How the Federal Reserve can help write down rents to save businesses, especially in the Hospitality industry

The IMF took a grave tone in April as it said COVID-19 could form "cracks" in the global financial system. One point of pressure, the group said, was the U.S. commercial real estate space, in which tenants were struggling to pay rent, which was putting a crunch on some financial institutions.

The single biggest costs to people and businesses are rents; the biggest cost for landlords- by far is mortgages, which are usually issued by commercial banks of various sizes. Federal reserve can stabilize banking operations at the banks, to cover for mortgage payments far easier than say, helping all of America, and frankly have been doing so for 15 years anyway. 2020 is going to an economic mulligan no matter what. By easing mortgage payments, transferring them forward 5 months, rents of commercial and residential real estate to say, 30% -50% of normal, which preserves the physical placement of businesses and people for a fixed, certain time. For people and affected businesses, an affadavit of income loss should suffice.

The only businesses that seem to be completely unaffected by Covid-19 are landlords-though I am certain they are experiencing greater than usual default rate, and there is no way that mass evictions and/or business closings doesn’t hurt long term revenue for commercial real estate.

The closure of so many businesses points out a weakness in thinking of commercial or residential costs as being “free market” and elastic- instead, it seems very few commercial real estate holders are renegotiating to keep businesses in their space during exceptional times.

Businesses are instead closing, and it is highly unlikely to be reoccupied in the near term. Lending to cash to new businesses to meet commercial rates seems to be a large hurdle, and vacancy rate is not good for business, or the communities the businesses serve. It's also arguable that

Lending to new businesses is already terrible, so there is no elasticity, businesses that close will be gone for a very long time.

I personally prefer 30% of normal occupied rate to 100% of normal unoccupied rate, i.e. 0$.

Write down Commercial and residential rental rates 40-70% 5 months, retroactive

Landlords will be hurting if they have to pay full mortgage rates, but a simple suspension at low to no interest will cover this.

Suspend mortgage payments -50-80% 0% interest for 5 months

Darrell Prince

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