The Evolution of Canadian Federal Rent Relief
Following the unpopular CECRA program, the federal program has created a direct to tenant federal rent subsidy (the Canada Emergency Rent Subsidy, or CERS). This program mirrors the federal wage subsidy (CEWS) in both its application process, and that it determines compensation based on percentage revenue decline. It also boasts several other advantages over the previous program.
Commercial Real Estate Professionals and any business who owns or rents property should learn more about the program and its benefits.
Canada Emergency Commercial Rent Assistance (CECRA)
Announced at the end of April, the program should be commended for being a rapid response to one of the larger expenses for many small businesses. However the program had several issues:
(a) Required that businesses had lost 70% of revenue in April, May and June in order to be eligible, excluding many small businesses (for example, ones that had transitioned to online sales) with no sliding scale
(b) Required landlord led applications on behalf of the tenant, increasing uncertainty and risk (including the fact that the program opened in May, so businesses had to guess their June revenue)
(c) Requirement of landlords to forgive 25% of rent
By the time details came out, landlords had often worked out separate deferral agreements
(d) Eligibility was limited to small businesses
The program implementation was rushed and did not include commercial real estate groups who were expected to implement the program. While many landlords did take part, other landlords were criticized for not wanting to be a part of the flawed program. The issues were amplified when frustrated provincial governments instituted blanket evictions moratoriums, making it so that even tenants who could pay, no longer had to.
In the end, the program was roundly criticized by NAIOP and other business groups, and despite being extended for July, August and September, only dispersed $1.8 billion in rent support (out of an anticipated $3 Billion).
Canada Emergency Rent Subsidy (CERS)
The new Canada Emergency Rent Subsidy targeted the issues above and is a major improvement. NAIOP Edmonton’s biggest request, providing the rent subsidy directly to tenants, is the centrepiece of this new program, which is very positive.
Additionally, eligible business have been expanded, and also include charity, or non-profit entities (with a cap of $75,000 in eligible expenses per location, and an overall maximum of $300,000 in expenses per claim period including any affiliated entities).
The new program operates on a sliding scale based on the revenue drop experienced by the business, up to a maximum of 65 per cent of rent being covered. There is also an additional “top-up” subsidy of 25 per cent for organizations temporarily shut down by a mandatory public health order (pro-rated based on the number of days the health order is in effect).
While the program doesn’t help tenants who didn’t receive CECRA, it does start retroactive to September 27, 2020, and (with a review in December this year) will last in some form until June 2021.
*Any business who owns or rents property should learn more about the program and its benefits here>>
Overall these programs, while hugely expensive, will be a major source of support for Canadian businesses through the second wave of the pandemic and beyond. Improvements and extensions to these programs have made them even more attractive for the Commercial Real Estate Industry, despite being directed at tenants, as opposed to directly to building owners.
In the longer term Recovering exports, getting major resource-related construction projects back on track, distributing a vaccine, and minimizing future waves of COVID-19 will be critical determinants of overall economic growth.