore makes it easier for jobless workers to keep spending. That means residential landlords can keep getting paid and small businesses can continue paying their landlords.
Giving millions of unemployed workers more money to pump into the economy could also prevent countless small businesses -- and even larger businesses -- from having to permanently close their doors in the coming months. And that's good for real estate investors who don't want to see boarded-up windows and rampant vacancies in commercial centers, strip malls, and classic shopping malls.
How much will President Trump's executive orders help?
Whether the president's new orders actually achieve the above scenarios is yet to be determined, and for a couple of key reasons. First, the order initially requires each state to commit to covering its portion of the aforementioned $400 unemployment boost. Many states don't have that money, but eligibility requirements for the extra $300 in unemployment coming from the federal government could hinge on state eligibility first. In other words, if a given state doesn't sign on to provide its own share of the $400 boost, its workers may be out the full $400, leaving them with just a traditional unemployment benefit to fall back on.
That said, on August 9, President Trump stated he'd be open to having the federal government cover the full $400 weekly boost to unemployment benefits if some states push back. But more details need to be ironed out before jobless Americans can start celebrating.
Additionally, Congress has not authorized an extension of additional federal unemployment assistance, which means each state may need to set up a completely new system to deliver funds to the jobless. That process alone could take weeks or months. As such, while the president's executive order may achieve a lot of important purposes -- sparing workers on unemployment from financial ruin, putting money into mom and pop landlords' hands, and preventing countless business closures that could otherwise leave real estate investors reeling -- ultimately, there are still a lot of questions to be answered about it.
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