Follow the Money Part Two

The Highly Uncertain

This report is of interest to:

  • Leaders in the Built Environment Industry
  • Investors in Private Equity, Securities, and Real Estate
  • U.S. Small Business Owners
  • Developers of All Building Categories
  • Designers, Architects, Engineers, and Planners

Key Terms: RISK, INVESTING, CORONAVIRUS, COVID-19, PANDEMIC RECESSION, FINANCIAL SECURITY, FEDERAL RESERVE, COMMERCIAL REAL ESTATE, EQUITIES, MARKET SECTORS, EDUCATION, AVIATION, TRANSPORTATION, INFRASTRUCTURE, HEALTHCARE, RETAIL, HOSPITALITY, MISSION CRITICAL, INDUSTRIAL, LIFE SCIENCES, OFFICE BUILDINGS, CELL TOWERS, DATA CENTERS

Credits:
Dave Gilmore, President & CEO | Rob Hart, Senior Researcher
Chyenne Pastrana, Director of Marketing | Nicole Puckett, Lead Graphic Designer | Beckie Hawk, Web Master


FOLLOW THE MONEY: PART TWO THE HIGHLY UNCERTAIN

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While an ordinary recession, caused by a bubble collapse or liquidity shortage, grants the potential for modeling outcomes based on financial expectations, the present situation has no precedent.

While an ordinary recession, caused by a bubble collapse or liquidity shortage, grants the potential for modeling outcomes based on financial expectations, the present situation has no precedent. Economic forecasts depend on future infection rates — and predictive models for the spread of the virus have been all over the map.134

As Inga Holmdahl and Caroline Buckee explain in their article, “Wrong but Useful — What Covid-19 Epidemiologic Models Can and Cannot Tell Us,” published in the New England Journal of Medicine, contagion models are highly varied for several reasons:

  • We don’t know how many people are, or have been, infected 
  • We remain uncertain about the extent of protective immunity 
  • Transmission and immunity among people with no or minimal symptoms (including children) plays an important role in predictions: if there is very little asymptomatic infection, we are probably still far from the epidemic peak. If there is a lot of asymptomatic transmission, there are many unobserved cases, but we may be further along the epidemic curve than we thought — assuming some protective immunity… 
  • It remains extremely challenging to measure and model contact rates between susceptible and infectious people, not only under physical distancing policies but also in various reopening scenarios.135

In short, the pandemic could escalate, plateau, resurge, or subside, and could take months or years to do so. We simply have too little knowledge to make sound predictions.

Further ambiguity surrounds the vaccine plan. The Centers for Disease Control lacks the legal authority to restrict or impose vaccination for any group, but recommends that vaccines be administered in successive phases:

  • Phase 1a: healthcare workers and long-term care facility residents
  • Phase 1b: frontline essential workers and those over age 75
  • Phase 1c: those between 65 and 74, those with underlying medical conditions, and essential workers
VACCINE SURVEY RESPONSES

In just four months from September to December, public opinion shifted significantly in favor of COVID vaccination.

Vaccine survey responses

Source: KFF

Though two vaccines were approved in the U.S. by the end of 2020, supplies were still limited at the time of publication. Both vaccines are RNA-based, using genetic material copied from the virus to produce an immune response in the recipient. The two treatments, produced by Moderna and Pfizer/BioNTech, proved in accelerated trials to be 94.1% and 95% effective, respectively.136 

The Wall Street Journal reported in early December, “Federal officials have estimated there could be enough to vaccinate about 30 million people in the U.S. in January and then about 50 million in February, with more in the months following.”137 However, by the end of the month the vaccine rollout picture had changed for the worse. The Intelligencer reported,

As a country, we have only 40 million doses, and had aimed, according to Secretary of Health and Human Services Alex Azar, to vaccinate 20 million by year-end… we have administered only 2 million of those — barely 10 percent of the goal. At this rate, achieving sufficient vaccination to reach herd immunity and bring the pandemic to a close in the U.S. will take about seven years.138

While vaccination rates are expected to ramp up, the failure to administer the first 20 million doses on schedule foretells more difficulty than federal officials acknowledge. Meanwhile, backlogged supplies face imminent expiration if they aren’t used — Pfizer’s distribution guidelines indicate safe storage for up to 30 days.139

Adding to the uncertainty, the U.S. population is divided on whether to take the vaccine once available, but opinions have recently shifted in favor of vaccination. As of December, 71% of those surveyed said they would probably or definitely get the vaccine once available.140

Concerns emerged in November that a new strain of the coronavirus, variant B.1.1.7, termed “the English strain” or “Variant of Concern” (VOC), showed a much higher rate of transmissibility. Pre-print studies (released before peer review, thus bearing less certainty) estimate the transmissibility of this variant to be 40% to 70% higher than that of other strains of SARS-CoV-2.141 142 While the new strain has not been shown to be more deadly, it does spread far faster — which Science Magazine warns is worse: “Increased transmissibility of a virus is much more treacherous than increased pathogenicity because its effects grow exponentially, [data modeler Adam] Kucharski says. ‘If you have something that kills 1% of people but a huge number of people get it, that’s going to result in more deaths than something that a small number of people get but it kills 2% of them.’”143 Not only is a faster-spreading virus likely to infect more people; it’s also more apt to mutate again. Mutations could lead to strains that evade vaccination and testing, worsen symptoms, or find new vectors of transmission. 

The new variant has already breached U.S. borders, appearing in Colorado, California, and Florida in early January. As NPR reports, “Europe is riddled with the variant, which has been reported in Belgium, France, Germany, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland. It has also been detected in Asia, Australia, the Middle East and South America.”144 With its increased transmissibility, this strain is likely to cause more, and larger, surges of infection and death in the coming months.

Combined with unpredictable swings in public policy, and with financial markets looking more correlated and volatile all the time, these pandemic developments make uncertainty the only rational position. We caution industry leaders to move with care and conscience, maintain diverse strategies, and remain alert to subtle changes when it comes to the following building  types.


Multifamily & Single-Family Residential

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Filled with mixed signals, the residential sector could boom or bust in the near term — or may hold steady through the storm.

On the positive side, U.S. household debt decreased from Q1 to Q2 of 2020, marking its first quarterly decline since 2014145 and signaling fortuitous changes: healthier credit and greater access to wealth building. 

Analysts at Freddie Mac forecasted a decline in housing sales, explaining, “Due to the impact of COVID-19, we expect home sales will fall to 4.8 million in 2020 and then rebound to 5.6 million in 2021, which is still below the 6.0 million sales rate experienced in 2019. House price growth is projected to decelerate from 2.3% in 2020 to 0.4% in 2021.”146 These predictions would have equaled a 20% decrease in home sales for 2020, followed by a smaller 17% rebound in 2021. Unexpectedly, after a three-month downswing, home sales accelerated, reaching a 15-year high in October. Rather than dropping as predicted, the median home price actually jumped 16% over the same month in 2019.147 

U.S. EXISTING HOME SALES BY MONTHLY UNITS
U.S. Existing Home Sales by Monthly Units

Source: Tradingeconomics.com

Residential construction halted in Q2 but made more than a comeback through Q3 — Census Bureau data revealed that in November, residential construction starts were 12.8% higher than the same month in 2019.148 However, multifamily construction starts from January to November were 12% lower than the same period in 2019.149

At face value, renters’ vital signs were hopeful throughout the year. Monthly rent payments nearly kept pace with 2019 rates despite the hardship, falling at most three percentage points during the months of greatest unemployment.150

RENT PAYMENT COMPARISON
Rent Payment Comparison

However positive these trends may seem, there are warning signals beneath the surface. In August, more than 50% of U.S. households reported a loss in employment income due to the pandemic, with 35% expecting losses in the future.151 By December, 33% of households surveyed faced eviction or foreclosure in the next two months.152

At first, these metrics seem to clash — how could rents be paid on time and debt be decreasing, while a majority of people report lost income and increased housing insecurity? In fact, if both sides are true, they continue a pattern noted by Harvard’s Joint Centers for Housing Studies for over a decade: U.S. households, especially renters, are becoming increasingly cost-burdened. In fact, housing costs have been outpacing wages for middle-income U.S. households since at least 2006.153

While worse in some metros than others, the problem now afflicts four-fifths of U.S. counties: “A full-time worker earning the average median wage and working 40 hours a week can afford a two-bedroom rental home in only 20% of U.S. counties. Over 50% of renters pay more than a third of their income on their housing.”154 

In other words, more than half of U.S. renters are “severely cost-burdened” in the technical sense, along with many homeowners. Such a condition heightens the fragility of the housing and rental markets, increasing the likelihood that prolonged unemployment will cause evictions, foreclosures, and long-term damage to liquidity markets. If left unchecked, these losses yield the same types of cascade effects that caused the Global Financial Crisis of 2008. 

Cost burdens tend to increase whenever housing market growth outpaces median income growth — a pattern that was established long before the pandemic but has accelerated now that over half of households have lost income. In fact, while the monthly number of job losers has decelerated since April, the number of long-term unemployed has quadrupled over the same period.155 Housing fluctuations were more varied, with median house prices increasing 16% while the apartment rent index only dropped 1.5% year-over-year.156

MONTHLY JOBS LOST
Monthly Jobs Lost

Source: Statista, US Bureau of Labor Statistics

LONG-TERM UNEMPLOYMENT NUMBERS
Long-term Unemployment Numbers

Source: Statista, US Bureau of Labor Statistics

Meanwhile, real estate investors aren’t strategizing for long-haul economic health, but instead seeking short-term liquidity and growth. Their efforts to optimize for higher margins have been successful, raising real estate values and making multifamily housing “the most liquid asset class in the U.S., accounting for 32.0% of overall transaction volume in the first quarter of 2020.”157 The present-day value of each asset may increase, and the landlords can still afford the ante, but tenants are stretched thinner and thinner. 

When their lifeline snaps, the whole chain of value feels the lurch: “Private investors, landlords, and property owners are directly affected by the instability... High tenant turnover and the cost to evict tenants can become even more expensive for a landlord than high vacancy rates.”158 These higher costs mean lower margins, slower growth, and increasing risk.

Investors seeking short-term gains may therefore speed right over the cliff of affordability. A global health crisis is no time to pursue high prices or high margins, but to optimize for population resiliency. In 2019, Motley Fool offered a powerful and prescient guide to affordable housing.159For those who wish to make a positive impact in housing and local communities, understanding the report’s implications is essential.

Eviction and foreclosure moratoriums protected many millions from homelessness, but the relief bill passed in December extended those protections only until January 31st of 2021.160 Newsweek estimated 30 to 40 million households may face eviction,161 while survey data from advisory firm Scout shows the range to be 7 to 14 million households.162 In the case of mortgages, only those guaranteed by Fannie Mae and Freddie Mac are protected from foreclosure — about 28 million of the 50.5 million outstanding mortgages nationwide.163 164  Shortly after taking office, President Biden set the gears in motion to extend eviction moratoriums and government-backed mortgage forbearances from January to at least the end of March.

Despite the reprieve, the number of home mortgages in forbearance has risen to 5.54%.165 A study by ATTOM Data Solutions shows that in the most likely scenario, foreclosures on home mortgages will increase 132% by Q2 2021. That scenario found “14 states where filings would at least triple. They include Colorado, where the number would spike from 1,107 to 5,103, or 361%; Massachusetts, where it would rise from 2,512 to 11,228, or 347%; and California, where it would jump from 10,566 to 39,793, or 277%. Foreclosure filings would rise 288% in Michigan from 3,284 to 12,740 and 287% in Minnesota, from 1,056 to 4,091.”166 The simulated worst-case scenario, which assumes more prolonged unemployment, predicts foreclosures seeing a nationwide increase of 245%.

For investors and business owners, the high uncertainty in this category stems not only from economic fragility, but also from policy indecision, as no one can guess what legislators will agree to do, or when.

Caution in housing development is strongly advised, as vacancies may skyrocket soon. The single-family market may be more secure in the immediate future, but longer-term demographic shifts unrelated to COVID are likely to cause a lasting devaluation, with aftershocks for the economy at large.


K-12 Education

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The education sector has raised a web of complex questions about trade-offs between safety and social utility.

As the medical understanding of this novel pathogen deepens, it becomes increasingly clear that viral risk impacts all the users of education buildings, as well as their surrounding communities — but so, too, do school closures. UNESCO notes that grades are not the only things that suffer: “When schools shut down, early marriages increase, more children are recruited into militias, sexual exploitation of girls and young women rises, teenage pregnancies become more common, and child labour grows.”167 Thus, decisions about school policies have not been simple or straightforward; from local to federal levels, policy will be difficult to predict regardless of the pandemic’s path.

One point of contention has been the degree of contagion at school. While many have contested whether young people can become infected or infect others, a study of South Korean contact tracing data (based on more than 10,000 participants) found that children 10-19 years old are as likely to spread the virus as adults are.168 In a study of U.S. caseloads and school closings from March through May published by the Journal of the American Medical Association, it was found that school closures were associated with a 60% decrease in new cases and a 58% decrease in new deaths.169 In August, schools in Cherokee County, Georgia reopened, and the county’s daily new case rate jumped ninefold.170 Though correlation does not show causation, these trends do support the hypothesis that school systems are a vector for infection. 

Economic pressures are also bearing down on schools. As the National Bureau for Economic Research summed up, “school districts’ revenues are down, their costs are up, and state and local resources cannot fill these gaps.”171 The Upjohn Institute for Employment Research estimates “the total budget problem for state and local governments to be $899 billion through the end of 2021.”172 Both sources agree that federal aid will be the deciding factor for many schools’ survival, with meaningful consequences even beyond education outcomes: the education sector has a major impact on the wider economy, both in the near term via employment and childcare, and in the long-term via workforce preparedness.173

The federal funding approved in December provides $54.3 billion for public K-12 schools, plus $4.1 billion to be used at governors’ discretion, including $2.75 billion for private schools.174 The new influx will help ease the pain for state and local governments and public school systems, but does not entirely close the gap. The American Council on Education released a statement saying the real need was $120 billion more than Congress provided and urging the new Congress to increase funding.175

Private institutions face a different set of uncertainties that are no more clear: public health is understood to play a less direct role than economic trade-offs when it comes to enrollment and revenue, but those trade-offs are not transparent to administrators, parents, or faculty. As public school closures raise demand for private and charter schools, student-teacher ratios increase, lowering value.176 177 Simultaneously, proximity between students increases, elevating risk of infection for the wider community.

Due to fundamental incentive bias in privately-funded schools, it’s possible to see issues of safety overlooked in favor of economic survival needs. In a survey of private school administrators’ views on COVID, only a third were “very” or “extremely” worried about students or families contracting the virus, while over half were as worried about loss of enrollment.178 Such priorities could have administrators planning courses or using buildings in dangerous ways.

Overall, caution is advised not only with assets that serve education directly, but also with those that serve education needs indirectly; all are sensitive to policy changes, public sentiment, and pandemic surges, factors which lie outside the scope of reasonable predictability.

PRIVATE SCHOOL ADMINISTRATORS' COVID-RELATED CONCERNS
Private School Administrators' Covid-related Conserns

Source: Education Next


Seniors’ Housing and Care

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The closeup picture of Seniors’ Housing and Care is grim, with COVID claiming over 100,000 lives of U.S. Long Term Care residents and staff as of November,179 accounting for more than a third of COVID-related deaths in the U.S.180

These facilities’ conditions of close quarters, poor ventilation, and high traffic, combined with the risks of old age and its attendant comorbidities, put residents at extreme risk.

COVID-19 LONG-TERM CARE FACILITIES DEATHS
Covid-19 Long-term Care Facilities Deaths

Source: Kaiser Family Foundation

In response to the pandemic, existing facilities have struggled against waves of infection amid staffing and equipment shortages. In a data-driven study by professors at Harvard Medical School and the University of Rochester, one in five nursing homes reported a severe shortage of personal protective equipment or staff, especially nurses and nurse aides. The study’s authors warn that “despite intense policy attention and mounting mortality, the shortages did not meaningfully improve from May to July 2020.”181

Even more serious was the disparity in preparedness between for-profit and nonprofit facilities, and between highly rated and poorly rated facilities. The same study notes that “for-profit nursing homes reported substantially higher rates of PPE shortages than other facilities, but not staffing shortages. This is especially concerning, given that the vast majority of nursing homes in the US are for profit and given that a substantial literature from before the pandemic documented lower quality of care at for-profit nursing homes compared with nonprofit facilities.”182 The authors also point out, “more disadvantaged or lower-quality nursing homes, such as those with a higher percentage of revenue from Medicaid or those with lower star ratings, have worse staff shortages.”183 

A report from Moody’s Analytics laid out the financial implications of senior housing conditions: “Occupancy is declining as safety concerns are reducing move-in volumes and operators’ ability to replace natural resident turnover. Operators are also contending with higher costs for staffing and critical supplies. Healthcare REITs will feel the effect of these challenges more acutely in their senior housing operating portfolios.”184 It’s telling that in an already severely stressed healthcare environment, the riskiest investment category is senior housing. The report credits coronavirus as only a new headwind in an existing storm, adding, “before the coronavirus outbreak, senior housing was already struggling from new supply and high labor costs that have posed persistent challenges for the industry in recent years.”185

Taken together, these trends portray a Seniors’ Housing and Care sector that was already precarious and is now in severe crisis. Part 1 of our in-depth report on the future of senior living explores the underlying causes of this fragility, how it impacts the baby boom generation, and what it means for the entire world — economically, ecologically, and culturally.

While deeply uncertain, this dark cloud of chaos comes with a silver lining of immense opportunity. Because the population is aging rapidly, with more than 10,000 people turning 65 every day for the next decade and beyond, demand for retirement communities will soar to record highs. On the other hand, financial and epidemiological factors are seeing tectonic shifts, as are baby boomers’ expectations for retirement. The “old normal” is falling away, and a “new normal” has yet to be designed. What we reveal in our multi-perspective study will change the way designers think about seniors’ living spaces, from the scale of the living room to the entire city.

SENIOR HOUSING OCCUPANCY vs. CONTRUCTION INVENTORY
Senior Housing Occupancy vs. Contruction Inventory

AIRPORTS

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While typically lumped into the transportation sector, airports play such an important role in both the global economy and in the COVID crisis that they deserve a closer examination.

The aviation sector was one of the biggest losers in the early months of the pandemic, and even after many economies have reopened, air travel remains a sliver of its 2019 norms. But, airlines themselves are only a partial predictor of airport development. Since airports are funded through an unusual mix of specialty bonds, federal grants, passenger fees, retail revenues, and airline rents,186 the property values and construction forecasts for this category can be murky to outsiders. Funding sources and proportions vary with airport size, adding to the complexity.

PROPORTION OF FUNDING SOURCES BY AIRPORT SIZE, 2017
Proportion of Funding Sources by Airport Size, 2017

Source: RAND Corp

For primary and hub airports, the majority of funding comes from operating revenue and Passenger Facility Charges (PFC) on airline tickets. All of these depend on growth in passenger volume (measured as revenue-passenger-kilometers), which fell by 98% annualized in April,187 and had only recovered by ten percentage points in October.188 At that rate of recovery, it would take four and a half more years to return to pre-COVID volume.

Many smaller airports have a cushion of grant money from the Airport Improvement Program (AIP), a longstanding federal program that disburses upwards of $3 billion each year in infrastructure grants, mostly to small and medium-sized airports. In addition to the normal AIP funding, Congress has approved an extra $2 billion through the December COVID relief bill, including $1.75 billion for commercial service airports with more than 10,000 annual passenger boardings.189 These grants will provide some revenue replacement, but are unlikely to be used on the development of new infrastructure or buildings until economic activity has returned to sufficient levels.

For larger airports, specialty bonds contribute a great deal of funding for growth and construction. Independent credit and research firm Fitch Ratings offers an analysis of several COVID scenarios that could impact these airport bonds’ risk levels: “The portfolio showed resiliency, but rating actions were mixed, ranging from a one-notch downgrade to outlooks remaining stable… Under the coronavirus severe downside case, DSCR metrics remain on average below the downgrade triggers, indicating issuer credit profiles would likely be affected by one to two notches under this scenario.”190 That is, the risk rating for these bonds was only projected to change under their worst-case scenario, and only by two tiers at most. A downgrade would not necessarily indicate a major default risk but may damage overall demand for airport bonds — and therefore reduce airports’ funding for growth.

Pandemic conditions have caused slowdown or stoppage on major airport projects including the $15-billion overhaul on John F. Kennedy, Jr. Airport in New York. The project that was meant to wrap in 2025 and cost $10 billion will now take additional years and considerably more money.191 San Francisco International was scheduled to begin a billion-dollar Terminal 3 renovation in June, but postponed the project for at least six months due to decline in traveler volume.192 In November, it was announced that the build would remain on pause, and several other SFO developments would also be halted for at least six months.193Dallas-Fort-Worth Airport’s new $3-billion Terminal F has been halted indefinitely.194 Some major projects are continuing despite the downturn since their completion dates are nearer.

All told, airport development depends on two major uncertainties: party-driven grant disbursements and air travel volumes. Since the latter depend on local, federal, and international government policies as well as viral caseloads and consumer sentiment, it’s impossible to predict the future growth of airports based on their present states. They are, however, stabilized for the present. Smaller airports are in better financial shape based upon their financial support from the AIP, while larger airports remain more exposed to the elements.

PASSENGER VOLUME

Measured as year-on-year change in monthly revenue-passenger kilometers on international routes in North America from 2019-2020.

Passenger Volume

Source: IATA, Statista


INFRASTRUCTURE

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Unlike some categories, the demand for infrastructure development has by no means lessened during COVID, if only for the fact that it was already severely backlogged before the year began.

As recently as 2017, IHS Markit projected that from 2017 to 2035, the US would require $13.88 trillion in infrastructure construction.195 The American Society of Civil Engineers (ASCE) concurred, rating U.S. infrastructure a D+ overall in its most recent report card.196According to a longitudinal economic analysis by the American Action Forum, this is not merely the result of too little spending, but may be an issue of poor “quality” of spending (i.e. mismanaged funds).197 The mounting issues with infrastructure will not be solved with a simple stimulus bill or revenue increase — it will take that and much more.

However, the pandemic has created gale-force headwinds for revenue. According to the ASCE’s COVID report, 

The COVID-19 pandemic has made a difficult situation worse. A sizable portion of our existing infrastructure systems are supported with user-generated revenue streams. With the onset of the pandemic, commercial water use is down, commuters are staying off the roads and away from transit, and airports are virtually empty. Meanwhile, municipal and state budgets are buckling under unprecedented demands, meaning less support is available for parks, schools, and other publicly-owned infrastructure, precisely at the time we should be investing.198 

TRANSIT PROJECTIONS RELATIVE TO PRE-COVID 19 LEVELS
Transit Projections Relative to Pre-COVID-19 Levels

Source: S&P Global

An in-depth transportation analysis from S&P Global shows a long, difficult road ahead for transportation: “Our current 2020 and 2021 baseline activity estimates relative to pre COVID-19 levels show annualized declines of approximately 55% and 30% for public transit; 50% and 25% for airports; 45% and 15% for parking; 25% and 10% for toll roads; and 20% and 10% for ports.”199 While revenues in some lanes are expected to bounce back with reopenings (toll roads, for instance), others are expected to flow at a mere trickle through 2023. Their report concludes, “The COVID-19 pandemic has dramatically reshaped the global transportation industry like no other disruptive force in modern history.”200 

Charles Schwab rounds out the infrastructure picture with an assessment of utilities: “because some investors had already been reaching for yield before the crisis began, the high-dividend-paying Utilities sector had been bid up to record-high valuation levels. Even underperformance year-to-date hasn’t fully reversed those relatively high valuations, so we're not confident the sector will return to its defensive roots if markets sell off again.”201 Their overall expectation for utilities for the year is underperformance.

But it’s not all headwinds; the infrastructure real estate category also includes building types like cell towers and warehouses, which balance the heavy load of transportation and utilities. Due to these diverse inputs, Infrastructure REITs saw a modest 4.7% gain in 2020.202 Unfortunately, these gains do not begin to pay for the extent  of investment and innovation needed in the sector.

The funding mainstay for infrastructure is the public purse, which has been an unpredictable source this year — but the new Presidential administration and democratic Congress may steady the course. As a major pillar of his platform, President Joe Biden announced a 2-trillion-dollar clean-energy infrastructure plan.203 If passed, the plan would take four years to unfold, paying for many types of construction, “from roads and bridges to green spaces and water systems to electricity grids and universal broadband.” It aims for zero-emissions public transit systems in major cities, renewable energy sourcing, and nationwide repairs of roads and highways. In addition to infrastructure, the plan promises to upgrade 4 million buildings and 2 million homes to meet sustainable energy use standards and aims to add 1.5 million new sustainable homes.

$2 trillion may seem an ambitious sum, but it may not be enough. A 2017 assessment by the ASCE showed that 2 trillion would barely fix roads and highways, leaving roughly half of the maintenance and upgrade needs unmet.204 Already, the U.S. spends well over $400 billion each year on infrastructure,205 and there’s widespread agreement that it should spend more. Though two trillion would offer a good head start, it’s doubtful whether the plan would achieve its aims with that sum — and still more doubtful whether the amount would be feasible, given the many other emergency expenses incurred from COVID.

In fact, in his run for the 2016 election, President Trump similarly promised to spend $1 trillion on infrastructure revitalization206 — and at inauguration time, voters polled by Gallup said, with bipartisan agreement, that it was his most important campaign promise.207 However, the promise was dropped in mid-2018208 due to the 2017 corporate tax cuts209 that made infrastructure spending a fiscal impossibility.210 Affording infrastructure, it turns out, is a major political and financial hurdle.

One advantage to the Biden infrastructure plan is the new Democratic majority in both houses of Congress. Historically, the Democratic party has been more willing to spend on infrastructure, and a Democrat-controlled Congress is more likely to side with proposals from a Democratic President. Thus, while the plan may still face financial and logistical difficulty, it will at least see more political support than previous initiatives. Though uncertain, the future of infrastructure projects is likely to be one of growth.

The Precarious Present
READ FOLLOW THE MONEY PART TWO: DI INSIGHTS

the highly uncertain: FOOTNOTES:

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134Bui, Q., Katz, J., Parlapiano, A., & Sanger-katz, M. (2020, April 22). The New York Times: What 5 Coronavirus Models Say the Next Month Will Look Like. Retrieved January 13, 2021, from https://www.nytimes.com/interactive/2020/04/22/upshot/coronavirus-models.html 

135Holmdahl, I., & Buckee, C. (2020, July 23). New England Journal of Medicine: Wrong but Useful - What Covid-19 Epidemiologic Models Can and Cannot Tell Us. Retrieved January 13, 2021, from https://www.nejm.org/doi/full/10.1056/NEJMp2016822 

136Wagener, D. (2021, January 11). Live Updates: The Race for a Coronavirus (COVID-19) Vaccine - GoodRx. Retrieved January 13, 2021, from https://www.goodrx.com/blog/coronavirus-covid-19-vaccine-availability-live-updates/ 

137Loftus, P., & McKay, B. (2020, December 11). The Wall Street Journal: The Covid-19 Vaccine: When Will It Be Available for You? Retrieved January 13, 2021, from https://www.wsj.com/articles/the-covid-19-vaccine-when-will-it-be-available-for-you-11606339361 

138Wallace-Wells, D. (2020, December 30). America's Vaccine Rollout Is Already a Disaster. Retrieved January 13, 2021, from https://nymag.com/intelligencer/article/americas-vaccine-rollout-disaster.html  

139Pfizer & BioNTech. (2020, November 20). COVID-19 Vaccine U.S. Distribution Fact Sheet. Retrieved January 13, 2021, from https://www.pfizer.com/news/hot-topics/covid_19_vaccine_u_s_distribution_fact_sheet 

140Kirzinger, A., Hamel, L., Muñana, C., & Brodie, M. (2020, December 15). KFF COVID-19 Vaccine Monitor: December 2020. Retrieved January 13, 2021, from https://www.kff.org/coronavirus-covid-19/report/kff-covid-19-vaccine-monitor-december-2020/  

141Volz, E., Mishra, S., Chand, M., Barrett, J. C., Johnson, R., & MRC Centre for Global Infectious Disease Analysis, Jameel Institute for Disease and Emergency Analytics, Imperial College London. (2020, December 31). Pre-print: Transmission of SARS-CoV-2 Lineage B.1.1.7 in England: Insights from linking epidemiological and genetic data. Retrieved January 13, 2021, from https://www.imperial.ac.uk/media/imperial-college/medicine/mrc-gida/2020-12-31-COVID19-Report-42-Preprint-VOC.pdf  

142Davies, N., Barnard, R. C., Jarvis, C. I., Kucharski, A. J., Munday, J. D., Pearson, C. A., . . . Centre for Mathematical Modeling of Infectious Diseases. (2020, December 23). Pre-print: Estimated transmissibility and severity of novel SARS-CoV-2 Variant of Concern 202012/01 in England. Retrieved January 13, 2021, from https://cmmid.github.io/topics/covid19/uk-novel-variant.html  

143Kupferschmidt, K. (2021, January 09). Science Magazine: Viral mutations may cause another 'very, very bad' COVID-19 wave, scientists warn. Retrieved January 13, 2021, from https://www.sciencemag.org/news/2021/01/viral-mutations-may-cause-another-very-very-bad-covid-19-wave-scientists-warn  

144Schwartz, M. S. (2021, January 2). NPR: U.S. COVID-19 Death Toll Tops 350,000. Retrieved January 13, 2021, from https://www.npr.org/sections/coronavirus-live-updates/2021/01/02/952842631/new-covid-19-variant-spreads-to-dozens-of-countries  

145Pitterson, S., & Federal Reserve Bank of New York. (2020, August 6). Total Household Debt Decreased in Q2 2020, Marking First Decline Since 2014. Retrieved January 13, 2021, from https://www.newyorkfed.org/newsevents/news/research/2020/20200806 

146Economic & Housing Research Group, Freddie Mac. (2020, June 16). Quarterly Forecast: The Economy is Recovering from a Deep Contraction and Housing is Rebounding, but the Outlook Remains Highly Uncertain. Retrieved January 13, 2021, from http://www.freddiemac.com/research/forecast/20200616_quarterly_forecast_economy_recovering.page 

147Trading Economics. (2020, November). United States Existing Home Sales 1968-2020. Retrieved January 13, 2021, from https://tradingeconomics.com/united-states/existing-home-sales 

148U.S. Census Bureau and the U.S. Department of Housing and Urban Development. (2020, December 17). Monthly New Residential Construction, November 2020. Retrieved January 13, 2021, from https://www.census.gov/construction/nrc/pdf/newresconst.pdf 

149MultifamilyBiz. (2020, December 22). Multifamily Housing Construction Starts Drop Fourteen Percent in November According to Recent Dodge Data Report. Retrieved January 13, 2021, from https://www.multifamilybiz.com/news/9522/multifamily_housing_construction_starts_drop_fourt%E2%80%A6  

150National Multifamily Housing Council. (2021, January 1). NMHC Rent Payment Tracker. Retrieved January 13, 2021, from https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/ 

151U.S. Census Bureau. (2020, December 21). Household Pulse Survey Data. Retrieved January 13, 2021, from https://www.census.gov/data-tools/demo/hhp/#/ 

152Ibid. 

153Joint Center for Housing Studies of Harvard University. (2020). America's Rental Housing 2020 (M. Fernald, Ed.). Retrieved January 13, 2021, from https://www.jchs.harvard.edu/americas-rental-housing-2020 

154iPropertyManagement. (2020, December 8). Rental Vacancy Rate [2021]: National Trends & Rates by City. Retrieved January 13, 2021, from https://ipropertymanagement.com/research/rental-vacancy-rate  

155U.S. Bureau of Labor Statistics, & Statista. (2021, January 12). U.S. long-term unemployment: Seasonally adjusted number, December 2020. Retrieved January 13, 2021, from https://www.statista.com/statistics/217813/seasonally-adjusted-monthly-number-of-long-term-unemployed-persons-in-the-us/  

156Salviati, C., Popov, I., & Warnock, R. (2020, December 28). Apartment List National Rent Report. Retrieved January 13, 2021, from https://www.apartmentlist.com/research/national-rent-data  

157Lawton, M. (2020, July 22). How Multifamily's Defensive Nature Holds Investor Interest. Retrieved January 13, 2021, from https://www.multihousingnews.com/post/how-multifamilys-defensive-nature-captures-investor-interest/  

158iPropertyManagement. (2020, December 8). Rental Vacancy Rate [2021]: National Trends & Rates by City. Retrieved January 13, 2021, from https://ipropertymanagement.com/research/rental-vacancy-rate 

159Brumer-Smith, L. (2020, June 18). The Affordable Housing Crisis and Investor Opportunity. Retrieved January 13, 2021, from https://www.fool.com/millionacres/real-estate-market/articles/affordable-housing-crisis-and-opportunity-it-presents-real-estate-investors/ 

160 National Conference of State Legislatures. (2021, January 4). COVID-19 Economic Relief Bill. Retrieved January 13, 2021, from https://www.ncsl.org/ncsl-in-dc/publications-and-resources/covid-19-economic-relief-bill-stimulus.aspx  

161Fung, K. (2020, August 20). Newsweek: Federal eviction moratorium lapse will lead to COVID surge, poverty and future housing shortages. Retrieved January 13, 2021, from https://www.newsweek.com/federal-eviction-moratorium-lapse-will-lead-covid-surge-poverty-future-housing-shortages-1526561 

162Stout Risius Ross, LLC. (2020, December). Estimation of Households Experiencing Rental Shortfall and Potentially Facing Eviction. Retrieved January 13, 2021, from https://app.powerbi.com/view?r=eyJrIjoiNzRhYjg2NzAtMGE1MC00NmNjLTllOTMtYjM2NjFmOTA4ZjMyIiwidCI6Ijc5MGJmNjk2LTE3NDYtNGE4OS1hZjI0LTc4ZGE5Y2RhZGE2MSIsImMiOjN9  

163Williams, R., Russell, A., & Federal Housing Finance Agency. (2020, December 2). FHFA Extends Foreclosure and REO Eviction Moratoriums. Retrieved January 13, 2021, from https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-Foreclosure-and-REO-Eviction-Moratoriums-12022020.aspx 

164Komos, M. (2020, September 17). TransUnion: The Consumer Credit Industry Shows Signs of Bouncing Back Despite COVID-Related Challenges. Retrieved January 13, 2021, from https://www.transunion.com/blog/consumer-credit-origination-balance-and-delinquency-trends-q2-2020 

165DeSanctis, A., & Mortgage Bankers Association. (2020, December 1). Share of Mortgage Loans in Forbearance Increases to 5.54 Percent. Retrieved January 13, 2021, from https://www.mba.org/2021-press-releases/december/share-of-mortgage-loans-in-forbearance-increases-to-554-percent 

166Attom Data Solutions. (2020, December 21). Residential Foreclosure Activity in U.S. Could Easily Double Over Coming Year. Retrieved January 13, 2021, from https://www.attomdata.com/news/market-trends/figuresfriday/residential-foreclosure-activity-in-u-s-could-easily-double-over-coming-year/  

167UNESCO. (2020, May 13). Adverse consequences of school closures. Retrieved January 13, 2021, from https://en.unesco.org/covid19/educationresponse/consequences 

168Park, Y., Choe, Y., Park, O., Park, S., Kim, Y., Kim, J....Jeong, E. (2020). Contact Tracing during Coronavirus Disease Outbreak, South Korea, 2020. Emerging Infectious Diseases, 26(10), 2465-2468. https://dx.doi.org/10.3201/eid2610.201315. Retrieved January 13, 2021, from https://wwwnc.cdc.gov/eid/article/26/10/20-1315_article 

169Auger, K. A., MD, Shah, S. S., MD, & Richardson, T., PhD. (2020, September 01). Association Between US Statewide School Closure and COVID-19 Incidence and Mortality in the US. Retrieved January 13, 2021, from https://jamanetwork.com/journals/jama/fullarticle/2769034 

170Fausset, R. (2020, August 12). New York Times: 1,193 Quarantined for Covid. Is This a Successful School Reopening? Retrieved January 13, 2021, from https://www.nytimes.com/2020/08/12/us/georgia-school-coronavirus.html 

171Gordon, N. E., Reber, S. J., & National Bureau of Economic Research. (2020, July). Federal Aid to School Districts During the COVID-19 Recession. Retrieved January 13, 2021, from https://www.nber.org/system/files/working_papers/w27550/w27550.pdf 

172Bartik, T. J., & W.E. Upjohn Institute for Employment Research. (2020, May 22). An updated proposal for timely, responsive federal aid to state and local governments during the pandemic recession. Retrieved January 13, 2021, from https://www.upjohn.org/research-highlights/updated-proposal-timely-responsive-federal-aid-state-and-local-governments-during-pandemic-recession 

173Barnum, M. (2020, July 29). Three ways the current schools crisis could hurt the economy. Retrieved January 13, 2021, from https://www.chalkbeat.org/2020/7/29/21346805/economy-education-schools-stimulus-jobs  

174National Conference of State Legislatures. (2021, January 4). COVID-19 Economic Relief Bill. Retrieved January 13, 2021, from https://www.ncsl.org/ncsl-in-dc/publications-and-resources/covid-19-economic-relief-bill-stimulus.aspx  

175Mitchell, T., & American Council on Education. (2020, December 21). Statement by ACE President Ted Mitchell on COVID-19 Relief Package Higher Education Funding. Retrieved January 13, 2021, from https://www.acenet.edu/News-Room/Pages/Statement-by-ACE-President-Ted-Mitchell-on-COVID-19-Relief-Package-Higher-Education-Funding.aspx  

176Blad, E. (2020, November 30). EducationWeek: Private Schools Catch Parents' Eye as Public School Buildings Stay Shut. Retrieved January 13, 2021, from https://www.edweek.org/ew/articles/2020/08/06/private-schools-catch-parents-eye-as-public.html 

177Smith, M. D. (2020, July 30). The Daily Ardmoreite: Charter school enrollment spikes amid pandemic. Retrieved January 13, 2021, from https://www.ardmoreite.com/story/news/2020/07/30/charter-school-enrollment-spikes-amid-pandemic/5537377002/ 

178Squire, J. (2020, September 02). In Pandemic, Private Schools Face Peril. Retrieved January 13, 2021, from https://www.educationnext.org/pandemic-private-schools-face-peril-policy-choices-may-help-preserve-options/ 

179Chidambaram, P., Garfield, R., & Neuman, T. (2020, November 25). COVID-19 Has Claimed the Lives of 100,000 Long-Term Care Residents and Staff. Retrieved January 13, 2021, from https://www.kff.org/policy-watch/covid-19-has-claimed-the-lives-of-100000-long-term-care-residents-and-staff/ 

180Centers for Disease Control and Prevention. (2021, January 12). CDC COVID Data Tracker. Retrieved January 13, 2021, from https://covid.cdc.gov/covid-data-tracker/#cases_casesper100klast7days 

181McGarry, B. E., Grabowski, D. C., & Barnett, M. L. (2020, August 20). Severe Staffing And Personal Protective Equipment Shortages Faced By Nursing Homes During The COVID-19 Pandemic: Health Affairs Journal. Retrieved January 13, 2021, from https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.01269  

182Ibid. 

183Ibid. 

184Marks, L., & Kibel, P. (2020, April 28). Moody’s Investor Service: Coronavirus effects vary at healthcare REITs with senior housing, skilled nursing at risk. Retrieved January 13, 2021, from https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1225165  

185Ibid.

186Miller, B. M., Knopman, D., Ecola, L., Phillips, B., Kim, M., Edenfield, N., . . . Prosdocimi, D. (2020). RAND Corporation: U.S. Airport Infrastructure and Financing. Retrieved January 13, 2021, from https://www.rand.org/content/dam/rand/pubs/research_reports/RR3100/RR3175/RAND_RR3175.pdf  

187International Air Transport Association. (2020, July). IATA Air Passenger Market Analysis. Retrieved January 13, 2021, from https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-monthly-analysis---july-2020/ 

188International Air Transport Association. (2020, October). IATA Air Passenger Market Analysis. Retrieved January 13, 2021, from https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-monthly-analysis---october-2020/  

189Federal Aviation Administration. (2020, December 31). Airport Coronavirus Response Grant Program. Retrieved January 13, 2021, from https://www.faa.gov/airports/crrsaa/  

190Lehman, S., Lack, J., & Mu, J. (2020, June 17). FitchRatings: Coronavirus Stress Test U.S. Airports' Special Revenue Bonds. Retrieved January 13, 2021, from https://www.fitchratings.com/research/us-public-finance/coronavirus-stress-test-us-airports-special-revenue-bonds-limited-revenue-pledge-may-pose-elevated-risk-should-traffic-downturn-persist-17-06-2020  

191Berger, P. (2020, August 9). The Wall Street Journal: Coronavirus Delays JFK Airport's $15 Billion Makeover. Retrieved January 13, 2021, from https://www.wsj.com/articles/coronavirus-delays-jfk-airports-15-billion-makeover-11596985225  

192Yakel, D. (2020, April 8). Press Release: SFO Postpones $1 Billion Terminal 3 West Project. Retrieved January 13, 2021, from https://www.flysfo.com/media/press-releases/sfo-postpones-1-billion-terminal-3-west-project?_ga=2.69387920.1845818603.1599590902-733551920.1599590902 

193International Airport Review. (2020, November 10). San Francisco Airport postpones multiple construction projects. Retrieved January 13, 2021, from https://www.internationalairportreview.com/news/144053/san-francisco-airport-postpones-construction-covid-19/  

194Pickering, S. (2020, August 18). DFW Airport Suspends Terminal F Construction: Report. Retrieved January 13, 2021, from https://www.nbcdfw.com/news/coronavirus/dfw-airport-suspends-terminal-f-construction-report/2427974/ 

195McKinsey, IHS Global Insight, ITF, GWI, United Nations, & Statista. (2019, November 29). Infrastructure demand - regional investments 2017. Retrieved January 13, 2021, from https://www.statista.com/statistics/271779/infrastructure-spending-forecast-by-region/  

196American Society of Civil Engineers. (2021, January 4). ASCE's 2017 American Infrastructure Report Card: GPA: D+. Retrieved January 13, 2021, from https://www.infrastructurereportcard.org/ 

197Arndt, C. (2016, November 23). American Action Forum: Infrastructure Spending Trends. Retrieved January 13, 2021, from https://www.americanactionforum.org/research/infrastructure-spending-trends/ 

198American Society of Civil Engineers. (2020). COVID-19 Status Report. Retrieved January 13, 2021, from https://www.infrastructurereportcard.org/covid-status-report/ 

199Pezzimenti, J. J., Spence, T. R., & Forsgren, K. E. (2020, June 4). S&P Global: Activity Estimates For U.S Transportation Infrastructure Show Public Transit And Airports Most Vulnerable To Near-Term Rating Pressure. Retrieved January 13, 2021, from https://www.spglobal.com/ratings/en/research/articles/200604-activity-estimates-for-u-s-transportation-infrastructure-show-public-transit-and-airports-most-vulnerable-to-11516657 

200Ibid.

201Kastner, D. (2020, December 10). Schwab Sector Insights: A View on 11 Equity Sectors. Retrieved January 13, 2021, from https://www.schwab.com/resource-center/insights/content/utilities-sector  

202Schnure, C. (2020, December 14). Nareit: REITs Trimmed Recent Gains Last Week. Retrieved January 13, 2021, from https://www.reit.com/news/blog/market-commentary/reits-trimmed-recent-gains-last-week  

203Presidential Campaign for Joe Biden. (2020, August 5). The Biden Plan to Build a Modern, Sustainable Infrastructure and an Equitable Clean Energy Future. Retrieved January 13, 2021, from https://joebiden.com/clean-energy  

204VanderMey, A., & Rapp, N. (2017, March 30). Here's How Bad U.S. Infrastructure Has Become. Retrieved January 13, 2021, from https://fortune.com/2017/03/30/infrastructure-spending-funding/ 

205House Committee on Budget. (2019, October 22). Strong Infrastructure and a Healthy Economy Require Federal Investment. Retrieved January 13, 2021, from https://budget.house.gov/publications/report/strong-infrastructure-and-healthy-economy-require-federal-investment

206Bryan, B. (2016, October 27). Trump campaign unveils plan to spend $1 trillion on roads, bridges, and other infrastructure with no tax hikes. Retrieved January 13, 2021, from https://www.businessinsider.com/trump-campaign-1-trillion-infrastructure-plan-with-no-tax-hike-2016-10  

207Ryan, B. (2017, January 20). Infrastructure Spending Deemed Most Important Trump Promise. Retrieved January 13, 2021, from https://news.gallup.com/poll/202691/infrastructure-spending-deemed-important-trump-promise.aspx?g_source=link_newsv9&g_campaign=item_249161&g_medium=copy  

208Chait, J. (2018, May 9). Trump Admits Infrastructure Promise Isn't Happening. Retrieved January 13, 2021, from https://nymag.com/intelligencer/2018/05/trump-admits-infrastructure-promise-isnt-happening.html  

209Klein, A. (2017, December 26). Brookings: How the new tax bill will cut infrastructure investment. Retrieved January 13, 2021, from https://www.brookings.edu/blog/up-front/2017/12/26/how-the-new-tax-bill-will-cut-infrastructure-investment  

210Center on Budget and Policy Priorities. (2018, May 16). 2017 Tax Law Used Potential Infrastructure Money for Corporate Tax Cuts. Retrieved January 13, 2021, from https://www.cbpp.org/blog/2017-tax-law-used-potential-infrastructure-money-for-corporate-tax-cuts