Ottawa has unveiled a rent relief program for small businesses that have seen their revenues collapse amid the pandemic, but entrepreneurs argue it’s too restrictive and too reliant upon landlords being willing to participate.
Under the Canada Emergency Commercial Rent Assistance (CECRA) program, federal and provincial governments will cover half of small-business tenants’ rent for April, May and June, while asking landlords to absorb one-quarter of the costs.
The Globe and Mail first reported details of the relief program on Thursday, including that the federal government would work with the provinces and territories to fund the program with forgivable loans.
Prime Minister Justin Trudeau formally announced the plan Friday in Ottawa. Small and medium-sized businesses contribute half of Canada’s gross domestic product, but were also among the hardest hit as widespread shutdowns struck the country a month and a half ago. Many were already burdened with tight margins and minimal access to credit, only to find revenue collapse while fixed costs remained – the biggest of which is rent.
Like many of its COVID-19 relief program announcements, details on the CECRA program were scant Friday, and left many entrepreneurs ineligible, confused or both. Because the CECRA is expected to launch mid-May and apply retroactively, many worry about what happens when they can’t pay rent next week.
Others feel the maximum $50,000 monthly rent qualification will arbitrarily exclude their business. And because onus is on the landlords to apply, and requires them to absorb a quarter of tenants’ rent, some fear their landlords will ignore the program.
Lee Sanger, who co-runs the Arts Off Main gallery in East Vancouver with a group of artists, said Friday that without details on how much control tenants have in applying for the CECRA, “We’re still dependent on what the landlord does.”
Entrepreneurs have called on Ottawa for rent relief for nearly six weeks. For some business owners, the federal government’s staggered approach to pandemic assistance funding has already forced them to close for good – leaving many wondering why Ottawa’s fiscal policy wasn’t designed in tandem with the health policy that forced the economic shutdown.
The funds will flow through Canada Mortgage and Housing Corp. to landlords of tenants who have had revenues drop at least 70 per cent since the novel coronavirus pandemic began.
Ottawa said the loans will be forgiven if landlords agree to reduce small-business tenants’ rent by 75 per cent. In this case, tenants would pay a quarter of their usual rent, while landlords would absorb an additional quarter. Landlords must also agree not to evict tenants while the agreement is in place.
But without a blanket ban on commercial evictions, the lobby group Save Small Business said Friday that landlords won’t have incentive to take part in the CECRA because they could still try to evict tenants or defer rent payments, burdening tenants in the long term. As it stands, the CECRA is a good deal for landlords, "but worse than getting all rent,” organizer Jon Shell said.
Finance Minister Bill Morneau said at a news conference Friday that “we think that this provides a very good incentive for both parties," not just tenants, because the funding was better than not receiving any rent money at all.
Commercial rent is a provincial jurisdiction. The provinces will be expected to cover a quarter of the forgivable loans, Mr. Trudeau said, while Ottawa will cover the remainder. Ontario Premier Doug Ford said Friday that his province would commit $241-million to the rent program.
Andrew Oliver, whose Oliver & Bonacini hospitality group has restaurants across the country, applauded the federal government for finally taking steps toward rent relief, but said details needed to be more targeted than broad. Some of his businesses would qualify for the rent program because of the $50,000 rent cap; others wouldn’t because of high rent in urban centres.
“Instead of the government putting out the fire, they’re just dousing it. It doesn’t mean the fire won’t grow or spread,” Mr. Oliver said in an interview.
Halifax entrepreneur Christian Rankin co-owns a wine bar called Obladee. He said it was great that Ottawa finally recognized the hospitality industry’s fixed costs, but said three months is too short term of a program.
“We’re the first ones to be shut down and we’ll be the last to recover,” Mr. Rankin said. “This helps cover rent for April, May and June – there’s another period of three, six, nine months or longer, where restaurants and retail are going to be looking at significantly lower revenue.”
Despite the lack of detail, some commercial landlords welcomed the program. Michael Cooper, chief executive with Dream Office REIT, said he was willing to shoulder the 25-per-cent cut in rent from struggling tenants.
Dream Office, which owns 32 office properties, has seen its ground-floor retail and restaurants suffer from the closings.
“It might be the best approach with tenants that are struggling to get 75 per cent of the rent instead of 100 per cent, and make sure they continue to stay in business,” Mr. Cooper said.
Dream, along with some of the other major landlords, such as RioCan REIT, SmartCentres REIT and Ivanhoé Cambridge, had offered rent deferrals to some of their smaller retail tenants in April.
SmartCentres REIT, which operates 165 retail plazas in the country, said it was prepared to take the haircut for its struggling small tenants.
“We are truly all in this together,” said Mitchell Goldhar, chief executive of SmartCentres. But Mr. Goldhar said there should also be some rent relief for bigger retailers and businesses, which employ more than a million Canadians, and have been forced to close owing to the pandemic.
Getting smaller landlords to take part in the program could be very difficult. Carol Mair owns a building on Toronto’s Queen Street West and plans to apply for her barbershop tenant, but says there’s a significant lingering question: “Thousands of small businesses rent from people who aren’t even living in Canada – offshore property owners,” she said. “How do those tenants get the break?”
The Canadian Federation of Independent Business has been lobbying Ottawa for rent relief for weeks, but shared entrepreneurs’ concerns about the program’s complications and lack of clarity – warning that because landlords have to eat some of the cost, they might choose not to apply for the relief. They also warned that the “all-or-nothing” revenue-drop threshold will leave some businesses behind.
For businesses still unable to cover the remaining quarter of their monthly rent, Mr. Trudeau suggested they access the $40,000 Canada Emergency Business Account loan program, of which $10,000 can be forgivable if repayment terms are met.