The Consequences of Public and Private Debt on Real Estate

ABSTRACT

Up through the May Federal Open Market Committee meeting, the U.S. Congress had passed four Coronavirus stimulus and rescue bills (the largest being the $2.3 trillion CARES legislation), and the Federal Reserve had ballooned its balance sheet to a new record of $7.2 trillion dollars with announced new facilities, such as the Main Street Lending Program to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. Individual and personal indebtedness such as student loans, car loans, and credit cards is a drain on disposable income, which directly impacts an individual's ability to pay rent, buy a home, and spend at local businesses. 5. A quickly escalating issue for the November 2020 elections and the debate over future fiscal intervention by Congress to address the tentacles of the COVID-19 outbreak is fiscal aid that states will need to fund essential operations and essential infrastructure that support an array of commercial real estate-from urban housing and office buildings that depend on public infrastructure, to industrial warehouses that rely on ports, rail, and road infrastructure that enable the flow of goods and functioning of our supply chain. According to the Transportation Security Administration, by April airline passenger traffic had fallen from 2.3 million passengers per day to a low of <90,000 - and that has only recovered to a daily average of 250,000 passengers in May as states reopened.1 The PEW Charitable Trusts examined the disparity in fiscal health among states in a report published April 2020 with the results revealing the bifurcation in states' fiscal health.2 The good news in the PEW report was that most states have "Total Balances" (reserves including "Rainy-Day" funds) at their highest levels post the financial crisis.