How PPP loans impacted California’s brokerage business

While post-pandemic news regarding federal Payroll Protection Program (PPP) loans tends to skew towards misappropriation, data suggests that the initiative has boosted one sector: Real estate agents and brokers in California.

California companies that were categorized as “offices of real estate agents and brokers” were among the largest beneficiaries under PPP in the state, according to a TRD analysis of data from the U.S. Small Business Administration and the Federal Reserve Bank of St. Louis. The sector received a total of 31,492 loans – the third-highest loan total among all sectors. The pandemic-era program distributed nearly $800 billion in cash to businesses across the country to stabilize employment.

In total, California real estate brokerages received $845.6 million in PPP loans. The sector’s average loan amount was $26,473. The emergency financing secured nearly 63,000 jobs.

Woodmont Real Estate Services, a property management firm based in Belmont, ranked first in the state in terms of loan amount, taking out $5.4 million under the PPP program. Zev Hertz’ Hertz Investment Group, meanwhile, ranked second with a $4.9 million loan.

Companies such as The Agency, Kidder Matthews and Homelight were also among the firms that took out the most money through the program. Ten of the loans with the highest dollar amounts have been repaid in full or forgiven.

The financing activity has coincided with a rise in the headcounts at real estate agencies not seen since the mid-2000s. In March of this year, the number of people working in California real estate brokerages reached 59,299 people. The figure represents the first time that the sector’s population breached the 59,000 mark since August of 2006. The latest figure, from July, showed 58,249 people working in the sector.

The upswing is a product of an incremental climb with several drops, and the start of the upward movement came conspicuously just as the government started offering PPP money. In April 2020, the earliest weeks of the Covid-19 pandemic, California’s agent headcount dropped by nearly 5,500 workers within the span of a month, going from nearly 55,300 to 49,721 employees, the St. Louis Fed data showed. It was at that time that the government started the bailout program, which was designed to pump cash into businesses to prevent mass layoffs. Over the two years since then, the sector has added more than 8,500 jobs, TRD’s analysis shows.

The federal PPP initiative is likely just one strand within a web of factors that ballooned California’s agent population during the pandemic. Burned-out workers from other industries and laid-off employees defected to the commission-based industry as California home prices reached record levels.

The increase in headcount is not consistent among industries that received the most number of PPP loans in California. For instance, restaurants, which received the second-highest number of loans in the state at 40,687, have yet to fully recover from April 2020, when its number of workers dropped to 213,200 people. In July, its headcount was at 605,500 workers, which is still below its most recent apex of nearly 664,000 from June of 2019.

The $845.6 million in PPP loans given to California real estate brokerages represent just under 1 percent of the $103 billion distributed across the state. The federal government gave out nearly 1.3 million loans to California companies with an average amount of $81,170.