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How the $1.9 Trillion COVID-19 Relief Package Helps the Construction Industry
On Wednesday March 10, the House of Representatives approved the American Rescue Act of 2021, which is also known as the COVID-19 relief package. The bill has many measures that will help the American economy recover from the pandemic, which include employment incentives and a dedicated budget for the construction industry.
The Covid-19 relief package is welcome in the US construction sector, which has been affected by high materials prices and low employment in recent months:
- Associated Builders and Contractors found that construction input prices increased by 2.1% in February 2021, and there is a 7.6% increase with respect to February 2020. This affects key inputs like softwood lumber (+79.6%) and steel mill products (+20%).
- Associated General Contractors of America reported a drop of 61,000 jobs in the construction industry for February 2021, which was caused in great part by harsh weather conditions and blackouts. Compared with February 2020, construction employment dropped by 6.8% in a year.
The COVID-19 relief package also includes an employee retention tax credit, which allows a payroll tax deduction of up to $10,000 per employee. This is a general benefit for all business sectors, but it will be particularly helpful in the construction sector, which recently suffered a drastic job loss. This measure was praised by the Associated General Contractors of America, since it can help stem the tide of layoffs that is affecting the construction sector.
This is the second relief package in response to the coronavirus pandemic, following the $1.4 trillion bill signed in November 2020. The previous bill included a two-year extension of the federal solar tax credit which will now remain at 26% until the end of 2022.
Construction Incentives in the COVID-19 Relief Package
The $1.9 trillion relief package includes a series of funds that focus on high-priority projects, which cover the construction sector.
- Emergency school relief aid: $125.8 billion, which includes a budget for school building improvements and repairs.
- Federal Transit Administration grants: $30.5 billion, helping compensate for the drop in transportation revenue caused by the pandemic.
- Restaurant revitalization fund: $25 billion
- Healthcare providers fund: $8.5 billion, which includes a budget for retrofits and temporary healthcare facilities.
- Novel coronavirus genomic sequencing and surveillance: $1.8 billion, including a fund for facility construction and alteration.
- Tribal governments fund: $600 million, which covers healthcare facility construction.
The bill also includes the $10 billion Coronavirus Capital Projects Fund, which focuses on priority projects that contribute to jobs, education and healthcare monitoring. Construction projects that meet this description are included in the fund.
- The Coronavirus Capital Project Fund will provide $100 million for each of the 50 states, and also $100 million funds for Washington DC, Puerto Rico and tribal governments.
- The rest of the fund will be allocated among states based on total population (50%), rural population (25%), and population with an income below 150% of the poverty line (25%).
The relief package also includes $340 billion in coronavirus recovery funds for states and local governments, which will help compensate for the drop in tax revenue. A fund of $219.8 billion is assigned to state governments, and the remaining $120.2 billion are for cities and counties. Local governments have been given freedom in how to use these funds, and construction projects are eligible.
Liability protection remains as an area of opportunity, which was not covered by any the COVID-19 relief package. Contractors can help prevent workplace infections with personal protective equipment and social distancing, but these measures are not 100% effective. The pandemic is a grey area in many insurance plans, contracts and even legislation, and many construction firms are concerned about possible lawsuits related to COVID-19.
The White House Office of Public Engagement has communicated that an infrastructure bill is also being discussed, which will include more incentives specifically for construction projects. The measures in this bill are still being discussed, but renewable energy and climate action will likely get plenty of funding.