Ottawa poised to extend commercial rent relief into August

CBC News has learned the federal government will extend Canadian Emergency Commercial Rent Assistance (CECRA), its rent subsidy program to support small businesses.

Michael Smith, co-founder of the grassroots advocacy group Save Small Business (SSB), said a senior official from Finance Minister Bill Morneau’s office told him the government is “committed to extending CECRA for the month of August.”

Another senior government official, who cannot be identified because they are not authorized to speak on the subject, told CBC News the extension is likely.

For Georgette Simms, manager of the family-owned and -operated Social Barber Studio in Brampton, Ont., another month of rent relief is welcome news.

She said cautious customers are coming back but business is still way down.

“It will be tremendously helpful,” said Simms. “We’re still operating on a part-time basis.”

First extended for July

Under CECRA, small businesses that have lost 70 per cent or more of their revenue due to COVID-19 only have to pay 25 per cent of their rent. The provinces, territories and federal government combine to cover 50 per cent, while landlords cover 25 per cent.

Originally intended to span April, May and June, CECRA was initially extended to include July.

Business groups have been speaking out on CECRA, flagging problems first cited when the program was announced in the spring and saying flaws in the program are now a threat to the economic recovery.

There are calls for rent relief to be extended well into the fall, expanded for more businesses to qualify and modified to allow tenants to apply for themselves, instead of counting on landlords.

Smith’s group, which has about 50,000 members, is lobbying aggressively for changes to CECRA.

“Getting better rent relief through an improved program is going to be the make-or-break issue through the fall and winter for small businesses,” he said.

A problem of access

The key requests from SSB, the Canadian Federation of Independent Business (CFIB) and others is that CECRA must be expanded so more businesses qualify and that it be made easier to access.

“Extending the current program is simply not going to work, because it’s leaving too many people out,” said Smith, who feels the 70 per cent revenue loss threshold is too high.

To help more businesses, he wants the government to extend the program to December, as has been done with the wage subsidy program (CEWS), and implement a “sliding scale” of support, which has also been endorsed by the CFIB.

From its initial design, CECRA “has been too complicated and dependent on landlords,” so many businesses that meet the criteria aren’t getting relief, Smith said.

While large-scale landlord groups like BOMA and REALPAC have said their members are using CECRA for tenants who need the help, results from the program have not been encouraging to Smith and other supporters of small business.

Large drops in revenue

A CFIB survey from late May suggested 40 per cent of the country’s one million small businesses had suffered revenue drops of 70 per cent or more.

But according to the government’s Economic and Fiscal Snapshot, by July 8, nearly four months into the pandemic, just over 29,000 CECRA applications had been approved, for about $221 million in assistance.

The application site did not open until late May. Advocates like SSB and CFIB say the low number of applications prove there are too many barriers to accessing rent relief.

Ottawa estimated rent relief would cost nearly $3 billion through 2020 to 2021, and Smith believes that with less than 10 per cent of the relief funds having been doled out so far, time is running out.

“This is leaving a vast majority of small businesses that can’t survive without rent relief on the brink,” he said.

Getting relief vs. being left out

Simms said without rent relief, her family would probably have to shut down their barber shop.

Before COVID-19, the small salon northwest of Toronto was busy seven days a week. Back for just five weeks, Simms said she can’t predict when the business will be able to sustain four workers and $2,500 a month in rent and utilities.

“It’s really, really nerve-wracking,” she said.

Phil Cha, co-owner of Riddle Room, an escape room and board game cafe in downtown Toronto, said his rent and utilities come to $18,000 a month and his landlord will not apply for CECRA, even though Cha has been closed since mid-March.

He said he signed a confidential deal with his landlord to get through COVID-19.

“Is it as good as CECRA? No, it’s definitely not as good. But sometimes, you know, we just have to think about the future of the company.”

Cha spent most of the government’s $40 000 CEBA loan on rent.

He wishes he was allowed to apply for CECRA as a tenant. But the government official CBC spoke on condition of anonymity said that’s unlikely.

“There’s so much complexity under the surface to that,” the official said. “It’s a very difficult space for the federal government to lead in, given that most of it is provincial jurisdiction.”

Cha is worried about widespread closures in Ontario if the province lets its moratorium on commercial evictions expire at the end of August. “The whole situation sucks,” he said.

A way to ‘get things moving again’

Murtaza Haider, who teaches real estate management at Ryerson University in Toronto, believes the government made a tactical mistake in setting up CECRA.

“I think the goal of the government, instead of putting [in] stringent qualifying conditions for landlords and tenants, should be to seek flexibility in the delivery of their programs,” he said.

Making it easier to access rent relief would help Canada’s economic recovery, he said, by sending fewer people into unemployment as struggling businesses close for good.

“I would see the rent relief not as a subsidy … but as investing in the necessary economic infrastructure which is going to get things moving again.”

Depending on how the recovery goes, the CFIB estimates as many as 218,000 small businesses — 19 per cent of the total — could fail.

Cha doesn’t want his business to be one of them. Though he and his partner thought about calling it quits earlier, as COVID-19 wears on, they’re becoming more committed.

“I think one of the best, most important things that business owners have to do as a responsibility during this time is to make sure that there’s ways for people to spend money, and make sure that people have jobs as we try to get back to normal.”

CBC