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USA offers tax breaks to landlords helping victims of natural disaster

Editorial Staff

As Asia continues to struggle to come to terms with a series of enormous natural disasters, the USA's Inland Revenue Service has come up with a scheme to help victims of similar events. It appears to be a groundbreaking idea that can offer some genuine assistance - if it's done right.

In the USA, providers of low-income housing are subjected to a vast range of restrictions over who they can let to and other factors. There has been, for some years, a "special relief" as set out in Revenue Procedure 2014-49 and Revenue Procedure 2014-50 under which providers of low-income housing can disregard the income limits, transience rules and certain other restrictions that normally apply to low-income housing units when housing is offered to those displaced by natural disasters. The scheme relates to temporary, emergency, housing and in particular both local residence requirements and income limits are set aside.

The scheme depends upon the Federal Emergency Management Agency (FEMA) declaring what amounts to a state of emergency - it's called "jurisdiction designated for individual assistance." But in order for FEMA to do that, first the President has to declare a major disaster. That's been a bit of a problem under PoTUS TRUMP who has not been particularly speedy with such declarations. Having said that, FEMA is not bound to make, immediately or at all, a designation even when PoTUS has made his declaration.

Currently, the applicable areas are parts of Florida, Georgia, North Carolina, South Carolina and Virginia, though FEMA may add other locations in the future.

Those displaced from those locations can now take up low-income housing anywhere in the USA for up to one year after the end of the month in which PoTUS made his declaration.

And it's not all plain sailing then, either. Although owners and operators of low-income housing projects are allowed to offer temporary housing to qualified disaster victims, they are not required to do so.

What owners and operators of housing are, in many states, prevented from doing is raising prices to take advantage of the victims. Under what the USA bizarrely calls "price gouging" (1) laws, it is illegal in more than thirty states plus DC to raise prices above a reasonable level in certain circumstances.

For example, in the state of New York General Business Law § 396-r) prohibits merchants from taking unfair advantage of consumers by selling goods or services for an "unconscionably excessive price" during an "abnormal disruption of the market," which would include natural disasters such as Hurricane Sandy and others. The law covers New York State vendors, retailers and suppliers, including but not limited to supermarkets, gas stations, hardware stores, bodegas, delicatessens and taxi and livery cab drivers. New York's price gouging law takes effect only upon the occurrence of triggering events that cause an "abnormal disruption of the market." An "abnormal disruption of the market" is defined as "any change in the market, whether actual or imminently threatened," that results from triggering events such as "weather events, power failures, strikes, civil disorder, war, military action, national or local emergency or other causes." During an abnormal disruption of the market like Hurricane Sandy, all parties within the chain of distribution for any essential consumer goods or services are prohibited from charging unconscionably excessive prices. (extracted and modified from https://ag.ny.gov/price-gouging)

Demanding excessive rents for those displaced by natural disasters would fall under the anti-profiteering law (isn't that a much better term?) provided that a comparison of prices before and after the event revealed a "gross disparity." Some increases are acceptable which reflects that, in relation to goods and personal services, there may be a need to cover a period of reduced income that will come after the initial rush dies down.

(1) the grammar is wrong. It is the victims who are "gouged" (i.e. wounded) by high prices whereas the expression, in the form it is used means that the price is gouged which is nonsense.