NAR: Legislative Update, March 10, 2021

By Jamie McMillen posted 03-11-2021 09:18:42 AM

  

From the desk of Zack Rubin-McCarry, NAR Senior Political Representative

 March 10, 2021

NAR Stresses Support for Independent Contractor Classification

 NAR has been educating policymakers on the importance of real estate professionals’ ability to be classified as independent contractors to the real estate industry, homeowners across the country, and to boosting the economy.

The ability to work as an independent contractor is recognized and protected under many state and some federal laws (see 26. U.S.C. §3508(link is external) and state laws). However, litigation and new federal and state legislation continue to threaten workers’ ability to be classified as independent contractors, including many real estate professionals. More specifically, NAR has communicated the concerns with adoption of the “ABC test” used for classifying workers. Should new federal standards adopt this test, there may be states that mirror that action and also encourage more litigation challenges that may impact real estate professionals’ independent contractor status. 

In recent years, there continues to be interest in moving federal legislation that incorporates the “ABC test” for classifying independent contractors. Under this test, all of the following must apply: (a) an individual is free from direction and control applicable both under the contract for the performance of service and in fact; (b) the service is performed outside the usual course of business of the employer; and, (c) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed. Based on these factors, the state statutory supervisory and control requirements imposed on brokers over agents make it challenging to classify real estate professionals as independent contractors. 

The Department of Labor (DOL) also recently proposed to delay the effective date of a final rule issued by the Trump Administration, which was set to go into effect on March 8, 2021. DOL proposed this delay following a memorandum issued by the Biden Administration requesting federal agencies to review or delay certain pending regulations. NAR commented (link is external) on this delay, requesting that the effective date not be delayed, as the regulation provides needed clarity and certainty for how an employer may classify a worker. While these regulatory modifications have no direct impact on real estate professionals’ classification under the Internal Revenue Code for federal tax purposes, it is anticipated DOL will effectively delay this rule and eventually modify or rescind it, potentially adding more challenging worker classification standards, especially if the ABC test is incorporated.

NAR has developed new resources to communicate the importance of this issue to policymakers.   

Resources

 

SBA Updates Loans for Schedule C Filers

On Wednesday, March 3, the SBA announced updates to the Paycheck Protection Program (PPP) to reflect announced changes from the Biden Administration to loan calculations for borrowers who are independent contractors, sole proprietors, or self-employed (“Schedule C borrowers”). Under the updated system, those borrowers are eligible to use either net profit or gross income when calculating the total loan amount they are eligible for. 

These changes reflect concerns that those borrowers, who frequently do not have any employees, were disadvantaged in the earlier calculation system.  PPP borrowers are eligible to receive loans of up to 2.5x their average monthly payroll costs from before the pandemic. Schedule C borrowers however were required to use their “net profit” when calculating their loan amounts, which subtracts business expenses from the total amount, thus leaving them eligible for a lower percentage of their actual income than other businesses with employees who simply use payroll costs. Under the updated rules, Schedule C borrowers now can elect to use either gross income or, if they prefer, net profits. An updated application form and interim rule has been released by the SBA reflecting these changes, and the agency is in the process of revising its PPP FAQ document.

 

Notably, these changes will not apply to PPP borrowers who have already received their loans or applied for one under the earlier regime. NAR is advocating for them to be made retroactive so early-program participants can get the full amount they would receive in funds under the current calculations.

 

Treasury Provides Rent Relief Guidelines

On Tuesday, February 23, the Treasury Department released updated FAQs for states and municipalities (“grantees”) reflecting the Biden Administration’s guidelines for structuring Emergency Rental Assistance (ERA) programs, clearing the way for states to being administering rental assistance to renters and housing providers. The ERA fund was created by the December 2020 COVID-19 relief package, which appropriated $25 billion for rental relief. The funds were distributed by the Treasury Department to states and municipalities that applied for them; each state received at least $200 million, with more available based on population. The states are now charged with creating programs to disburse the relief funds to renters and housing providers to assist renters who have been financially impacted by COVID-19 pay their rent and relieve the financial burden on housing providers caused by the CDC eviction moratorium. 

These FAQs give states the information they need to begin administering their programs and releasing funds, which they have been waiting to finalize to ensure compliance with federal guidelines. Some of the most relevant points for housing providers and tenants are:

  • “Eligible households” must have at least one person who:
    • Qualifies for unemployment OR has experienced a reduction in household income/incurred significant costs/experienced financial hardship due to COVID-19;
    • Is at risk of homelessness or housing instability;
    • Has a household income at or below 80% of the area median income (AMI).
  • Applications for rental assistance may be submitted by either an eligible household or by the housing provider on behalf of an eligible household.
  • Applicants can self-certify that they meet many of the requirements at the time of application, and income may be determined based on either the total income for the year 2020 or the monthly income at the time of application.
  • Assistance can only be applied for three months at a time (not including rental arrears), totaling up to 12 months.
    • Grantees may provide an additional 3 months of assistance (beyond the 12 months) if they determine it is necessary for the household.
  • Rental arrears payments are to be prioritized (though it does not require that they be fully paid before applying to prospective rent).
  • Tenants that receive housing subsidies are eligible for rental assistance to cover any portion of rent and utilities that the tenant pays themselves.  
  • Housing providers can accept direct payments on behalf of tenants, but must confirm their cooperation with the state program; outreach to the housing provider to confirm this by the states will be considered complete if one of the following conditions is met:
    • A request to the housing provider sent by mail, which the housing provider has 14-calendar days to respond to (from date of mailing);
    • At least three attempts by phone, text or email over a 10 calendar-day period to the housing provider; or
    • The housing provider confirms in writing that they do not wish to participate.

 The Treasury has stated that further guidance is forthcoming, which will provide more details on these requirements. Congress is currently considering a budget reconciliation bill that appropriates an additional $20.25 billion for rental relief. NAR will continue to advocate for rental relief fund amounts that accurately track the length of the CDC eviction moratorium, maximum flexibility for renters and housing providers when applying for these funds, and an efficient system for disbursing the funds.

NAR Comment to FHFA on Appraisals

On Friday, February 26, 2021, NAR submitted comments to the Federal Housing Finance Agency's (FHFA) Request for Information on Appraisal-Related Policies, Practices, and Processes (RFI). NAR provided input on several of the questions posed by FHFA in the RFI, focusing mainly on concerns related to risk in the valuation space, the role of technology, and discrimination in appraisals and other valuation products.

In general, NAR believes a traditional, in-person appraisal continues to provide the most comprehensive and thorough opinion of value for a real estate transaction. NAR also supports innovation in the valuation field and allowances for various forms of appraisal type depending on the need of transaction. Continued work in improving the valuation field must ensure fair and sound appraisal practices and processes.

 

NAR Comments on Potential Changes to the FHFA's Housing Goals

NAR submitted comments (link is external) to the FHFA in response to its advanced notice of proposed rulemaking (ANPR) which sought feedback on potential changes to the construct of the GSEs' housing goals.

In our response, NAR highlighted that:

  • The FHFA should not limit the types of mortgages that qualify for housing goals beyond their required compliance with the QM (rebuttable or safe harbor) exemption to the ability to repay rule, and
  • The FHFA should update the measures it uses to evaluate the housing goals with screens for mortgages that may qualify under the current measures, but do not meet the spirit or intent of the goals.

Read NAR's Comments to the FHFA (link is external)

 

NAR Comment to FHFA on Appraisals 

On Friday, February 26, 2021, NAR submitted comments to the Federal Housing Finance Agency's (FHFA) Request for Information on Appraisal-Related Policies, Practices, and Processes (RFI). NAR provided input on several of the questions posed by FHFA in the RFI, focusing mainly on concerns related to risk in the valuation space, the role of technology, and discrimination in appraisals and other valuation products.

In general, NAR believes a traditional, in-person appraisal continues to provide the most comprehensive and thorough opinion of value for a real estate transaction. NAR also supports innovation in the valuation field and allowances for various forms of appraisal type depending on the need of the transaction. Continued work in improving the valuation field must ensure fair and sound appraisal practices and processes.

NAR's Response to the FHFA Appraisal RFI

 

NAR Comments on Potential Changes to the FHFA's Housing Goals

NAR submitted comments (link is external) to the FHFA in response to its advanced notice of proposed rulemaking (ANPR) which sought feedback on potential changes to the construct of the GSEs' housing goals.

In our response, NAR highlighted that:

  • The FHFA should not limit the types of mortgages that qualify for housing goals beyond their required compliance with the QM (rebuttable or safe harbor) exemption to the ability to repay rule, and
  • The FHFA should update the measures it uses to evaluate the housing goals with screens for mortgages that may qualify under the current measures, but do not meet the spirit or intent of the goals.

 Read NAR's Comments to the FHFA (link is external) 

#IssuesandLegislation
#RPACNews

​​
0 comments
1 view

Permalink