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Housing Cooperatives and PPP Loans: Is It Time To Rejoice?

Housing Cooperatives and PPP Loans

This has been updated on December 31, 2020: “Cooperatives Now Eligible for New PPP Loans

The Consolidated Appropriations Act, 2021 (“CAA”), passed by Congress on December 21, 2020, and just signed by the President, should “spark joy” for housing cooperatives (“co-ops”). The CAA renders housing cooperatives eligible for the Paycheck Protection Program (“PPP”). Division N, Title III of the CAA, known as the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act,” includes significant and retroactive changes to the eligibility and administration of the PPP.

The CAA amends section 7(a)(36)(A) of the Small Business Act (15 U.S.C. 636(a)(36)(A)) to include the term “housing cooperative” with not more than 300 employees. Note: this language refers explicitly to cooperatives. The fate of condominiums (and HOA’s) remains to be seen.

What Did the COVID-19 CARES Act Do?

Originally, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in April 2020, Congress created the PPP to help small businesses retain their employees and remain viable. But the CARES Act provided no assistance to co-ops. Pursuant to 13 CFR 120.110(D)(3), passive businesses owned by developers and landlords were deemed ineligible. Additionally, apartment buildings were excluded.

This oversight was most unfortunate. Each co-op functions as a small business, providing housing and employing various types of workers and managers. In fact, co-op budgets depend on shareholders’ maintenance payments and commercial rent from tenants to pay the co-op’s expenses. As a result of COVID-19, both maintenance and rent payments have been reduced or suspended in many cases. Without this income, the ability of co-ops to pay employee salaries — as well as utilities, taxes, and other expenses — was significantly affected. The CAA addresses this issue.

What Has Changed for PPP Loans?

In addition to including co-ops, there are other important distinctions as to how the loan funds must be allocated and how the rules have changed since the CARES Act passed in April. The CAA specifies that expenses paid with PPP loans are now tax-deductible. The CAA increases the refundable payroll tax credit and allows businesses to take the employee retention tax credit as well as participate in the PPP. The CAA further increases allocations for the Low-Income Housing Tax Credit.

The CAA also expands the definition of eligible expenses covered by the PPP. Covered operations expenditures now include “payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.” The definition of covered property damage is expanded to include vandalism occurring during the 2020 year that was not covered by insurance or separate compensation.

The definitions of covered supplier cost and covered worker protection expenditure have broadened too. Covered supplier cost is “an expenditure made by an entity to a supplier of goods for the supply of goods” that are essential to operations or made pursuant to a contract. Covered worker protection expenditure now covers safety protocols related to COVID-19. These expenditures may include a drive-through window facility, air systems, expansion of business space, health screening capability, and personal protective equipment.

The CAA extends the availability of PPP loans through March 31, 2021, subject to the availability of funds. To receive loan forgiveness, borrowers must allocate the funds towards certain expenses as discussed above. Additionally, 60% or more of the funds must be used for payroll. Borrowers have the option of spending the funds within eight or 24 weeks.

What Is the Next Step for Housing Cooperatives?

We recommend that cooperatives promptly contact their banks to discuss applications and how best to utilize the benefits of this program. High demand is likely, and as with the first set of PPP loans, those who apply early are much more likely to receive funds. It is important that you work closely and quickly with your banking partner.

These changes, together with the inclusion of co-ops as businesses eligible for PPP funds, provide much-needed relief to cooperatives that were denied relief in the CARES Act. If you have any questions about this post or any other related matters, please feel free to email me at For other topics related to the coronavirus, visit our Coronavirus Thought Leadership Connection.

The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor this site for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking advice from professional legal counsel.